Pro Athletes: Know when an investment loan risk can change your life – or ruin it.
Take as a for instance: A third year NFL player who’s had a few stand out years nearing a new contract, and is expecting a salary jump equal to his impact. He’s confident in his game, he’s also now confident mixing with businessmen, owners and managers. Opportunities come his way regularly and more are expected with the new contract. He’ll see options for real estate investment with varying degrees of risk. Friendships and emotion may come into play in his decisions. After all the loan risks have even been spelled out to him, he’s confident – and no one gets into an investment expecting failure. But if the deal goes into default and he hasn’t protected himself, he could lose a whole lot more than his initial investment. Confidence in his game came from years of practice and hard work but bringing that confidence to investing without preparation could affect him for years to come.
I’m often called for help with defaulted loan negotiations by high net worth clients who have made investments involving a personal loan guarantee that has them in a perilous financial situation. Often their problem could have been avoided altogether through basic investment analysis combined with prudent asset protection planning.
Sometimes they don’t even know the difference between a straight cash investment, where their risk involves their original investment capital only vs an “at risk” investment, which involves the investor becoming liable for the entire project’s debt by signing on as the guarantor of a bank loan to the project. Read more →
The Federal Government recently announced new incentives for homeowners underwater with their current mortgage to work with their bank on a “short sale.” The new rules give timelines and parameters that offer confidence to lenders who have too often been stuck in an undefined and time consuming processes. The Obama Administration’s aim is to lessen the credit ruining aspects of a foreclosure and give homeowners and lenders a start at moving forward with the least pain.
Lenders lose about 40 percent of a property’s value on a foreclosure vs. about 19 percent on a short sale, according to industry estimates.
The program also offers $3000 in moving costs to the homeowner and some mortgage support if the owner moves into HUD approved housing. Read more about it here.
Here’s a good resource if your real estate development or investment runs into some trouble and you or your lender think you may need a court appointed receiver.
A court appoints a receiver only after both sides of the litigation are given an apportunity to give input upon the specific receiver and the goals of the receivership. In real estate, those goals could be as diverse as selling the property to completing construction to financial analysis and auditing.
The Court and Receiver
The litigants counsel define the skill set needed in a receiver for their particular property and identify an agreed upon receiver. But once the court accepts their choice, the receiver is an extension of the neutral court.
“Parties with an interest in the receivership should treat the receiver as an arm of the court and should not seek ex-parte communications with or special treatment by the receiver.”
What to look for in a receiver
“A receiver should be chosen on the basis of background, expertise, neutrality, availability, compensation rate and temperament, and not because of perceived alliances and relationships.”
What you need to know
If you think your situation may require a receiver, go read the clear yet short article and learn more about the process and what you may need to look for. Your familiarity will aid you and your counsel in choosing the right path and goals of the receivership in your specific situation. PDF on Court Appointed Receiver here.