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Financial Consultants Statesville NC

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.

Ms. Michelle M. Rokes, CFP®
(704) 872-7671
PO Box 312
Statesville, NC
Firm
Opus Financial Advisors, Inc
Areas of Specialization
Asset Allocation, Comprehensive Financial Planning, Divorce Issues, Employee and Employer Plan Benefits, Estate Planning, Planning for Couples, Retirement Planning
Key Considerations
Average Net Worth: $100,000 or less

Average Income: $50,001 - $100,000



Data Provided by:
Ms. Carole W. Hendrix, CFP®
(702) 872-7671
PO Box 312
Statesville, NC
Firm
Opus Financial Advisors, Inc.

Data Provided by:
Mr. James Terry Staples, CFP®
(704) 872-7671
PO Box 312
Statesville, NC
Firm
Opus Financial Advisors, Inc
Areas of Specialization
Comprehensive Financial Planning

Data Provided by:
Ms. Sara Irene Seasholtz, CFP®
(704) 658-1040
136 Gateway Blvd Ste C
Mooresville, NC
Firm
Preferred Financial Strategies, Inc.
Areas of Specialization
Charitable Giving, Comprehensive Financial Planning, Divorce Issues, Education Planning, Estate Planning, Insurance Planning, Intergenerational Planning

Data Provided by:
Mr. Jeffery S. Andrew, CFP®
(704) 663-9041
918 Brawley School Rd Apt A
Mooresville, NC
Firm
LPL Financial
Areas of Specialization
Insurance Planning, Investment Planning, Retirement Planning

Data Provided by:
Mr. Brent C. Bowman, CFP®
(704) 293-7815
1434 Wilkesboro Highway
Statesville, NC
Firm
Bowman Financial Solutions

Data Provided by:
Ms. Sheri Bistreich, CFP®
(704) 872-8181
642 Signal Hill Drive Ext
Statesville, NC
Firm
Ameriprise Financial
Areas of Specialization
Asset Allocation, Charitable Giving, Comprehensive Financial Planning, Education Planning, Estate Planning, Intergenerational Planning, Investment Management

Data Provided by:
Mr. Scott A Polo, CFP®
(704) 924-8815
325 East Front St.
Statesville, NC
Firm
Main Street Investment Service
Areas of Specialization
Retirement Income Management, Retirement Planning, Socially Responsible Investments, Wealth Management

Data Provided by:
Mr. David M Alley Jr., CFP®
(704) 799-2661
179 Gasoline Alley
Mooresville, NC
Firm
First Command Financial Services
Areas of Specialization
Comprehensive Financial Planning
Key Considerations
Average Net Worth: $250,001 - $500,000

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

Profession: Government Employees

Data Provided by:
Garrett Moretz
290 Glencoe Lane
Mooresville, NC
Company
Title: Financial Advisor/Principal
Company: Moretz Wealth Management, LLC
Type
Investment Advisor Rep: Yes
Education
BS Business Administration
Years Experience
Years Experience: 11
Service
401k Rollover From Employer,Income for Life/ Preserve Principal,Wealth Management,Disability Insurance,Annuities,Alternative Asset Class Planning,Investment Consulting & Allocation Design,Business Succession & Liquidation Planning,Estate Tax Planning,Asset Protection Strategies & Planning,Fee-Only Comprehensive Financial Planning,Pension for Highly Compensated Owners,Stock Market Alternative,Reverse Mortgage,Medicare Planning,Life Insurance,Investment & Portfolio Management,Long-Term Health Care

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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