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Financial Consultants Hamden CT

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.

Paul Pignone
Boston Retirement Advisors, LLC
(203) 453-2806
720 Goose Lane
Guilford, CT
Expertises
Ongoing Investment Management, Retirement Plan Investment Advice, Retirement Planning & Distribution Rules, Hourly Financial Planning Services, High Net Worth Client Needs, Middle Income Client Needs
Certifications
NAPFA Registered Financial Advisor, AIF, CFP®, ChFc, CLU, CSA

Mr. Jeffrey R. Russek, CFP®
(203) 985-8277
565 Washington Ave
North Haven, CT
Firm
Russek Financial Services

Data Provided by:
Mr. Bryan P. Bogen, CFP®
(203) 248-8587
2525 Whitney Ave
Hamden, CT
Firm
Spectrum Finl Strategies Inc

Data Provided by:
Mr. Arthur J. Kelleher Iii, CFP®
(203) 287-5492
3190 Whitney Ave. #8
Hamden, CT
Firm
Kelleher Investment Management, LLC.
Areas of Specialization
Investment Management, Investment Planning
Key Considerations
Average Net Worth: $500,001 - $1,000,000

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



Data Provided by:
Mark D. Stevens, CFP®
(203) 288-2990
2319 Whitney Ave
Hamden, CT
Firm
Waddell & Reed

Data Provided by:
Clifford Straub
Lifestyle Financial Strategies, LLC
(860) 344-8356
100 Riverview Center, Suite 316
Middletown, CT
Expertises
High Net Worth Client Needs, Tax Planning, Ongoing Investment Management, Planning Concerns for Corporate Executives, Retirement Plan Investment Advice, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, BS, CFP®, MBA

Mr. Vincent A. Rascati, CFP®
(203) 909-6005
2 Washington Ave
North Haven, CT
Firm
Lincoln Financial Securities Corp.
Areas of Specialization
Education Planning, General Financial Planning, Insurance Planning, Investment Management, Investment Planning, LGBT Individuals and Couples, Retirement Income Management
Key Considerations
Average Net Worth: $500,001 - $1,000,000

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



Data Provided by:
Ms. Elizabeth Mcclelland, CFP®
(203) 281-1112
AG Edwards
Hamden, CT
Firm
Benjamin F Edwards & Co

Data Provided by:
Mrs. Meredith W. Briggs, CFP®
(203) 281-2430
2319 Whitney Ave Ste 6A
Hamden, CT
Firm
TIAA Cref
Areas of Specialization
Asset Allocation, Business Succession Planning, Charitable Giving, Comprehensive Financial Planning, Divorce Issues, Education Planning, Employee and Employer Plan Benefits

Data Provided by:
Mr. Martin R. Lambert, CFP®
(203) 281-7028
295 Washington Ave Ste 8
Hamden, CT
Firm
U.S. Wealth Management, LLC
Areas of Specialization
Comprehensive Financial Planning, Divorce Issues, Estate Planning, Retirement Income Management, Tax Planning, Tax Preparation, Wealth Management

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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