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Financial Consultants Prineville 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.

Chase Bank
(541) 447-3821
550 Ne 3rd St
Prineville, OR
Type
Freestanding
Office Hours
Mon:9:00-6:00
Tues:9:00-6:00
Wed:9:00-6:00
Thurs:9:00-6:00
Fri:9:00-6:00
Sat:closed
Sun:closed

US Bank - Prineville Office
(541) 447-4181
221 NE 3rd St
Prineville, OR
Languages
Spanish
Drive Up Hours
Mon 09:00 am to 05:00 pm
Tue 09:00 am to 05:00 pm
Wed 09:00 am to 05:00 pm
Thur 09:00 am to 05:00 pm
Fri 09:00 am to 05:00 pm

Wells Fargo - Redmond In-Store
(541) 548-7192
1705 S Hwy 97
Redmond, OR
Type
In-Store Branch
Office Hours
Mon-Fri 09:00 AM-06:00 PM
Sat 09:00 AM-03:00 PM
Sun Closed

Chase Bank
(541) 548-2123
568 Sw 5th St
Redmond, OR
Type
Freestanding
Office Hours
Mon:9:00-6:00
Tues:9:00-6:00
Wed:9:00-6:00
Thurs:9:00-6:00
Fri:9:00-6:00
Sat:closed
Sun:closed

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

Wells Fargo - Prineville
(541) 447-6111
220 Nw 3Rd St
Prineville, OR
Type
Branch
Office Hours
Mon-Fri 09:00 AM-06:00 PM
Sat 10:00 AM-02:00 PM
Sun Closed

Bank of America - Redmond
(541) 548-6116
552 SW 6th St
Redmond, OR
Type
Banking Center
Services
Banking Center Services: Change Order, Commercial Deposits, Night Deposits, Drive Up
Outdoor ATM Services: Open 24 Hours, Braille, Accepts Deposits
Languages
English, Spanish, Chinese, Korean, French, Russian, Portuguese
Office Hours
Monday 9-5
Tuesday 9-5
Wednesday 9-5
Thursday 9-5
Friday 9-6
Saturday 9-2
Sunday Closed
Drive Up Hours
Monday 9-5
Tuesday 9-5
Wednesday 9-5
Thursday 9-5
Friday 9-6
Saturday 9-2
Sunday Closed

US Bank - Redmond Office
(541) 548-1071
314 SW 6th
Redmond, OR
Languages
Spanish
Drive Up Hours
Mon 09:00 am to 06:00 pm
Tue 09:00 am to 06:00 pm
Wed 09:00 am to 06:00 pm
Thur 09:00 am to 06:00 pm
Fri 09:00 am to 06:00 pm

Wells Fargo - Redmond
(541) 548-4595
617 Sw 6Th St
Redmond, OR
Type
Branch
Office Hours
Mon-Fri 09:00 AM-06:00 PM
Sat 10:00 AM-02:00 PM
Sun Closed

Thomas Goodwin
Integrity Financial Planners
(541) 469-4080
16147 Hwy 101 S
Brookings, OR
Expertises
Ongoing Investment Management, Helping Clients Identify & Achieve Goals, Estate & Generational Planning Issues, Tax Planning, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, CFP®, CSA, EA

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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