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Financial Consultants Forest Grove OR

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.

Alan Nelson
Sterling Investment Management, Inc.
(503) 579-9744
16070 SW Whitebird Street
Beaverton, OR
Expertises
Ongoing Investment Management, Helping Clients Identify & Achieve Goals, Retirement Planning & Distribution Rules, Tax Planning
Certifications
NAPFA Registered Financial Advisor, CFP®, EA

Peggy Kessinger
Cedar Financial Advisors, LLC
(503) 512-5890
3853 SW Hall Blvd
Beaverton, OR
Expertises
Helping Clients Identify & Achieve Goals, Planning Concerns for Corporate Executives, Advising Entrepreneurs, Advising Employee Benefit Plan Participants, College/Education Planning, Ongoing Investment Management
Certifications
NAPFA Registered Financial Advisor, CFP®, MBA

Tim Kober
Cedar Financial Advisors, LLC
(503) 512-5890
3853 SW Hall Blvd
Beaverton, OR
Expertises
Hourly Financial Planning Services, Cash Flow/Budgets/Credit Issues, Ongoing Investment Management, Advising Employee Benefit Plan Participants, Middle Income Client Needs, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, BS, CFP®

Patricia Passon
Encompass Financial Advisors, Inc.
(503) 643-8075
6107 SW Murray Boulevard, #403
Beaverton, OR
Expertises
Ongoing Investment Management, Helping Clients Identify & Achieve Goals, Middle Income Client Needs, Retirement Planning & Distribution Rules, Retirement Plan Investment Advice, Planning Issues for Unmarried & Same-Sex Couples
Certifications
NAPFA Registered Financial Advisor, CFP®, MBA

Russell McAlmond
Evergreen Capital Management, Inc.
(503) 223-8880
10300 SW Greenburg Road, Suite 115
Portland, OR
Expertises
Ongoing Investment Management, Helping Clients Identify & Achieve Goals, Hourly Financial Planning Services, Planning Issues for Business Owners, Retirement Plan Investment Advice, Special Needs Planning
Certifications
NAPFA Registered Financial Advisor, CFP®, ChFc, CLU, CTFA, MBA, MSFS

Gabriel Markiz
Portland Financial Advisors, Inc.
(503) 684-6116
12655 S.W. Center Street, Suite 520
Beaverton, OR
Expertises
Cash Flow/Budgets/Credit Issues, Planning Issues for Business Owners, Advising Medical Professionals, Retirement Planning & Distribution Rules, Tax Planning, Middle Income Client Needs
Certifications
NAPFA Registered Financial Advisor, CFP®, CPA/PFS

Andrew Jamison
Main Avenue Financial Services, LLC
(503) 336-3776
9725 SW Beaverton Hillsdale Highway
Beaverton, OR
Expertises
Helping Clients Identify & Achieve Goals, Hourly Financial Planning Services, Retirement Planning & Distribution Rules, Cash Flow/Budgets/Credit Issues
Certifications
NAPFA Registered Financial Advisor, CFP®

Russell Francis
Portland Financial Advisors, Inc.
(503) 684-6116
12655 S.W. Center Street, Suite 520
Beaverton, OR
Expertises
Tax Planning, High Net Worth Client Needs, Ongoing Investment Management, Advising Medical Professionals, Retirement Planning & Distribution Rules, Planning Issues for Business Owners
Certifications
NAPFA Registered Financial Advisor, CFP®, CPA

Grant Griffith
Griffith Asset Management, LLC
(503) 246-3448
10260 SW Greenburg Road, Suite 400
Portland, OR
Expertises
Hourly Financial Planning Services, Ongoing Investment Management, Middle Income Client Needs, High Net Worth Client Needs, Retirement Planning & Distribution Rules, Estate & Generational Planning Issues
Certifications
NAPFA Registered Financial Advisor, BS

Mr. Randall D. Bateman, CFP®
(503) 681-2681
PO Box 220
Banks, OR
Firm
KMS Financial Services

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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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