BLUE PEAK DEALS
Here's how a typical deal would work A licensee finds a home they can buy for $275,000, perhaps from a family who have run into financial difficulties, but which a valuer is willing to rate as worth $320,000. An offer is made, conditional on Blue Peak being able to on-sell the property for $320,000 to a buyer without a deposit. Of the $45,000 price difference, $35,000 would be "given" back to the buyer as a deposit, initially as a zero interest loan with no repayments for two years, after which it becomes an eight-year principal and interest loan at 12%.
In effect, Blue Peak is delaying taking some of the profits from the purchase and sale in order to create a deposit. The remaining $10,000 would be divided between the licensee, Blue Peak, and costs. The buyer funds the rest of the purchase price, $275,000, with a loan sourced by a mortgage broker organised by Blue Peak.
When the "deposit" turns into a loan, the interest payments generate income for the licensee.
Here's how a typical deal would work A licensee finds a home they can buy for $275,000, perhaps from a family who have run into financial difficulties, but which a valuer is willing to rate as worth $320,000. An offer is made, conditional on Blue Peak being able to on-sell the property for $320,000 to a buyer without a deposit. Of the $45,000 price difference, $35,000 would be "given" back to the buyer as a deposit, initially as a zero interest loan with no repayments for two years, after which it becomes an eight-year principal and interest loan at 12%.
In effect, Blue Peak is delaying taking some of the profits from the purchase and sale in order to create a deposit. The remaining $10,000 would be divided between the licensee, Blue Peak, and costs. The buyer funds the rest of the purchase price, $275,000, with a loan sourced by a mortgage broker organised by Blue Peak.
When the "deposit" turns into a loan, the interest payments generate income for the licensee.
This is what I have:
1. A licensee finds a home they can buy for $275,000
2. An offer is made, conditional on Blue Peak being able to on-sell the property for $320,000 to a buyer without a deposit
3. difference, $35,000 would be "given" back to the buyer as a deposit
4. initially as a zero interest loan with no repayments for two years, after which it becomes an eight-year principal and interest loan at 12%.
5. The remaining $10,000 would be divided between the licensee, Blue Peak, and costs. The buyer funds the rest of the purchase price, $275,000, with a loan sourced by a mortgage broker organized by Blue Peak.
Clarified:
1. A licensee finds a home that they can buy for under market value, approximately 15%.
2. Blue Peak then resells to a buyer without a deposit for market value.
3. Of the difference, 15%, between market value and under market value, approximately 10% would be "given" back to the buyer as a deposit and the remaining 5% is taken up by the licensee, Blue Peak, and for other costs.
4. The buyer funds the rest of the purchase price, 100% of the under market value, with a loan sourced by a mortgage broker organized by Blue Peak. (Initially as a zero interest loan with no repayments for two years, after which it becomes an eight-year principal and interest loan at 12%). After that, presumably the buyer is own his own.
Implication here is: Blue Peak not only holds the 10% deposit as security, but is also appraiser and broker, or at least determines who that broker will be. This could become a pretty sticky situation if things start going south.
But, how could this operation go south?
Once clarified, as I have done above, you can see the common thread woven through this web-like structure: Market Value.
If market value were to begin to back-track this operation would suddenly begin to unravel because, essentially, the entire financing of the operation appears to be built on one, licensee fees, and two, the equity difference between purchase price and market value – a figure it appears, is determined, not by an independent body, but by Blue Peak itself and lastly, a mortgage broker selected by Blue Peak. The implication here is the credibility of the security in question, i.e. the house.
Oh, well -- live and learn.
Comment