“John, we have a problem,” one of my Buyer’s Specialists said to me over the phone on a recent autumn morning.
The day before, his clients’ Amanda and Bob (not their real names) were elated that their $3,250,000 offer was accepted on a beautiful big home in San Francisco. They were first time home buyers, both extremely successful and anxious to move out of their apartment. They were planning on selling some stock in Amanda’s company to raise approximately 5% of their 20% down payment. Close of escrow was scheduled for mid-October.
“The problem is that Amanda found out that her company stock is going into a blackout period until some time in mid November,” he said. “If she can’t sell her stock, they can’t go through with the purchase!”
A Trading Blackout Period is the period of time, usually before a company’s earnings are released to the public, when company executives, insiders and employees who might have inside information about their company are prohibited from buying or selling their company’s stock.
This is when we mobilized to explore ALL of the options that were available to Amanda and Bob. Over the next two days, we talked to 12-15 lenders, everyone from conventional banks, boutique mortgage brokers, credit unions and hard money lenders and we presented all of the options to our clients for funding an additional 5% of their purchase price. None of those lenders could provide a solution that was acceptable to our clients.
We found the best solution: a margin loan against Amanda’s stock holdings.
A Margin Loan is a loan by your stock broker using your stocks as collateral. It is an interest-bearing loan that can be used to access cash for investment and non-investment purposes. A margin loan can help you if you need cash outside of the stock market. One of the sweetest benefits of a margin loan is that the conventional lenders do not count this against you in the debt-to-income ratios.
Meanwhile, our clients started to rethink the entire purchase and decided to back out. We helped them terminate the contract and the seller ended up selling to another buyer. Amanda and Bob are content with their decision and happy with our high level of service and advice.
Moral of the story: Before you submit an offer on a property, make sure that your funds truly are liquid and that you are aware of all of your options. Call us if you want our advice about your particular situation!
Warmly,
John
