In this example a developer sells a lot for $35,000 with owner financing and gets $3,500 down. He carries the paper, $31,500 at 10% for 120 months with a monthly payment of $416.27.
The funding source will not discount this note, which has a face amount of $31,500, because it is written at the minimum buy rate, which is prime + 4% with a floor of 10%.
There is a 15% reserve of $4,725 withheld,that will be paid back quarterly as the loan amortizes.
Sovereign Capital's fee is 1%, or $267.75.
The total amount the developer receives from the funding source today is $26,507.25 (76% of the face amount of the loan).
The developer keeps the $3,500 down payment, which added to the $26,507.25 he receives at closing gives him a total of $30,007.25 today, (86% of the sales price of the lot).
When the reserve has been repaid (paid back quarterly based on the principal reduction of the loan) the developer's total return will be $30,007.25 + $4,725 = $34,732.25 (a full 99% of the original sales price).
$31,500.00 note balance -4,725.00 reserve (paid back quarterly) - 267.75 fee $26,507.25 amount developer receives at closing
$26,507.25 amount developer receives at closing +3,500.00down payment $30,007.25 amount developer receives today
(86% of sales price).
$30,007.25 amount developer receives today +4,725.00reserve (paid back quarterly) $34,732.25 developer's total return on a $35,000 lot
(a full 99% of the original sales price).
Legal Fee: One time minimum fee of $1,500 deducted at closing (developer's first project with funding source only). Not charged on future projects.
Facility Fee: One time minimum fee of $1,000 nonrefundable and due upon receipt of term sheet (developer's first project with funding source only). Not charged on future projects.
