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Financial Consultants South Weymouth MA

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.

Daniel Candura
PennyTree Advisers, LLC
(781) 930-3027
25 Braintree Hill Office Park
Braintree, MA
Expertises
Hourly Financial Planning Services, Investment Advice without Ongoing Management, Retirement Plan Investment Advice, Middle Income Client Needs, Advising Employee Benefit Plan Participants, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, CFP®

David McPherson
Four Ponds Financial Planning, LLC
(781) 561-1135
99 Derby St., Suite 200
Hingham, MA
Expertises
Retirement Planning & Distribution Rules, Retirement Plan Investment Advice, Ongoing Investment Management, Middle Income Client Needs, Hourly Financial Planning Services, Planning Issues for Business Owners
Certifications
NAPFA Registered Financial Advisor, CFP®

Wayne Morrill
Morrill Financial Services
(781) 775-4677
4 Indian Wind Drive
Scituate, MA
Expertises
Ongoing Investment Management, Cash Flow/Budgets/Credit Issues, College/Education Planning, Estate & Generational Planning Issues, Retirement Planning & Distribution Rules
Certifications
NAPFA Registered Financial Advisor, CFP®

Linda Gadkowski
Beacon Financial Planning, Inc.
(508) 230-3588
45 Bristol Drive, Suite 101
South Easton, MA
Expertises
Ongoing Investment Management, Advising Employee Benefit Plan Participants, Women's Financial Planning Issues
Certifications
NAPFA Registered Financial Advisor, BS, CFP®, M.Ed.

Robert Siefert
Modera Wealth Management, LLC
(617) 247-0518
535 Boylston Street, Suite 300
Boston, MA
Expertises
High Net Worth Client Needs, Planning Concerns for Corporate Executives, Charitable Giving - Trusts & Foundations, Ongoing Investment Management, Retirement Planning & Distribution Rules, Estate & Generational Planning Issues
Certifications
NAPFA Registered Financial Advisor, CFP®

Robert Hurley
Stoddard Management Co.
(781) 982-9932
800 Hingham Street
Rockland, MA
Expertises
Ongoing Investment Management, Retirement Plan Investment Advice, Retirement Planning & Distribution Rules, Advising Employee Benefit Plan Participants, Tax Planning, High Net Worth Client Needs
Certifications
NAPFA Registered Financial Advisor

Stephen Gorman
Gorman Financial Management
(781) 556-1001
99 Derby Street, Suite 200
Hingham, MA
Expertises
Ongoing Investment Management, Helping Clients Identify & Achieve Goals, Retirement Planning & Distribution Rules, Estate & Generational Planning Issues, Financial Issues Between Generations
Certifications
NAPFA Registered Financial Advisor, BS, CFP®

Walter Herlihy
Beacon Financial Planning, Inc.
(508) 230-3588
45 Bristol Drive, Suite 101
South Easton, MA
Expertises
Helping Clients Identify & Achieve Goals, Retirement Planning & Distribution Rules, Estate & Generational Planning Issues, Retirement Plan Investment Advice, Charitable Giving - Trusts & Foundations
Certifications
NAPFA Registered Financial Advisor, ChFc, CLU

Thomas McFarland
The Darrow Company, Inc.
(617) 330-5090
101 Federal Street
Boston, MA
Expertises
Ongoing Investment Management, Estate & Generational Planning Issues
Certifications
NAPFA Registered Financial Advisor, BS, CFP®

Peter Disch
Disch & Associates, LLC
(617) 585-0050
10 Newbury Street, 4th Floor
Boston, MA
Expertises
High Net Worth Client Needs, Ongoing Investment Management, Advising Medical Professionals, Advising Entrepreneurs, Alternative or Private Investments, Estate & Generational Planning Issues
Certifications
NAPFA Registered Financial Advisor, CFP®

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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