All Topics / The Treasure Chest / What happens in a falling property Market?

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  • Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 26, 2003 - 9:01 am

    Hi all,

    I know it’s a dirty word to mention falling property prices but they happen.What are the risk management techniques if your selling price is significantly higher than the FMV at contract maturity such that refinancing by the wrappee can not be achieved?

    Profile photo of ADAD
    Participant
    @ad
    Join Date: 2002
    Post Count: 636
    May 26, 2003 - 10:35 am

    Time, property improvements are two things that come to mind. If they cannot refinance then they will have to wait until they can.

    Enjoy
    AD [:0)]
    (Andrew)

    “”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
    Albert Einstein

    Profile photo of brentbrent
    Participant
    @brent
    Join Date: 2001
    Post Count: 165
    May 26, 2003 - 11:57 pm

    Who says they have to refinance the full amount?

    Why not let them take on bank finance for as much as they can, and you wrap them a second mortgage for the remainder?

    Profile photo of polarispolaris
    Member
    @polaris
    Join Date: 2003
    Post Count: 12
    May 27, 2003 - 12:45 am

    Hi,

    Thanks for the response.

    Basically the exit side of the wrap is negotiable at maturity depending on FMV at that time.

    I am assuming that all components of the wrap are flexible ie. maturity date, interest rate, sale price.

    Can the interest rate to the wrappee be altered midway thru’ the wrap if the wrappers IP loan rate has risen? I am assuming that you would have clauses in the contract to allow this.

    Risk management is essential planning!

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