Fundamentals of Seller Finance


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This slide show is a general outline to a video subsequently published on You Tube under Fundamentals of Seller Finance and also embedded in my website:

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Fundamentals of Seller Finance

  1. 1. GGB Capital LLC. <br />
  2. 2. The Fundamentals of Seller Finance Prepared especially for professionals, realtors and property owners<br />Prepared and presented by:<br />Kenneth E. Moll, President<br />GGB Capital LLC<br />San Francisco, CA<br />
  3. 3. Recent explosive growth of seller financing<br /><ul><li>Seller financing fills the void left by conventional financing
  4. 4. In 2005 an estimated 1 in 400 properties involved seller finance. By the end of 2008 it had grown to 1 in 50. Results since suggests the surge continues!
  5. 5. U.S. census data suggests that still 25% - 30% of all U.S. real estate is owned outright and more still with positive equity sufficient to empower this strategy</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />3<br />
  6. 6. Brief history of Seller Finance<br /><ul><li>Seller finance blossomed during the 1979 – 1982 period when prime skyrocketed to 20% and mortgages to 18%
  7. 7. The emergence and meteoric growth of sub-prime markets during the 2001 – 2007 period saw this comprise upwards of 20% of all mortgage originations
  8. 8. The spectacular collapse of sub-prime in late 2007 – 2008 fueled seller finance’s compelling resurgence</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />4<br />
  9. 9. A Tough Question: Should I Seller Finance?<br /><ul><li>Seller finance opens the potential number of eligible buyers by as much as 50% - 70%
  10. 10. Fact: If a buyer can qualify for conventional financing he/she/they will take it. Many just can’t today
  11. 11. Seller finance expands the flexibility beyond traditional boundaries and can significantly shorten the seller’s holding period and approx. 2%/month carrying cost</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />5<br />
  12. 12. Essential: Comprehensive due diligence<br /><ul><li>The #1 reason for default in the note business is fraud
  13. 13. Think like a lender, not a landlord. Trust, but verify!
  14. 14. The Five C’s of good credit still apply:
  15. 15. Character – the buyer’s good intentions
  16. 16. Credit – the buyer’s historical track record
  17. 17. Capital – the buyer’s “skin-in-the-game” (LTV)
  18. 18. Capacity – the % of income for debt servicing (DTI)
  19. 19. Collateral – the buyer’s upkeep and maintenance</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />6<br />
  20. 20. How a Note Professional creates a win-win<br /><ul><li>The mark of a true note professional is the ability to make even the real complicated sound understandable
  21. 21. Comprehensive due diligence and careful structuring generates a note that becomes highly marketable
  22. 22. A note professional can make certain the note meets the needs of private investors if it is later sold, with an estimated 60% eventually sold in whole or in part</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />7<br />
  23. 23. Sellers Beware: Be careful what you ask for<br /><ul><li>Fact: you get what you ask for. Avoid unnecessary time and expense dismissing unqualified buyers
  24. 24. If you offer “No Credit – No Problem” properties, you bring out mostly only those marginalized persons who do not represent truly credit worthy buyers
  25. 25. Advertise for “Seller Financing for Qualified Buyers” and get those people you want who meet that criteria</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />8<br />
  26. 26. What happens after the note is created?<br /><ul><li>Knowledge the note has been professionally prepared brings a great deal of confidence to the situation
  27. 27. Careful preparation and execution sharply improves all later hold-or-sell decisions regarding note
  28. 28. Developing a plan for servicing the note, tracking payments, monitoring taxes and insurance, and filing appropriate year-end IRS reports all essential elements</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />9<br />
  29. 29. What happens in the event of a default?<br /><ul><li>The seller and now note holder must always be prepared to foreclose on property if buyer in default
  30. 30. When speaking with your buyer, now creditor, always treat them with respect and keep lines of communication open at all [reasonable] costs
  31. 31. If foreclosure is unavoidable, always retain a trustee to handle the legal aspects as the laws are quite tricky</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />10<br />
  32. 32. Keeping in touch with your note professional<br /><ul><li>Most sellers have never structured a private sale before and don’t know how to conduct adequate due diligence
  33. 33. The risk appetites of note investors change as market conditions change and must be carefully monitored
  34. 34. Realtors who keep in touch with the seller finance market can retain a competitive edge by having one more tool to offer clients that most others won’t</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />11<br />
  35. 35. Happy Sales with Seller Finance!!!<br />Copyright 2009 GGB Capital LLC. All rights reserved.<br />12<br />
  36. 36. Getting in touch…<br /><ul><li>Contact Ken Moll of GGB Capital LLC at or 415-400-4077 for more insight as how best to utilize seller financing
  37. 37. Also contact our affiliates Alan Noblitt at Seascape Capital Inc. at or 858-672-4678, (a licensed real estate broker in California) or Eddie Speed at Colonial Funding Group at or 800-969-1200 x700 but please do mention our name.
  38. 38. Please reference this video and mention Code #125 for a special bonus on all your note closings with us!</li></ul>Copyright 2009 GGB Capital LLC. All rights reserved.<br />13<br />
  39. 39. Copyright 2009 GGB Capital LLC. All rights reserved.<br />14<br />