We are building with a very well known home builder, we have paid our deposit and have just got DA approval and mortgage approval and now they are threatening to up the base price of the house design by an amount we are not prepared to increase our mortgage by, can we forfit our deposit, take the plans and owner build the house without getting sued for IP/copyright by the builders? if not how much would we have to change the plans in order to be able to?
we are in NSW Australia

I doubt this. You have a few problems. You do not own the house plans. Even when you buy a house you have no right to the actual plans and can not use them to build without the artifact signing off. You can not use ANY of eh plans without copyright infringement.

Your other problem is the home loan, your loan is for a built home. Construction loans are different, with very different criteria.

Unique Capital {LLC|Commercial Lending}remains to lend on commercial {real estate|mortgages} despite the recent credit {difficulties|crisis} in the marketplace. With {conventional|standard|correspondent} programs that go up to 75% {LTV|Loan-To-Value} and govnernment SBA / FHA programs exceeding 90% {LTV|Loan-To-Value}, Unique Capital {Commercial Lender|LLC} remains a {firm|strong} source of commercial real estate loans. Apartment, Multifamily, Office, Retail, Industrial, Mixed-use, self-storage and {hotel/motel|hospitality} {financing|lending} is still being {cultivated|delivered}. Even in this tough environment, Unique Capital is actually able to structure SBA 7a and FHA/HUD loans up to 100% depending on the equity and collateral used for financing. A list of programs can be found on the unique-capital website with specific program parameters.

Unique Capital is also involved in the {acquisition|purchasing} of distressed or discounted commercial mortgage notes. Due to a lack of liquidity in the market, many lenders (banks, insurance companies, pension funds, portfolio companies) are having to sell off assets to improve leveraged ratios. With a limited amount of money in the marketplace and an ever growing amount of assets available, the supply is greater than the demand; thus the ability to purchase assets at a {substantial|sizeable} discount.

As regulators and experts through 2007 and the beginning of 2008 advised that the credit crunch would lighten up towards the end of 2008 or early 2009; speculation now arises that the markets may not cool off and adjust properly until 2010 or 2011. Hedge Funds, Private {Equity Groups|Equity Funds} and Private Investors are attempting to {re-liquidate themselves|raise capital} in order to take advantage of near future opportunities. Where the trading of commercial mortgage notes previously that were performing didn’t offer heavy yield components, they now do. The uncertainty in the credit markets have {displayed|shown} the possibility of an increased risk in the upcoming months and further discounts on performing as well as distressed {assets|notes}.

Unique Capital’s website is designed to give an abundance of information in regards to the commercial lending world, including glossaries, mortgage calculators for multifamily / apartment properties, office properties and retail properties, loan program information and commercial {loan|mortgage} news.

Unique Capital has also chosen a construction partner for renovation projects on acquisitions or financing requests to help facilitate an efficient and reasonably priced scope. Genesis Environmental Construction, www.genesisec.com, is capable of providing renovation, new construction and environmental remediation for commercial properties. This joint-venture helps to ensure that issues don’t rise up during the process which could hold the property owner hostage in any {form|capacity} of negotiation.

The commercial loan process is typically around 45 days. Documents to consider that are {needed|required} for the initial loan process would include, but not limited to, the following items:
Last 3 years of tax returns
Last 3 years of P&Ls
YTD {P&Ls|Profits and Losses}
Financial Statement on Borrowers
Balance Sheet on Business / Property
Pictures of the Building
Recent Appraisal if available
Executive Summary detailing details of structure
Application

Gen Wright
http://www.articlesbase.com/credit-articles/unique-capital-still-actively-lending-693171.html

Two months after closing the owner of a window and blind company called and said he was going to place a lien on the property if the builder doesn’t pay the invoice. The blinds were installed 6 days after closing and was included in the purchase agreement. the contract for the blinds was between the builder and the owner of the business and I never signed a thing between the business owner. Since its the Builders debt, I don’t see how my house can have a lien placed on it, what’s next the lumber used, bricks and lights?

I agree check with an attorney

What is Asset-Based Lending?

Asset-based financial services organizations (asset-based lenders) play a vital part in financing the economy and are dedicated to the growth and well-being of their clients. They provide their clients with cash by lending on fixed assets, accounts receivable and inventory, and engage in factoring, purchase order financing, real estate financing and leasing. They include the asset-based lending arms of domestic and foreign commercial banks, small and large independent finance companies, floor plan financing organizations, factoring organizations and financing subsidiaries of major industrial corporations.

Expert in all facets of collateralized lending, asset-based lenders – large and small alike – possess the experience and know-how to structure the proper financing program for their borrowers. They specialize in financing businesses and business transactions involving a broad range of products and services, both domestically and internationally. They provide:

Operating cash

Funding for an acquisition, a merger or a leveraged buyout

Debt consolidation

Turnaround financing

Bankruptcy/reorganization financing

Equipment financing

Inventory financing

Floor plan financing

Equipment leasing

Import/export trade financing

Growth financing

Factoring services

Growth Money

Businesses need money to grow. A business cannot survive just because it has a better product, an exclusive market or the best method of distribution. The catalyst required for progress is money.

Business owners and managers must be knowledgeable about financing, what it can do, why one form may be better than another. It can be used when:

Operating cash is tied up in receivables

The best trade terms for supplies create cash flow shortages

Inventory levels are high because of client demands

Sales growth is straining resources

Seasonality peaks cause problems

No fixed assets are available for collateral

Trade discounts and special pricing terms cannot be obtained

Letters of credit are required to supply or buy overseas

Debtor-in-possession financing is required

Asset-based lenders often advance funds when traditional sources are not available. They are familiar with various types of businesses and are responsive to client needs.

Loan size

Asset-based lenders fund businesses with annual sales less than $25,000 to more than $1 billion. Credit depends on the type of business and the content and quality of the collateral. Frequently, the credit granted is more than the net worth of the business.

The increased cash availability provided by asset-based lenders often makes the difference between profitable growth and failure for the undercapitalized business.

The phrases “too small,” “too new,” and “not enough net worth,” do not deter an asset-based funding source.

The flexibility and cash availability provided by asset-based financing have enabled countless companies to grow and take advantage of market opportunities.

Cost

The cost of asset-based loans is influenced by the credit risk and collateral associated with the transaction. When evaluating an asset-based loan, borrowers should assess the cost of financing in the context of the benefits to be received. Compared with other financing alternatives, asset-based lending is very cost effective and efficient.

Asset-based lenders frequently look beyond financial statements to determine how much money they are prepared to advance at and after closing. Therefore, borrowers can take advantage of profit opportunities in the market by being able to plan ahead based upon their cash availability.

Asset-based lenders are proactive rather than reactive and can often restructure debt during tough times to help avoid costly and disruptive refinancing.

Over the long haul, the benefits will tend to offset the premiums associated with borrowing from the asset-based financial services industry.

Types of Asset-Based Financing

Secured lending

The lender provides funds secured by the assets of the borrower. The collateral can include: accounts receivable, inventory, machinery, real estate, patents, trademarks or other assets where value can be determined.

The secured lender may establish a revolving loan where the borrower provides a pool of collateral that the lender translates into operating cash or working capital. The borrower uses the financing to buy more materials, expand marketing, improve productivity or other improvements and sells the resultant product. The sales create receivables that are pledged for cash advances and the payments received on the invoices pay down the loan. These increases and reductions in the loan balance are cyclical, hence the revolving nature of the loan.

Some receivables have less collateral value, for example, progress billing, past due receivables, and receivables subject to “set-off”. Raw materials and finished goods are normally acceptable collateral, but work-in-progress generally is not. Equipment and real estate may also be used as a source of financing.

Non-recourse factoring: The financing institution buys the receivable and assumes the risk of customer credit. The factor guarantees against credit loss, unlike a secured lending facility. The factor will also check credit, undertake collection and manage bookkeeping functions.

Full-recourse financing: The financing institution accepts assignment of the receivable but does not assume the credit risk. The client retains responsibility for managing the receivable portfolio. Generally, the lender will finance invoices up to ninety days from delivery of goods or services, then charge them back to the client.

Discount factoring: The factor purchases the receivables at a discount to compensate for paying prior to the due date.

Maturity factoring: The factor purchases the receivables, assumes the credit risk and advances cash to the client as the invoices mature.

Non-notification factoring: Account debtors are not notified of the sale of the receivables and the invoices are either paid to a lock-box or to the shipper. This is similar to a receivable loan.

Notification factoring: Account debtors are notified of the purchase of the receivables and are directed to make payments to the factor.

Spot factoring: A “one shot” transaction, generally out of the normal course of business.

Floor plan financing: Certain industries require significant high-priced finished goods inventory. Examples: automobiles, refrigerators, washing machines, televisions and stereo systems. These are supplied on extended credit terms to retailers. Retailers usually do not purchase this expensive inventory outright; rather a finance company will provide credit to purchase the inventory, secured by the product “on the floor”.

Leasing: The lessor purchases the equipment needed to fulfill certain obligations and the equipment remains the property of the lessor even after all the borrowed funds are repaid; or existing assets are sold to and leased from a leasing company to release capital needed for working capital purposes.

Purchase order financing: Working capital financing is secured by a security interest in existing purchase orders and the proceeds of the purchase orders. Normally the security interest is perfected by the lender taking possession of the inventory or raw materials.

Real estate financing: the mortgaging of land and/or buildings to raise working capital.

More about factoring

The origin of the factoring industry has been traced to the days of the Roman Empire or even earlier, but the industry as we know it today in the United States goes back only about 200 years to the early nineteenth century.

Factors evolved from U.S. selling agents for European textile mills. The European mills used the agents to sell their fabrics in the U.S. and paid the agents a commission on sales. The agents also warehoused merchandise and did the shipping for their European clients. As these selling agents prospered and became more familiar with their own customers, they began taking on the job of establishing credit terms and advancing funds to the European mills. The oldest documented factoring firm traced its roots to 1810 and several others were established in the first half of the nineteenth century.

Traditional or old-line factoring is fairly straightforward and is designed for long-term relationships. It involves the purchase of receivables without recourse and with notification to the client’s customer. The factor buys the receivables created by a client’s sales and then collects the proceeds directly from the client’s customer. After the factor buys a receivable, it assumes the credit risk on that receivable. If the client’s customer doesn’t pay because of a credit problem, the factor must assume the loss.

Essentially, an old-line factor offers its clients credit protection, collection, bookkeeping services and financing. In addition to advances against receivables purchased, once a relationship is established, factors often provide clients with over-advances during peak shipping seasons. Factors also offer financing services and accommodations such as inventory loans, letters of credit/import financing and equipment financing. Export financing is also available through alliances with international factoring networks. Principally because credit guarantees are important in textiles and apparel and because of factoring’s roots in the textile industry, about 70 percent of the volume of old-line factors is still in textiles, apparel and related industries.

Since the factor takes the credit risk on the sale, it must first approve the sale through its credit department. Thus, the client is relieved of the cost of running a credit department. Because of the credit guarantee, old-line factoring is limited to industries in which credit information is available. The charge for the credit and collection service, called the factoring commission, varies with the sales volume of the client, the size of the transactions and competitive conditions.

The economic rationale for the factoring service is fairly obvious. With thousands of suppliers selling to the same customer, without factoring, each seller would have to do its own credit appraisals and collections. This involves an incredible duplication of effort. With factoring, a single credit department operating for hundreds or thousands of suppliers, eliminates much of the duplication and promotes efficiency. And with the aid of electronic data processing, the cost of the credit and collection operation has been reduced exponentially and the savings are passed on to the client. Technology has revolutionized the industry, eliminating tons of paperwork and providing clients with valuable on-line information. The system can generate a host of reports on sales analysis and other information to help a client analyze its own business.

It should be noted that the factor’s guarantee, is a credit guarantee and does not apply to anything other than the financial inability of the client’s customer to pay. The guarantee does not apply to merchandise disputes between the buyer and the seller. If the receivable is not paid because of buyer claims of defective merchandise or untimely delivery or any other dispute involving the merchandise or its delivery, the factor will look to the client (the seller) for reimbursement.

The credit and collection service is just half of the business of the old line factor. The other half, and for many clients, the more important half, involves advances of funds against the purchased receivables. If the customer wants a cash advance, it can borrow from the factor. The interest on the loan is in addition to the commission and is usually at a rate competitive with the cost of a comparable bank loan.

Many factoring clients are maturity or non-borrowing clients. They wait until the purchased receivables are paid and then may collect the proceeds from the factor. If the client leaves the funds with the factor after collection, the factor will pay interest on the balances at a rate comparable with the factors’ cost of funds. These balances may be drawn upon when needed.

Traditionally, factoring was done on a notification basis. The client’s customer is notified that the account has been turned over to a factor and the customer’s payment should be made directly to the factor. However, a non-notification agreement can be worked out. The factor would still purchase the receivables outright after doing the normal credit check of the customer, but the customer wouldn’t be notified that its account has been sold. If the client borrows money, customer payments in non-notification accounts are usually sent to lock-boxes which the factor administers.

Aside from old-line factoring, there are as many variations on factoring as there are entrepreneurs who choose to use the name. There are commercial finance companies, some of which call themselves factors, single-invoice factors, purchase order factors, recourse factors, invoice discounters and re-factors.

• Commercial finance companies do not provide credit guarantees, but lend against collateral, principally receivables and inventory, and are an offshoot of the factoring industry and go back to the beginning of the twentieth century. Largely because the commercial finance companies operate in diverse industries in contrast with traditional factoring which is still largely married to textiles and apparel because of the need for credit guarantees in those industries, it has grown much more rapidly than traditional factoring. Rather than purchasing receivables, commercial finance companies take assignments of receivables as collateral for loans. The client collects the receivables proceeds and uses the funds to pay down the loan. Defaulted receivables are the client’s problem (but could be the lender’s problem if defaults are substantial). The lender normally provides enough of a cushion so that if the client fails to repay the loan, the collateral can be liquidated and provides full payment.

• Single-invoice factors provide essentially the same services as the old-line factors but they do it one invoice at a time. Also, there are very few non-borrowing clients for single-invoice factoring because a company that factors a single invoice usually is motivated by the need for financing.

• While factors finance receivables after they are created, purchase-order factors provide financing so clients can fill orders that they cannot finance on their own. Once the order is filled and is converted to a receivable, a traditional factor might purchase the receivable and cash out the purchase order factor.

• Recourse factors are usually small factoring companies that purchase receivables often in non-traditional industries where credit information is not readily available. They buy the receivables but those that are unpaid are charged back to the client.

• Invoice discounting is similar to the recourse factoring and is prevalent in England and some other European countries. The invoice discounter buys receivables, but rather than focusing on the credit worthiness of the client’s customer, they concentrate on whether the contract creating the receivable allows sale or assignment. Non-paying receivables are charged back to the client.

• Re-factors provide the same services as old-line factors, but they work with small companies, sometimes with sales volume as low as $500,000 (generally large factors need at least $3 million in volume). The re-factors provide the financing, but use the services of traditional factors to handle the credit checking and credit guarantees. They make their money from interest on money advanced and a spread between the re-factors commission cost and what it charges its own clients.

Accessing finance can be a real problem for many small businesses, especially if they are growing fast. One option many businesses don’t consider is factoring, or cash-flow lending as it is sometimes called.

While not suitable for every business, factoring can provide a revolving line of credit and a reduction in administrative costs.

Factoring involves the sale of a business’ book debts on a continuing basis. Usually, the factoring firm will buy the business’ sales invoices at a discount of between 70 and 90 percent. The factor then collects the invoice amounts from the business’ customers. The business receives the cash, less the discount, from a credit sale quickly (usually within 24 to 48 hours) and maintains a healthy cash-flow even though the debtors may not pay for the sale for another 60 days or so.

Usually, the factoring firm takes the difference as profit; however some factor companies prefer to provide a percentage up front, the remainder on collection, and charge interest and fees on the transaction.

The use of credit cards in the retail industry is a form of consumer factoring, where the retailer is paid immediately for goods or services and the credit card company collects the payment from the customer. Some US banks offer asset-based cash-flow lending but have generally found limited interest in the products – with many businesses put off by higher interest rates charged to reflect the risk of lending against assets not secured by property.

Several Options

Factoring firms can offer several levels of service. The premier service usually involves taking over the complete management of the business’ accounts receivable, including administration, confirmation, and collection of invoices, regular reports and monthly ageing reports on all accounts processed.

This is usually coupled with a seamless, confidential service, where the customer of the business is unaware of the relationship between the business and the factor and all communication between the factor and the customer is branded as the business. In other cases, the factor may only take over aspects of the accounts receivable function.

The level of service provided by the factor is often related to the value of the debtors book.

While it may appear complicated at first, outsourcing accounts receivable can significantly reduce costs. More importantly, it is particularly useful for businesses that are growing or moving in a different direction with a view to improving profitability. A growing business can quickly outgrow an overdraft secured by fixed assets, yet it may not be able to obtain finance on an unsecured basis.

A business may also need the flexibility to cover sudden increases in order levels. Factoring provides funding in line with sales growth.

This form of finance can also be useful for start-up businesses that need to pump cash back into their business to build their inventory, but have difficulty obtaining overdraft or working capital facilities due to a lack of trading history.

Service, manufacturing and wholesale businesses are often suited to this type of finance.

Businesses that mainly sell on cash terms to the general public may find credit cards or overdrafts more cost effective. Those with complex products or terms of sale such as trial and return clauses or those in the construction industry, where customers are invoiced in stages, are also less suited to factoring due to the complexity of the supplier/customer relationship.

Pros & Cons

As with all business finance, factoring offers advantages, disadvantages and potential pitfalls.

The level of benefit from factoring will vary from business to business.

But it usually provides:

* Immediate cash-flow access to 70-90 percent of the value of debtor invoices.

* Working capital for growth without requirements for a strong balance sheet or substantial net worth.

* A good interface with the supplier and, as a result, a seamless transaction for the customer.

* Outsourced debtor administration and associated cost savings.

* The ability to increase sales by offering credit which the business may have been unable to fund otherwise.

* The ability to take advantage of creditor discount terms, improve credit rating by being able to pay creditors promptly and an enhanced ability to capitalize on larger orders as required.

* The option to free up property from being tied as security.

Some issues that should be considered if looking at factoring as an option include:

* Complexity. Rather than simplify the account-keeping, factoring may add complexity to the business depending on the level of integration of account-keeping processes.

* Culture. If the culture of the business and the factor are at odds, the arrangement may interfere with the relationship with customers.

* Bad Debts. In most cases, the business still wears the non-collection risk and may end up following a restrictive process to maintain the facility.

* Cost. It can be expensive depending on the interest and costs charged by the particular firm such as finance charges, administration charges, mailing charges, etc.

* Asset control. Some factors take a floating charge over all the business’ assets not just debtors. Consequently a business may need to obtain a release from the factor to sell any of its assets.

* Value. The factor may only finance a percentage of the debtor value and may undertake its own audit of the business’ accounts.

* Customer relations. Some factors will take over the entire debtor ledger which may cause difficulties if a business wishes to remain in control of some accounts that are particularly sensitive or vital to the business.

* Security. Some factoring firms now require small businesses to provide property as security in which case it may be cheaper and more effective to arrange a bank overdraft.

One of the most common traps for small businesses using factoring is the assumption that outsourcing the function means outsourcing the responsibility.

The benefit of using a factoring facility still depends on good management of debtors and the finances of the business. Every business must manage their terms of trade, and ensure the terms they offer and the credits they receive are appropriate for their particular business. They need an effective debt collection system and simple internal controls to prevent errors.

Factoring could cause additional problems for businesses without a good handle on cash-flow management and cost budgeting. They may find themselves in a downward spiral, spending debtor receipts on current overheads and not paying the current creditors and then wondering what went wrong. They need to understand the money flow of the business and use short-term funding such as factoring on short-term assets.

With good management, the use of factoring can be a very useful source of finance particularly for a young business that is growing fast. However, there are plenty of traps for the unwary, and as always, if in doubt get advice before committing to any form of finance.

Copyright © 2007 Gregg Financial Services

www.greggfinancialservices.com

Gregg Elberg
http://www.articlesbase.com/finance-articles/advantages-and-disadvantages-of-factoring-asset-based-lines-of-credit-108087.html

I had my own builder’s risk insurance during construction of my residence but the foundation wall collapsed on 3rd day, had to sue the builder b’case it was not build as per plan. Builder does not have builder’s insurance all he has is carpentry insurance – is this FRAUD ??. but my builder’s risk insurance denied the claim. I though they will pay to repair the collapsed wall and then recover form the builder – is there any way I can collect form my own insurance company?
Builder did told me and send me link to verify their insurance but since i am new i just looked at the decleration page, BBB did not logged my complain since i was the first one to file complain. attorney general and consumers affaris will not get involve since i have sued them but attorney general and consumers did prosecuted other builders who committed similar fraud, asking more money after the contract was singed, altering the contract dring deposition, builder frauded other 8 or so home owner and has one 90K judgement aganist him, heard he is transferring all the $$ he roobed from other home owher to his courty and ready to file bankruptcy

This isn’t fraud.

Builder’s risk doesn’t cover inherent vice or latent defect. Your builder’s liability policy doesn’t cover his own faulty workmanship, which is the cause of the loss, presumably.

The thing that would have covered this, would have been a performance bond. If you had one in place, call in the bond. If not, you need to consult a lawyer, to sue your insurance agent for not recommending a performance bond.

If you did "do it yourself" insurance, well, you should have advised yourself to get payment and performance bonds. Sorry.

Trevor showed up at an open house party held by a local Realtor, Mary, for a new homebuyer. Several neighbors had dropped in for the welcoming event. A friend of the Title Company who had closed the loan for the new homeowner had invited Trevor to the gathering, as he was new in town and had stopped at the Title Company making inquires about future purchase business. Mary peeking out the window witnesses a sharply dressed middle aged man probably in his late 30s she surmised driving a brand new Mercedes. Upon entering, Trevor was dripping in bling with a huge Rolex watch, a heavy gold chain on his wrist and tailored suit that looked very expensive dressed out with a fine silk tie and a gold ring with an onyx setting bordered with small diamonds. It was a rare sight to see someone with French cuff links and a pleated white shirt. The light shinned off his carefully trimmed jet-black hair with a light amount of hair gel while showing good contrast with a deep tan. Mary noted that he was somewhat handsome man over six feet tall with a slight northeaster accent. He almost looked out of place but had an electric smile and a warm manner. There were about 20 people at the party. Introductions were made and Trevor indicated that he was involved in real estate investments. As small clusters of people gathered in various areas of the dining room and kitchen each sampling the bounty of passing dishes Trevor made his way from each group making small talk and further discussing the benefits of real estate investing with each. Betty Jane listening to the discussion appeared to be in deep thought. Finally, Betty Jane, a recent divorcee, asked Trevor if it was a good time to invest. Trevor turned his sharp focus in Betty Jane’s direction. Betty Jane was a friend of the new homebuyer and had used the same Realtor and Title closer on her loan and purchase twelve months ago. She had a comfort level with the professionals in the room. Betty Jane finally indicated to Trevor that she had recently became interested in finding property that would give good cash flow over something other than she was getting in CDs at the bank. Trevor engaged her further. A lengthy discussion followed. Numbers and information was exchanged. The game was on.

Betty Jane had excellent credit and was a professional marketing manager in her own right and had assets in the bank as well as a full investment portfolio which was just barely going sideways with the recent market climate. She wasn’t losing any money, but she wasn’t making much either. While at work Trevor called to make small talk and inquire as to the depth of Betty Jane’s commitment to find a good investment property.

A week passed and Trevor called Betty Jane to indicate that he might have something on the radar in the way of a stellar investment but would check it out fully before bothering her with anything that would not be in her best interest.

A few days later, Trevor called to say he had found a property but after doing a careful due diligence found the property had a termite problem. Likewise the owner wasn’t forthcoming about a settling problem of unstable soil in the neighbors house which could effect the for sale property so he rejected that possibility but was still looking for other opportunities. Trevor explained that he ran in different investment circles and was able to locate properties with extremely motivated seller’s who would listen to offers. Trevor’s stock began to rise.

A week later, Trevor called Betty Jane regarding an incredible deal that he had found and wanted to show the property to her with the listing Realtor. Since this was an exclusive property other Realtors were not being invited to sell it. The property was vacant and needed some improvements to bring it up to the neighborhood standards but had great square footage and otherwise in good structural condition. Betty Jane saw the potential and many of the homes in the area were selling in excess of $400,000.

Incredibly, Trevor called Betty Jane and indicated that he was in contact with a national writer who was looking for a large home in the area while he studied research material in the historical archives at the University in the area of Indian culture. This was to be the first in a series of three books, which would take some ten years to complete. It was a fiction based but needed to be factual in the background information. He wanted to lease with an option to buy a home similar to what Trevor was touting to Betty Jane but wanted some specific remodeling completed before moving in. The author wanted to remain below the radar and wanted to use a third party intermediary to negotiate and protect his identity. In this case, it was the author’s business manager. Trevor met with Betty Jane and showed her the agreement. Remarkably the terms included paying $5,000 per month including all utilities and deposits, and Trevor showed Betty Jane a cashiers check for $12,000 representing the first and last month’s rent and $2,000 option money. The option price was set at $600,000 or appraised value in three years. The improvements would certainly make the property worth a lot more, Betty Jane reasoned. The stipulation of the lease-option was that the property had to be remodeled to meet the specifications of the anonymous author who demanded secrecy, security, and floor plan modifications with a new kitchen as the author professed to be a gourmet cook. Trevor showed Betty Jane a virtual plan of the remodeled property that the author had agreed to in the lease option agreement. Trevor went on to explain the author was demanding autonomy and did not want any publicity while he worked on his next series of books. For that reason a high security fence was to be built in the back to shield him from prying eyes. Trevor’s contractor connection had already bid the property construction work out at $85,000. However, to take care of this opportunity, Betty Jane would need to move quickly to lock up this rare deal. The sales price was set at the appraised price of $425,000.00. This was about $40,000 more than the closest comparable but there was this great lease option and there were improvements to be made. Betty Jane decided to go ahead. With Betty Jane’s excellent credit she was able to get a 90% Combined Loan To Value with an 80% first of $340,000 at 6.5% and 10% LTV second mortgage of $42,500 at 8%. The total payment was $2,149.03/month on the first mortgage and $311.85 on the second for a total principal and interest payment of $2,149.03 + $311.85 = $2,460.88/month plus $390/month in taxes and $280/month insurance for a total payment of $3,130.88/month. And even with paying the utilities budgeted at $800/month including lawn care and maintenance that would still leave approximately $3,130.88 + $800 = $3,930.88 outgo with $5,000 in rent would give $1,069.12/month in estimated cash flow each month. With a 10% down payment of $42,500 and $8,000 in closing cost Betty Jane’s total investment was now $50,500 for which she figured she would get $12,829.44/$50,500 = 25.40% Return On Equity. Trevor showed her with the depreciation with land value backed out at $100,000 the improvement remainder of $325,000/27.5 years = $11,818.18/year in depreciation. The interest deduction would amount to $22,100 on the first mortgage and $3,400.00 on the second mortgage for a total deduction of $25,500. This would make for depreciation deduction of $11,818.18/year plus $25,500 the first years interest for a grand total of $37,318 to offset the rental income. The future appreciation and option exercise price Trevor demonstrated to Betty Jane was a situation investors dreamed about.

With the improvements the Return on Equity was now at 9.94%. The only thing Betty Jane needed to do was to arrange for the $85,000 construction funds to make the improvements on the purchase. For this Betty Jane took out a Home Equity Line Of Credit on her personal residence. All the mortgages and the closing were completed in three weeks from start to finish. The appraiser had to supply some additional comparables with notes of the impending improvements the lender signed off. The closing was held at a Title company of the seller’s and Trevor’s choosing. Betty Jane received the signed Lease Option Agreement with the $12,000 check from the author’s business manager and she wrote a check out to the construction company which promised to complete all the work in two weeks and thus needed the entire $85,000 up front. This she gave to Trevor. On the closing statement was a $40,000 amount paid from the seller’s side payable to Trevor for contract assignment and consulting. Trevor indicated to Betty Jane that this was normal and customary in his investment practice and at any rate he reinforced to her that since she was getting such a great deal she shouldn’t mind sharing some of the profits. Besides, the seller was paying for it. Closing went on and Betty Jane was the proud owner of the property to be leased to a famous author.

The contractors failed to show up on Monday as planned. Betty Jane called Trevor. The phone was disconnected. She called again. Disconnected. In a panic, Betty Jane called the original Title person, Patricia, who closed on her home loan and had made the introduction at the open house to find out if she had heard from Trevor. She stated that the last time she had seen Trevor was at the Open House but she asked why she was trying to find Trevor. Betty Jane told the story. There was dead silence on the other end of the line. Patricia took a deep breath and shared with Betty Jane that she may be a victim of fraud. Betty Jane broke down and cried. Patricia insisted that Betty Jane call the FBI and tell her story. Agent Ryan showed up at Betty Jane’s home and they went through all the details. Agent Ryan had been chasing this con man for over a year now. As the facts were revealed, the appraiser in conjunction with the Title Company by using two closing statements, one for the bank and one for the seller had all participated in perpetrating this fraud on Betty Jane. Agent Ryan shared that “Trevor” had closed three other deals on the same day and left town. The house was actually worth about $375,000 and needed work. “Trevor” had received $85,000 from Betty Jane and another $40,000 from the Title company for a total score of $125,000. The $12,000 check Betty Jane received bounced and was worthless. Betty Jane was left with a property worth less than $50,000 from what she paid for it. The market rents were only $2,000 per month if that. Now Betty Jane had a $3,130.88 plus a Home Equity Line Of Credit payment on her personal resident of $653.58/month with a massive shortfall to look at each month.

To cut the bleeding Betty Jane with her Realtor friend spiffed the property up as much as possible with paint and cosmetics and was able to sell the property for a little less than the mortgage. Betty Jane made up the difference out of the pocket. Betty Jane’s attorney sued the Title Company and the appraiser along with the participating Realtor and they have yet to go to court. This transaction had the potential to destroy Betty Jane’s excellent credit. It was a strain.

Agent Ryan, using a group picture from the open house party put out fresh photos of “Trevor” and two weeks later he was captured and charged with mortgage fraud among a litany of other charges. He still had some of the remainder cash but there were lots of people after their money and Betty Jane had little hope of getting all her money back. She was now, a lot wiser however.

Eventually, she did back in the real estate game with a team of good people and is slowly winning her way back.

Like any investment there are things to look for. If it sounds too good to be true, it probably is.

It’s always advisable to have an attorney at your side during negotiations and at closing. Get all the facts. Deal with established companies and brokers well known and long experienced in the community. Someone new in town just showing up is a red flag. Anyone can independently verify values. Start with the local assessor and work it from there. One can look very closely at the title history with one’s attorney to see if it’s a flip property or anything else that may not look right. One needs to take their time and not be rushed into these “great deals”. If you happen to miss one, there will be another coming along soon. Keeping the powder dry allows one to do something another day.

Dale Rogers

www.brokencredit.com

www.sellerhelpsbuyer.com

All rights reserved. Article may be reprinted as long as the content remains intact, unchanged, and all links remain active.

Dale Rogers
http://www.articlesbase.com/mortgage-articles/the-mark-is-selectedthe-fix-is-insting-underway-93332.html

Hi I have a vacant land in Florida.Year 2006 in August,I hired builder and signed the contract to build my dream home.Right after I signed the contract I made a deposit $61,000.00. Couple months later I was trying to cancel the contract due to my personal problem.I asked builder to refund my deposit. I was expecting about 80% because they already spent about $5,000.00 – survey. stake. etc…
They ignored. So I hired attorney to write a letter more than three times but I heard same story that they do not want to refund my money back. Now I decide to file a lawsuit against the builder.
But here is a problem. They closed their company. (*NOT BANKRUPTCY)
My question is
That company was INC.(S Corporation)
Owner(Share holder) was James and Tom)
I think I can not sue the builder because the company has closed their business. How about James and Tom (The owner also a share holder for that company) Can I still sue the owner for my deposit?
PLS Help.

First of all, you need to look at the refund policy under your contract to make sure you are in compliance with that.

Depending on how the company was unwound will determine a lot. If the owners assumed assets of the company upon closing, then those assets MAY be attachable (there are a lot of variables). If the company closed negative assets (sans bankruptcy) your chances of recovery are slim, unless you can prove fraudulent activity on the part of a principal.

I’m researching a new home that was built a couple of years ago. I searched the public records and found that the home was purchased by another builder. The owner is listed as a corporation. Why would a corporation buy a new house and then sell it 2 years later?

the current market might be up in your area. a seller buys it cheap, may fix it up and wait when the market is prime to sell it to make a profit.

The builder normally has a temporary meter installed and yes they pay that bill,

Unique Capital LLCremains to lend on commercial real estate despite the recent credit difficulties in the marketplace. With standard programs that go up to 75% LTV and govnernment SBA / FHA programs exceeding 90% LTV, Unique Capital Commercial Lender remains a strong source of commercial real estate loans. Apartment, Multifamily, Office, Retail, Industrial, Mixed-use, self-storage and hotel/motel financing is still being cultivated. Even in this tough environment, Unique Capital is actually able to structure SBA 7a and FHA/HUD loans up to 100% depending on the equity and collateral used for financing. A list of programs can be found on the unique-capital website with specific program parameters.

Unique Capital is also involved in the purchasing of distressed or discounted commercial mortgage notes. Due to a lack of liquidity in the market, many lenders (banks, insurance companies, pension funds, portfolio companies) are having to sell off assets to improve leveraged ratios. With a limited amount of money in the marketplace and an ever growing amount of assets available, the supply is greater than the demand; thus the ability to purchase assets at a substantial discount.

As regulators and experts through 2007 and the beginning of 2008 advised that the credit crunch would lighten up towards the end of 2008 or early 2009; speculation now arises that the markets may not cool off and adjust properly until 2010 or 2011. Hedge Funds, Private Equity Funds and Private Investors are attempting to raise capital in order to take advantage of near future opportunities. Where the trading of commercial mortgage notes previously that were performing didn’t offer heavy yield components, they now do. The uncertainty in the credit markets have displayed the possibility of an increased risk in the upcoming months and further discounts on performing as well as distressed notes.

Unique Capital’s website is designed to give an abundance of information in regards to the commercial lending world, including glossaries, mortgage calculators for multifamily / apartment properties, office properties and retail properties, loan program information and commercial loan news.

Unique Capital has also chosen a construction partner for renovation projects on acquisitions or financing requests to help facilitate an efficient and reasonably priced scope. Genesis Environmental Construction, www.genesisec.com, is capable of providing renovation, new construction and environmental remediation for commercial properties. This joint-venture helps to ensure that issues don’t rise up during the process which could hold the property owner hostage in any capacity of negotiation.

The commercial loan process is typically around 45 days. Documents to consider that are needed for the initial loan process would include, but not limited to, the following items:
Last 3 years of tax returns
Last 3 years of P&Ls
YTD Profits and Losses
Financial Statement on Borrowers
Balance Sheet on Business / Property
Pictures of the Building
Recent Appraisal if available
Executive Summary detailing details of structure
Application

Gen Wright
http://www.articlesbase.com/credit-articles/unique-capital-still-actively-lending-693261.html