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Financial Consultants Derby KS

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.

Kedre Mellor
Capital WealthCare Advisors, L.C.
(316) 440-4772
10333 E. 21st Street N., Suite 301
Wichita, KS
Expertises
High Net Worth Client Needs, Retirement Plan Investment Advice, Retirement Planning & Distribution Rules, Estate & Generational Planning Issues, Ongoing Investment Management, Advising Medical Professionals
Certifications
NAPFA Registered Financial Advisor, CPA/PFS

Mr. Jon Marvin Lewis, CFP®
(316) 777-0780
1214 N Rock Rd Ste A
Mulvane, KS
Firm
Edward Jones Investments
Areas of Specialization
Asset Allocation, Comprehensive Financial Planning, Estate Planning, Investment Planning
Key Considerations
Average Net Worth: $500,001 - $1,000,000

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



Data Provided by:
Mr. Paul F. Rosell, CFP®
(316) 644-9768
2111 S Rosalie St
Wichita, KS
Firm
Rosell Retirement Services

Data Provided by:
Mr. Jerald R. Juhnke, CFP®
(316) 630-8118
8621 E 21st St N Ste 130
Wichita, KS
Firm
Juhnke, Campbell & Associates
Areas of Specialization
Asset Allocation, Charitable Giving, Comprehensive Financial Planning, Elder Care, Estate Planning, Long-Term Care, Retirement Income Management
Key Considerations
Average Net Worth: $500,001 - $1,000,000

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

Profession: Business Executives

Data Provided by:
William May, CFP®
(316) 265-4605
1635 N Waterfront Pkwy Ste 250
Wichita, KS
Firm
New England Financial
Areas of Specialization
Asset Allocation, Business Succession Planning, Comprehensive Financial Planning, Employee and Employer Plan Benefits, Insurance Planning, Investment Planning, Retirement Planning

Data Provided by:
Mr. Ariel Jordan Lee, CFP®
(316) 788-2165
624 N Mulberry Rd
Derby, KS
Firm
Edward Jones
Areas of Specialization
Asset Allocation, Comprehensive Financial Planning, Investment Planning
Key Considerations
Average Net Worth: $500,001 - $1,000,000

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



Data Provided by:
Mr. Brent D. Thummel, CFP®
(316) 683-8400
9415 E. Harry
Wichita, KS
Firm
AXA Advisors, LLC

Data Provided by:
Matthew J. Thiessen, CFP®
(316) 425-5812
13111 E 21st St N
Wichita, KS
Firm
Cornerstone Financial LLC

Data Provided by:
Mr. Kevin W Brown, CFP®
(316) 630-4427
8301 E. 21st N. Ste 150
Wichita, KS
Firm
Morgan Stanley Smith Barney
Key Considerations
Average Net Worth: $500,001 - $1,000,000

Average Income: Not Applicable

Profession: Not Applicable

Data Provided by:
Mr. Vance E. Garwood, CFP®
(316) 636-2223
1223 N. Rock Rd., Bldg H-300
Wichita, KS
Firm
Raymond James Financial Services, Inc.
Areas of Specialization
Asset Allocation, Business Succession Planning, Charitable Giving, Comprehensive Financial Planning, Education Planning, Employee and Employer Plan Benefits, Estate Planning

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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