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Seller Financing and Notes in The Dodd-Frank Era Seller Financing and Notes in The Dodd-Frank Era

Seller Financing and Notes in The Dodd-Frank Era - PowerPoint Presentation

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Seller Financing and Notes in The Dodd-Frank Era - PPT Presentation

Stop Discounting Real Estate Sell Fast with Unlimited Benefits and Maximum Sales Prices Investor Presentation Phone 4808315067 supportpinnacleinvestmentscom The Bank of YOU Be The Bank ID: 231437

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Slide1

Seller Financing and Notes in The Dodd-Frank Era

Stop Discounting Real Estate

!

Sell Fast with Unlimited Benefits and Maximum Sales PricesSlide2

Investor PresentationPhone: 480-831-5067

support@pinnacle-investments.com

Slide3

The Bank of YOU! Be The Bank!

The Bank Wins!Slide4

The Seller Finance Step by Step Process

Buyer, Seller Agrees on Seller Financing

Hire Pinnacle Investments

Agree on Terms & Sign Papers

Move into new Home

Make Monthly payments to Seller

Everyone

Wins

Seller Sells note for cashSlide5

Slide6

Source: Westcourt Funds

Optimism

Excitement

Euphoria

Denial

Fear

Panic

Despondency

Depression

Hope

Optimism

Point of maximum risk in investment

Point of maximum opportunitySlide7
Slide8
Slide9
Slide10
Slide11
Slide12
Slide13

4 million renters want to buy. Can they?Diana Olick | @diana_olick

Thursday, 13 Mar 2014 | 9:03 AM

ET

CNBC.com

Zillow : More Than 4 Million First-Time Buyers Want to Enter the Housing Market in 2014, Buoyed by Strong U.S. Housing Confidence

03/20/2014 | 11:55am US/Eastern

 

Recommend:

 

       

0

Millions of renters say they really want to buy a home this year

 

                               

 

By 

Les

Christie

March

13, 2014 4:54 AM

More Than 4 Million First-Time Buyers Want to Enter the Housing Market in 2014, Buoyed by Strong U.S. Housing Confidence

Homeownership Aspirations Among Current Renters Highest in Markets Hard-Hit by Housing Recession, According to Inaugural Zillow Housing Confidence IndexSlide14

Americans Shut Out of Home Market Threaten Recovery: MortgagesBy Prashant Gopal and John Gittelsohn  Mar 5, 2014 7:08 AM PT 

Say Hello to the Lenders Recession

March 7, 2014 

Mortgage

Demand for Mortgages Plummets, But It’s Not a Winter Storm, It’s More of an Ice AgeSlide15

Solution Always is Seller Financing

Seller

Becomes the Bank

Money Exchanges Hands - Down Payment

Buyer

Signs

Promissory

Note and Security Instrument

Remaining

balance

is carried as a loanSlide16

1970’s and 1980’s Seller Financed Transactions Dominated MarketSeller Carry Market Cooled With Continued lower interest rates over 30 years and easy loans.

Seller Financing HistorySlide17

Tenuous Financial MarketsEver Tightening Number of Qualifying Buyer Pool

Slipshod Appraisals

Increases Flexibility Of Transactions

Increase Yield Over Traditional Investments

Avoidance of capital gains taxes

Seller Financing TodaySlide18

Requires licensing for consumer credit transactions

Licensee is mortgage loan originator

Must register through Federal mortgage licensing system

Sellers

offering

seller

financing “may”

need to be licensed

Real estate

brokers arranging

a

loan/ negotiating terms need a license

Regulatory Issue

SAFE Act - 2008Slide19

Disclosures required for sellers/brokers involved in certain seller financed deals

Amends TILA to require disclosures for seller financed transactions

Sellers

have to meet very strict guidelines to be exempt from disclosure

requirements

Brokers have the same standards for exemption as the

SAFE Act

but must be

careful with compensation

Dodd Frank Financial

Reform Act - 2010Slide20

SELLER FINANCE CONSUMER EXEMPTIONS UNDER DFA:One (1)

OR

three (3) properties in any 12 month period

WHEN:

 

(1)The seller is a natural person. 

(3) or, Corporation

, LLC, partnership, trust, estate, etc

.

(1,3) The seller did not construct the property

(1,3) The financing has a fixed rate

and

does not adjust for the first 5

years and No

negative amortization

(3) The borrower has a reasonable

Ability To

R

epay

the loan

(3) N

o Balloon Payment

ALL OTHER SCENARIOS REQUIRE A SFC MLO

ExemptionsSlide21

Large Growing Market for Buyers With Less Than Perfect Credit After The Foreclosure CrisisMarket Share Increases In Rising Interest Rate Environments

Perfect For Properties Not Qualifying For Institutional Financing

Retiring sellers need steady reliable income

Seller Financing FutureSlide22

2010 California TransactionsSlide23

Seller Financing Myths

Only desperate people carry notes

Only bad properties require seller financing

“I

need all cash at the closing so I can’t carry the

loan”

Only unqualified buyers want seller financing Slide24

Require A Down PaymentCheck Credit

Assure Regulatory Compliance

Possibly Require A Personal Guarantee

Document Pay History

Seller Financing UnderwritingSlide25

Sellers Benefits IncludeSeller saves

on closing

costs, repair credits

and

feesParties

negotiate

interest

rate, repayment schedule, and other conditions of the

loan

Defers

capital gains

taxes

Keep equity at work at interest rates higher than the bank is

paying and more than historical appreciation rates Slide26

Seller Benefits Continued

If

the buyer stops paying, the Seller keeps everything and gets the property back

If

seller or heirs need money, they can sell all or part of the note for cash

Fast Sale and Maximize

the sales price by offering terms

Adds liquidity to properties that don’t qualify for bank financing

The

property could be sold “as is” so there would be no need for repairs Slide27

Seller Financing Strategies

AITD (Also Referred to as a “Wrap”)

Title Holding Trust

Stand Alone Second

Land Contract

Lease Option

Lease Purchase

Contract for Deed

Purchase Subject ToSlide28

Sample Note

$420,000 Purchase

Price / Owner Occupied SFR

80% Note

$

336,000 Face

Amount

8.22% Note Rate Slide29

Why? This Makes Sense For BorrowerThe up front FHA insurance is 1.75%

Loan origination is 1-2%

Down payment is 3.5%

That is a 6.25-7.25 minimum investment in down payment on an FHA loan

On top of that there's a 1.35% add to the rate over the life of the loan.

So if interest rates are 4.5% the effective rate on

FHA will be 5.85%Slide30

A Creative Solution EqualsA Better, Safer, Smarter Sale:

$2519.94 in Monthly Income

$139,196.40 in Total Income Over 60 Months

Potential $40,000+ Increase in Sales Price

Potential Savings of $12,000+ Property Repairs/ or Credits

Potential Savings of $12,000+ in Buyer Closing Cost Credits

Potential Savings of 33.33% in Capital Gains Taxes

No More Taxes, Tenants, Termites or ToiletsSlide31

Most Current Seller Financed Investor DealSlide32

Repair EstimateRepair Estimate for

New

roof:  $16,000

Kitchen:  $10,000

Bathrooms:  $12,500

Ext Paint:  $5,500

Stucco:  $17,000

Landscaping:  $3,500

Int

Paint:  $6,500

Int

Texture:  $

4,600

Elec

Panel:  $

2,500

Carpet

:  $3,900

Wood Flooring:  $3,400

Bathroom Tiles:  $1,600

Dumpsters:  $2,500Demo:  $2,000

Doors:  $1,850Contingency:  $4,000

Total:  $97,300Slide33

Maybe a Wholesale Deal on “Steroids”Listed Price $350,000

Investor offer accepted by estate@ $350,000

Consumer buyer offer

$437,500 / 30% down

$306,250 @8% 30/5Slide34

Buy and Hold or Flip: That is The QuestionNew investor $350,000

Flips to $437,500 buyer

30% down

Note for $306,250 & $218,750 in the deal

Payment $2247.15

60 month IRR 17.40%

Net $222,320

12 Month IRR 44.77%

Net $114,464

Sell the note 3 months

3 Month IRR 152.59%

@12% yield and make $84,491Slide35

The Bank of YOU! Be The Bank!

The Bank Wins!Slide36

The Seller Finance Step by Step Process

Buyer, Seller Agrees on Seller Financing

Hire Pinnacle Investments

Agree on Terms & Sign Papers

Move into new Home

Make Monthly payments to Seller

Everyone

Wins

Seller Sells note for cash