Investor Report: Virgin Money USA and Takeback Financing

Written by Posted On Thursday, 28 February 2008 16:00

Investors in challenging markets increasingly are turning to one of the "golden oldies" in the real estate problem-solving toolbox -- custom-crafted seller "takeback" financing. And in the last few months, they've gotten a whole new source of help from a globetrotting British entrepreneur.

Takeback financing means property sellers offer mortgages on their own to buyers on mutually-beneficial terms. Everything is negotiable: rates, payback terms, and downpayments.

There is no bank involvement. The seller spreads out receipt of the full price for the property over a period of years. But in the meantime, the seller collects interest and principal payments -- and often gets a balloon payment at the end of a specified number of years.

The problem with takeback financing traditionally, however, was that sellers often had little or no guidance on how to do the deal, or how to handle it after closing. But now Sir Richard Branson, founder of the Virgin group of companies from airlines to entertainment, has jumped into the game.

Virgin Money USA, a Boston-based company, is the splashy new player in the seller-financing space. It offers a laundry list of services to real estate investors -- from preparing the legal documentation for the mortgage note, guidance with loan terms, escrow accounts, monthly servicing, credit reporting, title searches and loan closings -- all for a fee, of course.

Asheesh Advani, CEO of Virgin Money USA, says the current cutbacks and restrictions underway in the banking and mortgage industries make customized financing more useful -- for sellers and buyers -- than ever before.

Business is booming -- up by a "double digit increase" in volume during the last quarter alone -- Advani told Realty Times in an interview this week.

Sellers who want to offer customized financing but are not familiar with the necessary documentation can go to the company's Website and download a "Guide to Seller Mortgages," that walks them through the key steps and considerations.

One of Virgin's clients, according to Advani, is an investor in Texas who buys, fixes up and resells residential real estate in the Austin area. He uses Virgin Money to set up and service his seller takeback mortgages on multiple properties.

The servicing function is important because it takes over the burden of receiving and accounting for payments by borrowers, and issuing notices when payments come in late. Virgin Money charges nine dollars per payment to administer loan accounts, and reports borrowers' payment performance monthly to the national credit bureaus.

Costs for all Virgin Money services range from $699 for a basic package to $1,999 for a full closing package including title search and disbursement of funds.

You might want to check it out.

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