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Frequently Asked Questions (FAQ's)
Q. What can you tell me about Landmark Companies? A. The Landmark family of companies currently consists of three privately-held firms operating in Southern New Hampshire managed by Gilbert R. Bailey and staff. Mr. Bailey has thirty years experience in land purchase, sales, and structured finance.
1.) Landmark Land Sales, LLC, purchases tracts of rural acreage for subdivision and resale to consumers who buy the property for recreational use and first and second home construction. To promote sales, each property is offered with “owner financing”. This results in a continuous supply of notes being originated and owned by Landmark Land Sales. These notes are sold to private investors providing additional liquidity to the company. When an investor chooses to use their self-directed IRA as the investment vehicle, the investment returns to the investor are tax deferred.
2.) LLS Capital Management, LLC, buys and holds notes secured by first mortgages on land. These notes are owned and serviced by the Company. A beneficial interest in these loans is indirectly represented by ownership of the shares of LLS Capital Management sold to investors. Investors are offered an attractive fixed rate of interest and the return of principal paid monthly secured by the first mortgage positions. Investments are further protected through the use of credit enhancement techniques that provide cash reserves to cover individual note defaults, thus protecting the overall integrity of the note pool.
3.) Landmark Land Services, LLC, provides surveying, septic system design, wetland delineation, mortgage plot plans, local, state, federal permitting, and forest management services to existing land owners and also sells its services to Landmark Land Sales.
Q. What are the rates of return that I can expect if I purchase a mortgage note?
A.
Each note is different and rates of return vary according to a number of
factors. Historically, Landmark Land Sales investors have enjoyed rates of
return on individual notes ranging from 7% to 12%.
Your
return on your investment may be different. If you wish to purchase a note it is
important that you contact Landmark Land Sales directly to discuss the terms and
conditions for individual notes that may be available for purchase at the time
of your inquiry. Landmark Land Sales number is (603) 826-4600.
Q. Why are purchasers willing to pay a premium over bank
financing rates for owner financed notes?
A. The reasons for this are many and varied and include:
1.) Its
easy. All the buyer needs to say is “Yes”. Every other aspect of setting-up the
loan (other than filling out a standard credit application) is handled for them.
2.) Its simple. The buyer needs only to sign the required documents and is not
involved in dealing with multiple banks or their staffs. This makes the
acquisition process not only straight forward but less time consuming and less
intimidating for many buyers.
3.) Not all purchasers could qualify under current banking rules for second
homes or vacation properties. Landmark Land Sales takes a written credit
application and performs a credit check to verify the application. Specific loan
parameters are designed based on credit quality, with loan reserves required for
weaker credits. Credit scores average from 550 to 700, with average credits
ranging from B+ to A- when scored on a residential mortgage loan matrix.
Remember, as a general rule a higher yielding note has higher risk than a lower
yielding note.
Q. What types of mortgage notes are offered by Landmark
Land Sales to investors?
A. The mortgage loans offered for sale are notes secured by
first mortgage positions on lots and acreage. Lot sizes range from approximately
five acres to approximately forty acres with a few parcels of greater acreage.
Title insurance policies are available with each mortgage deed. Each property is
surveyed and platted by a registered land surveyor.
Note
Terms – Notes are typically written for terms of 5, 7, 10 or 20 years (60, 84,
120, or 240 months). A condition of each mortgage deed requires that no property
can be resold by the consumer without repayment of the mortgage loan. This is
known as an “acceleration” or a “due on-sale” clause and insures that the
investor is paid back their full investment before any transfer of title can
take place.
The original principal balances of the majority of the loans offered ranged from
approximately $30,000.00 to $55,000.00. Many larger notes are often available. Smaller
investments can be made by the purchase of a partial interest in a note.
And, if
your accountant should ask, loans are sold to the investor by the company under
terms of a loan sale agreement. This agreement meets requirements of a “true
sale” for generally accepted accounting principles. (GAAP)
A. Historical payoff data for the servicing portfolios
described above indicate an average of approximately 65 months outstanding, and
the majority ranging from 58 to 72 months. This include past experience of
company management. In many cases, payoff occurs sooner as a result of
construction financing.
Q. Can you describe the land that Landmark Land Sales
sells?
A. The property sold by Landmark is generally located in
southwestern New Hampshire, in Sullivan and Cheshire Counties. The area is
bounded on the south by Keene, NH, on the north by the Hanover – Lebanon region,
on the west by the Connecticut River, and on the east by the Lake Sunapee Region
and Interstate Route 89.
Parcels range in size from five to forty acres. A purchaser generally buys for
recreational use initially, with some properties being built for retirement. A
strong local market for residential construction has developed in the past seven
years, and the number of traditional weekend buyers from CT and MA is still
strong.
The property is generally located on a town secondary road, is rural in nature,
and is mostly wooded.
Properties are generally served by power and phone. Sites require individual
septic systems and water supply to be constructed by the consumer.
Small parcels are sold at prices beginning at $35,000.00. The average sale price is approximately
$65,000.00, and many parcels are now being sold in excess of $100,000.00.
Care is taken to insure each lot is buildable, and in some cases the lots are
further developed by Landmark Land Sales with septic and driveway designs
already approved and completed.
Q. How do I buy a mortgage note from Landmark Land Sales?
A. 1.) Register with Landmark Land Sales to be notified of
mortgage notes that become available. Landmark Land Sales will keep interested
purchasers informed as to loans available terms, property information, and
“Consumer Profile” information will be communicated to qualified loan buyers.
2.) An
investor interested in purchasing a note will be asked to commit to a purchase
by signing a Loan Purchase and Sales Agreement. Once this agreement is signed a
loan purchase date will be established. The actual transfer of funds by the loan
purchaser to Landmark, and the corresponding transfer of the note and the
mortgage deed by the company to the purchaser of the loan, will be handled by an
attorney located in New Hampshire. This is done to facilitate the recording of
the transfer documents in the Registry of Deeds in the county where the property
is located. Transfer of the security interest is done by an “Assignment of
Mortgage”, which is recorded at the Registry of Deeds.
Q. What are the costs associated with the purchase of a
loan from Landmark Land Sales?
A. Costs, including the legal expense of drafting of
assignments, title insurance, and recording fees for mortgage assignment, are
borne by Landmark. If the note purchaser requires an attorney other than the
closing attorney to represent their interests, that cost will be the
responsibility of the note purchaser.
Q. How can I see a copy of the Loan Purchase and Sales
Agreement as an example?
A. A copy can be provided along with the “Consumer Profile”. A
competitive market analysis (CMA) can also be ordered from a third party land
valuation expert for a $375.00 fee. Please contact Landmark directly for more
details if you are interested receiving an independent valuation opinion.
(Landmark Land Sales can be reached at (603) 826-4601.
Q. Please describe a Note, Mortgage Deed, and Warranty
Deed as they relate to Landmark loan sales.
A. Most commonly, when Landmark sells property, it conveys
ownership of that property to the purchaser by delivery of a Warranty Deed. This
Deed describes the physical location of the property and describes the quality
of title being conveyed.
When the consumer chooses to pay for the property over a period of time, a
promissory note is executed by the purchaser. This promissory note includes the
terms of payment, including the number of payments required to fully amortize,
(payoff) the loan, the interest rate, the monthly payment, and the conditions of
default.
Because this note is only a promise to pay, the promise is secured by a Mortgage
Deed. The Mortgage Deed grants a security interest in the property to the party
advancing the funds. This is possible since the new owner has acquired title by
acceptance of the Warranty Deed from Landmark. The new owner is now able to
transfer a security interest in property by executing the Mortgage Deed.
A. As an example, if a loan were written at a 6% annual percentage rate and the
loan purchaser required 9.5% annual percentage rate as a yield, the company
could sell the loan to the purchaser at a discount as follows;
Property Sales Price: $22,000.00 Down-payment $ 2,000.00 Terms of Note:
Principal Balance: $20,000.00 Rate: 6% Term: 120 Months Payment Amt: $222.04
Amount the loan purchaser pays the company for the $20,000.00 note: $17,159.52
(A discount of $2,840.48 from the $20,000 principal)
With the same amount of Monthly cash flow to the Loan purchaser: $222.04
And the same Term for The cash flows to the loan purchaser: 120 Months
This equates to a Discount Rate with a 9.5% Yield -
Please refer to “Yield” definition in the Glossary Section of this document.
Individual pricing of notes will be available, and will be based on
existing note terms and their relationship to market sales.
Q. What is the average delinquency and default rate for
loans of this type?
A. In addition to the management’s experience with past loans
of this type, two publicly listed companies operating for more than ten years in
the business of financing this specific type of land loan have reported default
rates from a minimum of 0.61% to a maximum of 2.74% of principal balances
outstanding annually. This data includes total loan volumes exceeding $1 billion
dollars.
Q. What happens in the event of default by the consumer
and foreclosure of the loan?
A. The property is acquired by the mortgagee (note holder) by
foreclosure, and sold in the open market. The loan purchase and sales agreement
with Landmark provides that the company will be responsible for sale of the
property once it is foreclosed.
It also provides that the company reimburse the note holder for any deficiency
between the principal balance outstanding, including accrued interest, at the
time of foreclosure, and the net proceeds received from the property sale. If
the proceeds exceed the amount due the note holder then the remaining difference
is the property of the company, and/or mortgagor.
Q. How long does the Foreclosure and property resale
process take?
A. If a consumer becomes seriously delinquent in the payment
process, the company first attempts to negotiate transfer of the property back
to the mortgagee (note holder) by a deed-back in-lieu-of-foreclosure, in
exchange for settlement of the balance outstanding. Generally this is quicker
and allows for an immediate marketing of the property. In the event the
foreclosure process must be completed, the total time from the first notice of
default to ownership of the property by the mortgagee (note holder) can be nine
months or more.
A. Yes. The loan sales agreement that is executed by Landmark
and the purchaser of the loan provides for conditions of default, the
corresponding management of the foreclosure process, and which party assumes
risk of loss.
The decision as to what party is responsible for management of this process, and
the risk of loss, is made at the time the loan is purchased. The decision is up
to the investor as to the desired approach.
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Investing in First Mortgage Land Loans with Self-Directed IRA's Living and Working in New Hampshire |
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