4 Excellent Personal Finance Advices You Should Read Today

How you invest depends on what you know. Some say it takes experience to fully understand how to invest properly. Although the most of the concepts can be abstract and unclear, there are ways and methods to start investing with good practices. The problem is that many people just would not follow the advices, although they are simple to understand. It is often the people who take action rather than doing the thinking (thus doing nothing) that are garnering real success in investments.

You should never invest based on a sales pitch

After listening to an impressive sales presentation about a new investment product, you are convinced and ready to buy. After all, they have all the statistics that are very real and that future trend of the product is the way to go. However, you should also be aware of marketing tactics. Often times, aggressive marketers or salespeople who pitch hard are either making money from commission from low quality products. You will find that the high-end investment products do not get promoted much. They are always regarded as opportunities that people just seem to pass on but get sucked into the nicer-sounding presentations instead.

You must not invest whenever you have doubts or questions

In simple terms, if you do not understand your investment the slightest bit, do not invest. It is as simple as that. So what if you can understand 80% of how an investment works? Be wary of salespeople or brokers who are good at selling. You will find that they will often sell to you products and services that you do not need at the first place. Why are they doing this? So that they could earn a bigger pay check from earning off your sales commission. Find out the track record and past history of the investment before even considering buying it. Get to know how “liquid” it is. Liquid in this case means how readily it is convertible to cash.

Stay away from high fees related products or services

Investments with high sales commissions and management expenses should be avoided at all costs. In fact, you should purchase all of your investments by yourself. The reason is most high commission investments do not perform as well. Chances are, you are better off with investments that cost you lower fees.

You should always keep tax in mind

Getting involved with investments could mean getting your hands dirty. You should be aware of the tax benefits and effects by investing alone. When you are busy investing, take the time to keep note of your taxes too. You do not want to pay higher taxes because of your aggressive investing habit.

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The Impact of Structured Finance on the Ghanaian Financial Services Industry in the Next 10 Years

A Company can issue bonds to investors secured on the future profits expected to arise from part of its existing life business.

When a pool of financial assets (such as car finance, home or commercial mortgages, corporate loans,royalties, leases, non-performing receivables, and contractually pledged operating revenues) are structured and transferred to a ‘special purpose vehicle or entity'(SPV or SPE) it is known as a Securitisation transaction.

Generally, most securitisation transactions involve a two tier transaction in which the originator of the assets to be securitised transfers such assets to a wholly-owned SPV.In turn the SPV transfers or pledges such assets to another entity, which issues rated securities in the capital markets that are collaterised by such assets. This second tier entity can be another SPV or a multi-seller commercial paper conduit and can provide funding by issuing medium term notes or commercial paper.

Types of Securitisation transaction

Usually with securitisation transactions, the transfer of rights to assets can take one of two main forms, true sale or synthetic securitisation.

1. True Sale securitisation

In a true Sale securitisation, the originator (for instance a bank selling mortgages) sells the assets to the Issuer. the assets are serviced by the servicer who happens to be the Originator, with respect to say the mortgages sold to the Issuer(i.e.) and the originator continues to collect the principal and interest from the borrowers on behalf of the issuer on such mortgages and see to all default mortgages as well.

The significance of true sale is that the first-tier sale of the assets from the originator to the SPV is structured as a “true sale” such that the assets are removed from the originator’s bankruptcy or insolvency estate and cannot be recaptured by any trustee. Thus, the issuers are usually incorporated as insolvency remote entities; and may not engage into any transactions other than those necessary to effect the securitisation what is known as “limited purpose-concept” by which virtue the SPV will not be allowed to issue any additional debt or enter into mergers or similar transaction.

The transactions can be conducted as conduit, whereby the purchaser purchases and securitises assets from a number of different originators. This is done by through refinancing by issuing commercial paper into the capital market. Banks usually engage in conduits by arranging securitisation for their clients, or standalone where the purchaser only purchases assets and issues as asset-backed securities in the context of a single securitisation transaction. No commercial paper is issued.

It must be said here that, the legal characteristics and economic substance of the transfer will be the primary determining factors as whether the transaction is a true sale not a loan.

2. Synthetic Securitisation

In a synthetic securitisation transaction the originator does not sell any assets to the Issuer and therefore does not obtain any funding or liquidity under the transaction. The originator enters into a credit swap with the issuer in respect of an asset or pool of assets, transferring the originator’s risk to the issuers. Under this contract, the issuer pays the originator an amount equal to any credit losses suffered in respect of such assets or pool of assets. The Issuer’s (SPV) income streams in a synthetic transactions are the fixed amounts paid by the Originator under the credit default swap and interest amounts received on the collateral. These transactions are typically undertaken to transfer credit risk and to reduce regulatory capital requirements.

3. “Whole-Business” Securitisation

Apart from the main two forms above,” whole business” securitisation is sometimes used to finance a stake in private or management buy out of the Originator.

This type of securitisation originated in the United Kingdom. It involves the provision of a secured loan from an SPV to the relevant Originator. The SPV issues bonds into the capital markets and lends the proceeds to the Originator. The Originator services its obligations under the loan through the profits generated by its business. The Originator grants security over most of its assets in favour of the investors. In terms of cash flow, there are three most common types of securitisation transactions:

Collaterised Debt- this is similar to traditional asset-based borrowing. The debt instrument need not match the cash flow configure ration of any of the assets pledged.

Pass-Through-this is the simplest way to securitise assets with a regular cash flow, by selling participation in the pool of assets i.e. an ownership interest in the underlying assets so that principal and interest in the underlying assets collected are given to the security holders;

Pay-Through debt instrument-this is borrowing instrument and not participation. Investors in a pay-through bond are not direct owners of the underlying assets but simply investors.

One significant thing with SPV is that unlike with ordinary operating companies, whose charters typically provide for maximum flexibility, the charters of SPVs provide for the entity to have only those powers that are necessary to accomplish the purpose of the securitisation transaction. Thus the SPV in a securitisation will have the power only to purchase the particular receivables contemplated by the transaction, issue the related capital market securities, and make the payments on them and so on.

The reason for these restrictions is thought to keep the risks of the SPV’s own bankruptcy as narrow as possible: the smaller the range of the entity’s activities, the smaller the risk of a bankruptcy.

Securitisation is based on the underlying assets being securitised. Rating agencies spend a lot of time to estimate the credit risk for all underlying assets in Securitisation transaction. Other risks considered is the prepayment risk.-the risk that a portion of the assets in the underlying pool may be repaid early. Payments and settlements in Ghana are considered to be good. Prepayments can reduce the weighted average life of the pool and as a result expose investors to considerable uncertainty over future cash flows.This can be mitigated by separating the payment of the principal and interest or the conversion of fixed rate returns to floating rate.

Third Party Risk

Collateral is not the only important factor in structured finance transaction. A servicer risk would be particularly strong in Ghana. This is the case that the collection of payments, distribution to investors and performance tracking will fail. Because in Ghana credit rating is not popular.

In a Securitisation or structured finance transaction, a lot of third parties are involved who must fulfill their various responsibilities to make the transaction go on successfully .”Time is money”, it is said. Other third party risks include trustee managing succession of servicing in case of servicer default, notifying investors and rating agencies of breaches and defaults, and holding cash payments to prevent servicer misuse of cash flows; manager responsible to balance the competing interest within a transaction.

Financial Risks (Interest Rate Risks, Foreign Exchange Rate Risks, Devaluation Risk)

Financial risks usually cover interest rates, foreign exchange rate & availability, currency and inflation risks. Inflation really affects the originator in a Securitisation transaction for reasons like raising the cost of the transaction which can delay its completion. Some governments are also sceptical about foreign investment in their country and sometimes prevent the repatriation of funds by foreigners outside. Devaluation and interest rate just like inflation can also affect Securitisation negatively especially when provision has not been made in the transaction deal for that. Russia is a good example. International funds are often cheaper than local ones, but given the fact that the payment to receivables is sold locally, and paid in local currency, using foreign loans creates exposure to the risk of currency depreciation.

Political Risk

Because cross-border transactions are conducted such that assets generate cash flows in the domestic currency while the securities backed by those assets are denominated in foreign currency, there is the risk that regardless of the credit strength of the underlying assets, the issuer might default on the payment. The following relevant known political risks are identified:

Expropriation risk:
The act of taking something from its owner for public use. This involves the act where a government takes over assets or accounts of local parties in the event of financial crisis.

Nationalisation:
Transfer of business from private to state ownership. This is not usually experienced in the West as in South America and Africa. In relation to Ghana’s political situation, this is not envisaged.

Convertibility risk:
This is the risk that in a national crisis, the government might impose a moratorium on all foreign currency debts because of a financial crisis in the country.

Change of law:
The ruling government can change the laws overnight and this can affect a structured finance. Sometimes for economic and political reasons, tax laws are enacted which might not be to the advantage of the originator in terms of the cost increase to certain elements which could increase the purchase price of the product on completion and can jeopardise the securitisation transaction which must be made cheaper if it is to succeed. For example an increase in the fuel tax can affect the entire transaction because tax neutrality is paramount to securitisation transaction.

Legal & Documentation Risks
Following change of law in political risk discussed above, possible legal risks to a Securitisation transaction include inadequate legal, legislative, and regulatory framework on tax, financial and money market & securities. Sometimes the case and administrative laws in the country concerned are not developed. These issues are of great concern to investors and for that matter the originator will have to deal with this risk.

In asset-backed securities(ABS),however, the legal and documentation risks include uncertainty surrounding the transfer of assets from the seller/originator to the SPV (i.e. ‘true sale’) the need to ensure that holders of ABS receive full control over the underlying assets; the bankruptcy remoteness of the issuing SPV.

This means reviewing all the covenants in relation to the separation of the SPV from the seller; the legal roles of the trustee and servicer across all relevant jurisdiction including Ghana to curtail operational and execution risks associated with the payment and receipts of transactions.

Because of the changes in deal structures and considering the legal and financial framework of Ghana, legal and documentation risk will be very high.

Regulatory Risk
The risk that originators and other lenders will not be treated fairly. There should be a laid down regulation on profit-sharing, regulations on the rated instruments and most importantly what structure should the SPV that issues the securities be.

Liability Structure Risk
This risk is the issues associated in which with the tranching or slicing of securities brings conflicting interests which if not checked may disrupt the appropriate distribution of receivables to end-investors. The key to structured finance transaction is the payment waterfall which set the covenants for paying the interests and principal and allocation of losses among investors. This can be sorted with over-collateralisaton tests which ensure the existence of sufficient collateral in the underlying pool of assets to cover principal payments; and interest coverage test to ensure that there are sufficient interest proceeds to cover interest payments to note holders.

Levels of Risks
Rating agencies usually would have to assess the totality of the risks envisaged in each transaction before assigning a rating to the security. Thus the potential for any shortfalls in receivables and the adequacy of any credit enhancement to ensure that the end-investors are assigned the right level of default risk. Cross-border transactions for example require specific analysis regarding the potential limit that could apply to the rating of the notes because of the potential default of a government and the possible application of a moratorium by a government in times of crisis.

Benefits of Securitisation
The use of Securitisation is not limited to one specific asset or income flow. The application stretches beyond the existing bank-funding products and equity funding arrangements. The challenge is the approach with which a Securitisation is considered and the ability to measure the impact thereof on the future of the business. This stems from the fact that Securitisation is cash flow driven and not earnings-improvement driven.

Generally, securitisation can offer the following benefits and we would later analyse to see whether or not it would benefit Ghana.

Efficient access to capital markets: when transactions are for example structured with credit ratings by a recognised credit rating agency on most debts, pricing is not tied to the credit rating of the originator. This is very significant if the originator is not credit worthy.

Limitation on issuer-specific’s ability to raise capital is reduced: securitisations can minimise an entity’s inability to raise capital because capital raised under securitisation becomes a function of the terms, credit quality or rating, prepayment assumptions and prevailing market conditions.

Illiquid assets are converted to cash: Securitisation makes it easier to combine assets which otherwise could not be sold on their own, to create a diversified collateral pool against which debt can be issued.

Raise capital to generate additional assets: capital can quickly be raised such as releasing long-term capital for any allowable purposes like completing capital project and purchasing additional assets.

Match assets and liabilities to minimise risks: a well-structured securitisation transaction could create near perfect matching of term and cash flow locking in an interest rate spread between that earned on the assets and that paid on the debt. This means that Ghanaian business entities can raise enough funds without necessarily providing collateral for security because of the transfer of risk.

Raise capital without prospectus-type disclosure: A conduit securitisation transaction allows one to raise capital without disclosure of sensitive information of any sort; in fact information is kept confidential.

Complete mergers and acquisitions, & divestitures more efficiently: Assets can be combined or divested efficiently under Securitisation transaction. By dividing assets into smaller parts against which debt is issued it can become possible to do away with other business entities which are no longer profitable.

Transfer risk to third parties: Financial risk on loans and other contractual obligations by customers can be partially transferred to investors under securitisations.

More funding beyond bank lending: A structured Securitisation transaction enables the originator to raise funding while maintaining the right to the profit on the receivables. However, these funds will not be linked to its credit rating but rather the credit rating is on the special purpose entity created for the Securitisation transaction. By incorporating an offshore SPE, many businesses in Ghana with poor credit rating might potentially raise funds for any purpose.

The overall effect of securitisation of bank loans and credit aggregates is likely to be a reduction in the level of credit extension by the monetary sector and a reduction of similar magnitude in the M3 money supply. This is to say that the banking sector closes its balance sheet by setting off some loans against some M3 deposits.However,the original borrowers still have obligations but to the SPV not a bank and institutional investors still own assets which are now tradable securities not M3 deposits.

Structure of Ghana’s Financial System
The financial system comprises of
1. Bank of Ghana
I. Savings and loans bank
II. Discount houses
III. Finance houses
IV. Leasing companies
V. Forex Bureaux
2. Securities and Exchange Commission
I. Stock Exchange
II. Brokerage firms
III. Investment Management companies
IV. Trustees and Custodians
3. National Insurance Commission
I. insurance Companies
II. insurance Brokers
III. reinsurance Companies

The banking system in Ghana is structured to serve the needs of all citizens as much as possible. At the end of 2005,the banking industry was made up of Merchant banks, Universal banks, Commercial banks, development Banks,ARB Apex banks, and Rural Banks; with a total growth of its assets by 17.62%.

The Non-Banking Financial institutions (NBFI) sector is made up of Savings and Loans Companies, Discount Houses, Finance Companies and Leasing Companies. Total assets for the Non-Banking Financial Institutions also grew by 47.98% which were mainly triggered by loans and advances, investments, other assets and fixed assets. The Discount houses hold 82.61% of the overall total investments of the NBFI sector.

The new Banking Law, Act 673, which became operational in 2005 with its higher Capital Adequacy Ratio requirements, new sanctions regime, as well as higher governance standards ensured that banks remained generally compliant with regulatory and prudential requirements.

The Securities Market in Ghana

African stock exchanges face a number of challenges before they could enter a new phase of rapid growth. The most critical issue is to eliminate existing impediments to institutional developments. These include a wider dissemination of information in these markets, the implementation of robust electronic trading systems and the adoption of central depository systems. Ghana has since established a central depository system in November, 2004.

The Ghana securities market is regulated by the SEC. The Ghana Stock Exchange is underdeveloped with reference to exchanges in US, Europe and even South Africa. South Africa for example has market capitalisation of $180 billion, one of the largest in the world with Ghana’s market capitalisation of $11 billion.

Considering that Ghana has had just one Securitisation transaction -structured finance-with no records for research, and the position of Ghana’s macro-economic situation, it was found expedient to look at the Securitisation transaction in South Africa. Even though Securitisation transaction is still at an early stage of development in South Africa, it has grown rapidly in recent years and it would be a suitable “benchmark” after which to carve Ghana’s Securitisation transaction.

According to the available information, the first Securitisation in South Africa was aimed at mortgage Securitisation; developments were very slow over the 11 years. Then in 1992 Securitisation was applied to corporate equipment rentals and leases up until 1997 through 2000s with Securitisation on trade receivables, properties, future rebate flows, future cross-border flows and CLOs.

South Africa’s motive for Securitisation transaction was to benefit from more efficient financing and profit maximisation; improved balance sheet structure and finance ratios; improved risk management; and lower economic and regulatory capital requirements among others.

Although the Securitisation transaction is still in its infancy in south Africa, available records show that issuance involving domestic banks in South Africa (i.e. private banks) has increased from R250 million in 1989 to a whopping R26 billion by the end of October 2005. Based on a recent study conducted on the UK market which suggests that Securitisation provides investors the opportunity to attain a higher after tax return in comparison with after tax returns being generated by equity related property investment , Securitisation in South Africa is being applied as an acquisition tool in acquiring properties and as a portfolio optimisation and value unleashing tool.

Securitisation regulations in South Africa compares to international Regulatory Practices similar to those in the United States of America and regulate the manner with which Securitisation assets and income flows are transferred from the originator to the SPV and operational aspects and efficiencies of the SPV.

Different opinions exist in the South African market regarding conformity to Securitisation regulation. One centres on the use of specific words “Bank or deposit-taking Institution” that only South African banks can originate a securitisation.The other opinion is on non-conformity as appropriate if a company or business other than a bank originates a Securitisation.

The onus of the matter is that Securitisation transaction is also designated within the regulation as an activity which is not limited to the business of a bank under certain conditions; thus allowing companies other than a bank to embark on Securitisation transaction.

The Ghana Securities Exchange Commission’s annual report for 2004 does not mince words about the position of the Ghana Securities market. It reported that “despite the modest decline in index performance in percentage terms, the GSE still maintained its position as one of the best performing stock exchanges in the world in 2004 for the second time running.” Market capitalisation of listed Companies on the Ghana Stock Exchange increased by 84.90 trillion cedis to 97.61 trillion cedis from just 12.6 trillion cedis.In dollar terms, market capitalisation went up by 654.0% from US$1.43 billion at the beginning of 2004 to US$10.8 billion at the end of 2004.

Unlike the stock market, the bond market in 2004 was relatively low posing “a serious market development challenge to the commission”. The turnover value of listed corporate bonds in 2004 declined from US$606,600 in 2003 to US$73,414 a decline of 87% whilst government bonds also declined by 71%.The value of listed corporate bonds in 2004 was US$6.79 million compared to US8.98 million in 2003.

The corporate bond market remained relatively quiet. However, the US dollar denominated corporate bonds traded on the market increased by $41,783 to $115,200.

The government of Ghana is determined to use municipal, corporate, government and agency bonds to improve activity in the primary market. As a result of that, the Bank increased accountability and transparency in line with International Financial reporting Standards (IFRS) best practices in its financial reporting and disclosures in 2005.
Coupled with this, other relevant Government policies were strengthened to reinvigorate revenue collections and consolidate public expenditure aimed at reducing the domestic debt in relation to GDP .As a result of that the government started a programme of reducing domestic debt in relation to GDP to enable the private sector access credit and lead the growth process.

The significance of Bank of Ghana in the financial system is that the bank is the provider of technical support for the legal and regulatory reform of the financial system to minimise risks and ensure legal certainty especially for electronic transactions; and also monitor various financial laws at different stages of development.

There is no doubt that people learn from experiences of others so do nations about the successes and failures of other nations especially with regard to something new and complex like the concept of Securitisation transaction. It is recommended that Securitisation in Ghana is modeled on the experience of South Africa’s Securitisation transactions with some changes in the legislations to fit the situation in Ghana.

Ghana’s private sector is beset with many constraints for no doubt, however, the other side is that, there are so many opportunities either untapped or unidentified comparative as well as other natural and mineral resources already in large quantities. There is potential for more effective exploitation of these endowments. But continued reliance on a few commodities with low prices and wages subject to fierce international competition in slow global markets have left the country vulnerable to hardship. These products could be structured and securitised.

Training of players of Securitisation transactions like, the originator, servicer, legal advisers, accounting adviser, tax advisers and others must be continuous about the technicalities of Securitisation transaction from now till the take-off. There should not be any mediocrity as is the characteristics of government and government agencies.
Investors and potential originators must also be educated on the benefits of Securitisation as an alternative for traditional capital formation besides equity and debt which is common to the Ghanaian business community. Providing better understanding of, cash flow drivers behind Securitisation transactions, credit rating agencies and also credit enhancement issues. This would trigger a strong desire for this form of capital formation to put Ghanaian businesses in the race to compete favourably on the international scene.

The technicalities of grasping the intrinsic techniques of properly analysing the segregation of assets and income flows from the company that owns them to the SPV which is meant to control the assets for the benefit of investors, must be well understood by the investment community.

A lack of genuine understanding of the drivers behind a Securitisation transaction, the ability to measure the impact on future operations as well as the initial costs involved in Securitisation creates difficulty in clearly defining the true incentives for conducting Securitisation amongst South African companies. Thus a comprehensive understanding of such amongst Ghanaian companies will boost Securitisation transaction.

One issue that needs to be tackled very well is the Tax Laws to make the Securitisation transaction work. Ghana operates a free-zone scheme and this can be extended to encourage Securitisation transaction. Certain areas within the country could be assigned as ‘free zone for Securitisation’and ‘use as tax haven’ to nurture and groom Securitisation in Ghana.

The regulatory environment through which Securitisation is conducted, coupled with capital market infrastructure to support adequate pricing of all risks associated with all forms of Securitisation transaction-conduit, synthetic or “whole-business”.

Finally, it is recommended that, research into the legal framework on bankruptcy, tax, and commercial laws relating to structured finance and Securitisation in particular should be encouraged among the Ghanaian academia.

Ghana indeed has an enabling environment suitable for Securitisation transaction. Key issues to drive this on might include as mentioned above extension of existing laws like Tax, Bankruptcy and commercial Laws to include treatment of Securitisation transaction.

Ghanaians are strong-willed, forceful and patient. When the expertise is acquired for Securitisation with the training of the players above, good governance of the other key government policies like MIDR and Strategy for 2004-2008‎, improvement on the Ghana School Financing activity‎ they will serve as catalyst for Securitisation.

Considering the experience of South Africa over the past decade, the experience of the developed economies in Securitisation transaction and the macroeconomic and the investment climate continue to improve as it is now ,in the next 10 years, Ghana will not be too farther away from engaging in Securitisation transaction if not already there.

Reference:
1. ‘Securitisation in South Africa-a revolution for local funding’, by Bagley et al(2003) Fitch Ratings available online accessed 20/07/2007
2. ‘Securitisation: A public tool?’ Treasury working paper, by Davis,N ,available online treasury.govt.nz/workingpapers/ accessed on 20/07/2007
3. ‘Securitization.’Wikipedia, the free encyclopaedia. Reference.com accessed 25 Feb. 2007.
4. “Consider Securitisation to improve liquidity in the South African property market” by Eugene G van den Berg, accessed on vinodkothari.com accessed on 04/08/07
5. “Note on the impact of securitisation transaction on credit extension by banks” in Quarterly Bulletin December 2005 by N. Gumata and J .Mokoena
6. “The awakening of securitisation in south Africa”, by Van Vuuren online available vinodkothari.com/secafric.htm
7. Africa -Ghana organising in the informal sector(on line) Available from oecd.org/dataoecd/html (accessed 29th April 2006)

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How “Seller Financing Available” or “Owner Will Carry” Can Help the FSBO Home Seller

It’s no secret our economy-especially the real estate market-is in turmoil. Ten percent or more of Americans are unemployed. Nobody has even compiled statistics for the number of people who are surviving on a drastically reduced income. More than 5 million homes have been foreclosed on and more are still expected to come as people simply walk away from upside down situations. The Real Estate market nationally has approximately a 12 month supply meaning it will take property owners who do not offer a significant price reduction over their competition, 1 full year to sell.

Does that fit into Your Time Frame?

Are you willing and or able to take the drastic price reduction that will bring you a buyer?

Downward pressure on prices, buyers simply holding back, and the inability to secure traditional financing is creating extreme competition for the limited few buyers that are out there. You however – The For Sale By Owner Seller – can create your own competitive edge, your own market, your own liquidity and,

Get Top Dollar for your sale by offering Seller Financing!

Why Are You Selling Without the Assistance or a Real Estate Agent?

1) You want to keep All proceeds from your sale and not give away 6% paying agent commissions.

2) You are very familiar with the process-maybe an agent yourself-and do not necessarily need the assistance of an agent

3) You just don’t like real estate agents

4) You are trying to get out of a bad situation-maybe very close to upside down-and there simply is not enough equity to pay commissions

5) You WANT to Keep ALL the proceeds from the sale

Regardless of the reasoning behind doing FSBO the fact of the matter is, this is a very strong buyers market but with only a limited few buyers and the competition for sellers to attract them fierce. They are bargain hunters, and with so many foreclosure and short sale opportunities available you aren’t getting any interest in your full or near full property value sale price.

3 Magic Words to Create a Fresh New Market

By adding these three words-“Seller Financing Available”or “Owner Will Carry”–to your ad, you have the potential to pull in as many as 20% more potential buyers, that your competition is turning away. There is a multitude of would be buyers who for many different reasons cannot secure the traditional financing they need to make the purchase they want. Buyers who have CASH, an eagerness to buy, and many who have decent to very good credit. These buyers are now searching high and low for the 3 magic words that could allow them to make the property purchase-YOURS-they are looking for. Include these words in your ad and your phone will start ringing again.

What do These 3 Words Mean

Seller Financing Available, or Owner Will Carry simply means you will act as the bank. Without any money out of your pocket, you will loan the buyer the money they need to purchase your home- or whatever other type of property you are trying to sell as this strategy works for any type of real estate, or even for the sale of a business. This is how it works. You and your buyer will create the terms that are agreeable to both of you. You can set these terms up in any way you want–there are no restrictions. Everything including but not limited to Interest Rate, Down Payment, Length of Repayment terms, Balloon Payments, Monthly Payment, Special Clauses, even Sales Price is negotiable. Then you will draw up, or have them drawn up by an attorney-highly suggested-the contracts and the all important “Mortgage Note”. These are the binding documents obligating your buyer to pay as per the terms set forth within them. It’s really that simple. You then close the transaction just as any other real estate transaction through a title company, and set forth the agreement.

How Can This Help You with Your Property Sale

I’ve already pointed out how just offering seller financing will help you gain a huge advantage over your competition by bringing in more potential buyers tapping into a virtually untapped resource. Seller Financing can also provide the seller with these additional benefits: 1) Get Your Asking Price–Possibly Even More-Regardless of the existing market conditions around you 2) Close Quickly 3) Get Cash at Closing 4) Defer Capital Gains Taxes that your net profit will be exposed to, thus creating the potential for you to hold onto even more of it 5) Create a Positive Cash Flow for your Future 6) Have the availability to obtain a Lump Sum of Cash at any time 7) Create an Overall Larger Net Gain from Your Sale I’m sure that at one point or another all of these “benefits” must have been taken into consideration in relation to your property sale, although some of them such as capital gains taxes may not have been viewed as an actual benefit. Seller financing adds a positive spin to each one of these factors every property owner must consider when selling.

Tips to Help You

There are still many questions to be answered should you decide this strategy could work for and many of you may even still have doubts about offering seller financing. It is strongly recommended you hire a real estate attorney to help answer these questions and quell any doubt or concerns you still have. The retainer fee will be well worth it and realistically not all that much when compared to the benefits and increased profit potential. It is also strongly recommend you incorporate the assistance of a reputable mortgage note service. While an attorney can help you with all of the legal aspects, advise you on potential pitfalls and benefits, and draw up the contracts and documents for you, they may not be very helpful in the actual structuring of the deal. This is where a Note Service can help. Depending on your individual needs and what your ultimate goals are, the way you structure the deal can either supplement, hinder or possibly even negate your final results. An experienced mortgage note specialist can help guide you through your buyer negotiations and help you generate the terms of the sale that will uphold your ultimate goals. You don’t want to find out after it’s too late you created something that limits the full potential of your Owner Carry sale.

Shhh-I’ve Got a Secret for you

Seller Financing/Owner Carry Financing your FSBO– CAN put a lot more CASH In Your pocket than a traditional real estate sale, and help you do it Faster.

The banks DON’T-Want-Anyone to know this! Neither do the Real Estate Agents– So keep it quite and TELL EVERYONE!

PSR Note-ability-Mortgage Note specialists

Specializing in privately held mortgage notes created from a seller financed sale of real estate. Residential, Commercial, Multi-family, Apartments, Vacant Land, Special Use, and Industrial Property. We also buy Business Notes created from the seller financed sale of your business. Buyer stopped Paying? We may be able to purchase your defaulted notes, no matter how old they are, and Cash you out of a dead end situation. Receive a large lump sum payment for your future incoming small monthly payments. Not a loan, this is already your money which you can use any way you want and Never have to repay.

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Profiting With Owner Financed Homes (AKA Seller Financed Or Owner Carry) – Real Estate Agent Gold

For the real estate agent, broker, or professional, who understands how to structure owner financed deals, gold in the form of commission checks is awaiting. After having spoken with dozens of agents regarding the topic, I want to help provide solutions to your number one question: How do I get paid?

Agents upon hearing the words “would the owner be willing to finance the sale” usually have a negative alarm going off in their heads that says “I won’t get paid”, or “I won’t receive my full commission”. By understanding how to structure these types of deals, you can assure yourself commissions in any market.

Obviously, we all know that it’s important for the buyer of the property, on a home listed with agents or brokers, to do one thing; find a way to cover three important things: 1) the agents commissions, 2) the seller’s closing costs, and 3) the buyer’s closing costs. We all know agents need to eat, therefore they need to get paid for helping buyers and sellers close real estate transactions.

Assuming we are working with a home owned free and clear (don’t worry, according to U.S. Census Bureau statistics, 31.7% of owner occupied owned homes are free and clear of mortgages), the key for the buyer is to find a way to provide approximately a 10% down payment (at least) so that all three of those above mentioned objectives can be obtained.

The first, and easiest, method is to have the buyer pay 10% cash down from either their bank account, a line of credit, or borrower from a relative. This will allow the seller to finance the remaining 90% of the purchase to allow the transaction to close.

The second, not as easy, method is to have the buyer borrow the 10% down payment from any lender on this planet to bring the cash to the closing table, and then allow the seller to hold a 2nd lien position of 90% to allow the sale to close. Even strict banks will worth with MANY borrowers to give the bank a 10% Loan to Value loan on a residential property. How can the bank lose ? If they borrowers make their payments, they win. If the borrowers default, they win. They are more secure in this type of deal than any other investment they could park their depositors hard earned money.

In summary, the agents who find a way to help buyers come up with 10% to cover their minimum acquisition costs can become a deal structuring machine. They can help sellers sale their homes quickly, and help buyers when conventional lenders are running for the hills.

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