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Financial Consultants Humboldt TN

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.

Adrian Eddleman
Eddleman & Eddleman, LLC
(731) 554-2408
121 Stonebridge Blvd., Suite D
Jackson, TN
Expertises
Ongoing Investment Management, Retirement Plan Investment Advice, Advising Employee Benefit Plan Participants, Charitable Giving - Trusts & Foundations, Advising Medical Professionals, High Net Worth Client Needs
Certifications
NAPFA Registered Financial Advisor, MBA

Mr. Robert T. Tucker Iii, CFP®
(731) 784-4444
1420 Osborne Street Ste B16
Humboldt, TN
Firm
Sycamore Financial Advisors
Areas of Specialization
Comprehensive Financial Planning
Key Considerations
Average Net Worth: Not Applicable

Average Income: Not Applicable

Profession: Not Applicable

Data Provided by:
Ms. Karen A. Hutcherson, CFP®
(731) 660-7208
325 Oil Well Rd
Jackson, TN
Firm
First Tennessee

Data Provided by:
Mr. John W. New Jr., CFP®
(731) 661-7035
1000 Union University Dr
Jackson, TN
Firm
Bancorp South Investments
Areas of Specialization
Asset Allocation, Banking, Comprehensive Financial Planning, Education Planning, Investment Management, Investment Planning, Wealth Management

Data Provided by:
Regions Bank - Jackson N Liberty Main
(731) 422-9600
118 N Liberty
Jackson, TN
Type
Branch
Office Hours
M-F 8:30-5:00
S CLOSED
Su NA
Drive Up Hours
M-S CLOSED
Su NA

Mr. Charles E. Cloud, CFP®
(731) 784-8800
15 Sanders Bluff Rd
Humboldt, TN
Firm
Edward Jones Investments

Data Provided by:
Mr. Dudley E. Pritchard Jr., CFP®
(731) 723-1132
503 W Church Ave
Medina, TN
Firm
NFP Securities

Data Provided by:
Ms. Shirley J. Borden, CFP®
(731) 668-3825
3339 N Highland Ave
Jackson, TN
Areas of Specialization
Asset Allocation, Budget Development, Comprehensive Financial Planning, General Financial Planning, Life Planning, Women's Finances
Key Considerations
Average Net Worth: $100,001 - $250,000

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

Profession: Service Professionals

Data Provided by:
Jason Schultz, CFP®
(731) 571-8312
72 Lynoak Cv
Jackson, TN
Firm
Northwestern Mutual
Areas of Specialization
Comprehensive Financial Planning, Education Planning, Insurance Planning, Investment Management, Long-Term Care, Retirement Income Management, Retirement Planning
Key Considerations
Average Net Worth: Not Applicable

Average Income: Not Applicable

Profession: Medical/Dental Professionals

Data Provided by:
Caldwell Bryant Financial Advisors
(731) 668-5117
2802 N Highland Ave
Jackson, TN
 
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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