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Financial Consultants Bella Vista AR

The Seller Finance trap begins with a seller who is having trouble finding a buyer. Maybe the park’s vacancy is too high, maybe the location is too rural or in obvious decline. Whatever the cause, the seller can either sit on the park for an eternity, or find a creative way to attract a buyer. And what can be more attractive to a buyer than an easy to qualify, below market interest rate loan.

Mr. Christopher Donovan, CFP®
(479) 855-1309
2842 Bella Vista Way
Bella Vista, AR
Firm
Edward Jones
Areas of Specialization
Asset Allocation, Education Planning, Insurance Planning, Long-Term Care, Retirement Income Management, Wealth Management

Data Provided by:
Mr. Kevin P. Barnes, CFP®
(479) 464-5055
2400 SE C St
Bentonville, AR
Firm
Clement Financial Service Inc

Data Provided by:
Mr. John L. Craig, CFP®
701 NW McNelly Rd Ste 7
Bentonville, AR
Firm
Ameriprise Financial Services,
Areas of Specialization
Comprehensive Financial Planning

Data Provided by:
Adam J. Kuettel, CFP®
(479) 270-4092
811 SW Raintree Ste 26
Bentonville, AR
Firm
NWA Financial Partners
Areas of Specialization
Asset Allocation, Business Succession Planning, Comprehensive Financial Planning, Education Planning, Employee and Employer Plan Benefits, Estate Planning, General Financial Planning
Key Considerations
Average Net Worth: Not Applicable



Data Provided by:
Mr. Rodney W. Bastian, CFP®
(479) 464-5055
PO Box 3150
Bentonville, AR
Firm
Clement Financial Services Inc
Areas of Specialization
Comprehensive Financial Planning, Retirement Planning

Data Provided by:
Mr. Randall W. Roebuck, CFP®
(479) 855-5800
633 W Lancashire Blvd
Bella Vista, AR
Firm
Raymond James Financial Services, Inc.
Areas of Specialization
Investment Management, Retirement Income Management, Retirement Planning

Data Provided by:
Mr. J. Mel Parks, CFP®
502 SW 12th St
Bentonville, AR
Firm
Forty Three Eighteen Advisors, LLC
Areas of Specialization
Asset Allocation, Charitable Giving, Comprehensive Financial Planning, Investment Management, Investment Planning, Retirement Planning, Risk Management

Data Provided by:
Ms. Deann G. Gann, CFP®
(479) 271-3083
405 S Walton Blvd
Bentonville, AR
Firm
Arvest Private Banking
Areas of Specialization
Investment Planning
Key Considerations
Average Net Worth: $250,001 - $500,000

Average Income: $100,001 - $250,000

Profession: Business Executives

Data Provided by:
Mr. Kevin M Brown, CFP®
100 SW 14th St Ste 6
Bentonville, AR
Firm
VALIC
Areas of Specialization
Asset Allocation, Banking, Budget Development, Business Succession Planning, Charitable Giving, Comprehensive Financial Planning, Employee and Employer Plan Benefits
Key Considerations
Average Net Worth: $100,001 - $250,000

Average Income: Not Applicable

Profession: Not Applicable

Data Provided by:
Mr. Roger E. Clement, CFP®
(479) 464-5055
P.O. Box 3150
Bentonville, AR
Firm
Clement Financial Services Inc
Areas of Specialization
Comprehensive Financial Planning
Key Considerations
Average Net Worth: $250,001 - $500,000

Average Income: $100,001 - $250,000

Profession: Not Applicable

Data Provided by:
Data Provided by:

Beware of the Seller Finance Trap

BEWARE OF THE SELLER FINANCE TRAP
Sat 08/15/09 08:48:07 pm
by Frank Rolfe

There are few things more attractive about the mobile home park business than seller financing. Non-recourse seller financing allows the buyer to escape the hassle and scrutiny of bank lending, while at the same time offering some degree of insurance against fraud (you have not yet paid the seller in full), the ability to give the park back and walk clean in the event of catastrophe, and often includes a below-market interest rate and longer loan term.  

That being said, there is a trap often used by sellers that is baited with seller financing, and it is important to always be aware of, and stay clear of, this danger. 

The trap begins with a seller who is having trouble finding a buyer. Maybe the park’s vacancy is too high, maybe the location is too rural or in obvious decline. Whatever the cause, the seller can either sit on the park for an eternity, or find a creative way to attract a buyer. And what can be more attractive to a buyer than an easy to qualify, below market interest rate loan. 

Of course, there’s nothing wrong with a below-interest rate seller note. But not when it is used as a trap. And many times, that’s exactly what is being set. 

You see, the seller knows that the park will never hold up to the scrutiny of a bank – the appraisal, the independent review of the numbers, even the negative logic of the loan officer. To keep you from finding out that the park is overpriced, Do the Search or in a bad neighborhood, or basically completely unable to be financed, the seller offers to carry the loan and cuts the bank out of the loop day one. That’s the first leg of the trap.

The second part of the trap is to bait the deal with a super low interest rate to make the park look like it is a profitable investment, even though it could never carry a regular bank debt load of the same size. If a park is a 4% cap, then what better way to disguise the poor performance than with a 2% interest rate on the mortgage? The seller is effectively cooking the books with the buyer’s blessing. When you accept a cash-on-cash return that is spiked by ridiculously low interest rates, then you may be getting into trouble.

The final part of the seller trap is to offer only a short loan term, maybe two to five years, and the below-market interest rate for only the first year or so. What this does is to put the buyer in a negative cash- flow situation almost immediately, and force the round of bank loan requests that normally end in nothing but rejection. Faced with the loan coming due, and no bank loan prospects, the buyer often gives the park back to the seller, less his 20% down payment. There are sellers out there who have sold the same park two or three times under this framework, garnering 60% of their purchase price in down payments, and still owning the park. 

So how do you avoid ...

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