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Financial Consultants Hilliard OH

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 Dolce
Financial Solutions, LLC
(614) 604-3551
Riverside Drive
Columbus, OH
Expertises
Middle Income Client Needs, Retirement Plan Investment Advice, Hourly Financial Planning Services, Investment Advice without Ongoing Management, College/Education Planning, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, CFP®, MBA

Connie Demers
Demers Financial Planning
(614) 451-4505
2929 Kenny Road, Suite 190
Columbus, OH
Expertises
Ongoing Investment Management, Divorce Planning, Tax Planning
Certifications
NAPFA Registered Financial Advisor, BA, CFP®

John Sestina
John E. Sestina and Company
(614) 326-3077
1161 Bethel Road, Suite 201
Columbus, OH
Expertises
Advising Medical Professionals, Professional Athletes or Entertainers, Estate & Generational Planning Issues, High Net Worth Client Needs, Helping Clients Identify & Achieve Goals, Planning Issues for Business Owners
Certifications
NAPFA Registered Financial Advisor, BS, CFP®, ChFc, MSFS

Paul Dolce
Financial Solutions, LLC
(614) 604-3551
4946 Donegal Cliffs Drive
Dublin, OH
Expertises
Middle Income Client Needs, Retirement Plan Investment Advice, Hourly Financial Planning Services, Investment Advice without Ongoing Management, College/Education Planning, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, CFP®, MBA

Robert Reed
Reed Financial Planning LLC
(614) 263-3900
3763 North High Street
Columbus, OH
Expertises
Helping Clients Identify & Achieve Goals, Middle Income Client Needs, Newlyweds & Novice Investors, Tax Planning
Certifications
NAPFA Registered Financial Advisor, CFP®, PhD

Jill Gianola
Gianola Financial Planning
(614) 340-0770
2094 Tremont Center, Suite 4
Columbus, OH
Expertises
Middle Income Client Needs, Newlyweds & Novice Investors, Retirement Planning & Distribution Rules, Women's Financial Planning Issues
Certifications
NAPFA Registered Financial Advisor, BA, CFP®, MBA, MS

Thresa Alexander
Alexander Financial Planning, Inc.
(614) 538-1600
1570 Fishinger Road, Suite 200
Columbus, OH
Expertises
Helping Clients Identify & Achieve Goals, Middle Income Client Needs, Retirement Plan Investment Advice, Ongoing Investment Management
Certifications
NAPFA Registered Financial Advisor, CFP®, MS

William Leuby
Hamilton Capital Management, Inc.
(614) 273-1000
5025 Arlington Centre Boulevard Suite 300
Columbus, OH
Expertises
Estate & Generational Planning Issues, Planning Issues for Unmarried & Same-Sex Couples, Planning Issues for Business Owners, Advising Medical Professionals
Certifications
NAPFA Registered Financial Advisor, CFP®, CPA, JD

Carol Friedhoff
Savvy Outcomes
(614) 873-2874
6336 Phoenix Park Dr.
Dublin, OH
Expertises
Middle Income Client Needs, Newlyweds & Novice Investors, Cash Flow/Budgets/Credit Issues, Women's Financial Planning Issues, Advising Medical Professionals
Certifications
NAPFA Registered Financial Advisor, CFP®, MS

Joseph Reardon
Summit Financial Strategies, Inc.
(614) 885-1115
7965 North High Street, Suite 350
Columbus, OH
Expertises
Ongoing Investment Management, Cash Flow/Budgets/Credit Issues, College/Education Planning, Newlyweds & Novice Investors, Advising Medical Professionals
Certifications
NAPFA Registered Financial Advisor, CFP®, CRPS

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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