Frequently Asked Questions

How is this different from a traditional real estate purchase or sale?
  When an offer to purchase is made, it is very fair and reasonable for both the Buyer and Seller. The important differences are as follows:
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Unlike most real estate transactions where the burden is on the Buyer to qualify for a loan, in this transaction much of the burden is on the Seller rather than the Buyer. The Buyer has already completed most everything to close the transaction. The property must sufficiently appraise and the Seller must be able to deliver and maintain constant and clear title.
The property is purchased and fully paid over the term of 12 months by making equal monthly payments or nine month escrow with a single lump. The Seller may choose which method of payment works best for them.
The Seller holds title until they have received all their consideration. Title transfers approximately 12 months after the transaction starts. When title actually transfers is always after the Seller receives all their consideration, and generally the about same time the final payment is made.
To cover the Seller’s operating costs while the property is being purchased, the Buyer leases the entire property for an amount equal to the property’s operating cost plus principal and interest payments on existing debt, if any, until the Seller receive all their money. This is paid over and above the monthly payment to purchase the property.


How much will ACQ Capital pay for a property?
  The property will be purchased at the appraised value, In isolated instances, prices somewhat over the appraised value for an exceptional property (trophy) is possible and on a case by case basis. Generally, the Seller is paid something close to the asking price but in return the Buyer gets their terms.

What type of property is considered?
  Typically, larger premium (trophy) properties including single family residences, apartment complexes, office buildings, industrial parks, warehouse, development land and ranches. Businesses can be purchased where a substantial portion of the value is in real estate holdings.

How the Seller is paid?
  The formula is simple. The property is purchase for all cash in 12 months. The Seller’s equity divided by 12 and that equals the monthly payment.

How much is the down payment?
  None. Initially this sounds very risky but it is not because the monthly payments are guaranteed by a major bank, not the buyer. Therefore, the Seller is very secure. Think of it this way. The last time you purchased a CD from the bank, did you ask them to make a down payment to secure the note (“CD”) will be paid as agreed? Of course not.

Why are monthly payments over one year?
  The funding bank does not fund all cash and therefore the Seller is not paid all cash. Funds are received monthly. Therefore, monthly payments to the Seller are structured to match how funds are received to assure there will not be a default.

If I have existing debt, what happens to the debt?
  The total existing debt cannot exceed 30% of the appraised value. The debt remains on the property and the Seller continues making payments as always. After the Seller has received their full consideration, then the Buyer will assume, refinance or pay-off the existing debt. The Seller is legally relieved of the debt obligation.

When does title transfer?
  In most states, title transfers at the close of escrow, and if there is a note to the Seller, then payments begin. In this structure, there are, you might say, actually two closings; the first when the bank funding contract is signed and payments begin to the Seller; and the second is when title actually transfer only after the Seller receives all their money due. This structure actually increases the Seller’s security.

Must the Buyer qualify and be approved for a loan by the bank or lender?
  No. The Buyer has already met all the bank’s requirements. There is not a loan on the property on in this transaction. This is much closer to an “all equity” purchase with no debt.
Who performs the appraisal?
  The Seller provides and pays for a full narrative appraisal. The appraiser must be MAI certified . It is recommended the appraiser submit their resume and client list for the approval prior to ordering an appraisal.

What is the security? What happens if payments are not received or the payments stop for some reason?
  The Seller is secured in two ways: First, the primary security is the property. The Seller continues holding title to the property UNTIL all money due from the Buyer is received. Only then does title transfer to the Buyer. This is very different from a deed of trust and completely avoids the entire foreclosure process in the event of a default. Secondly, if the Buyer defaults OR for some reason the bank does not make the payment (other than a Seller Default), then the Seller keeps all the money received to date AND keeps the property.

How are payments guaranteed by the bank?
  The bank issues a funding contract based upon the property’s appraised value. The Seller is made a party to the contract directly with the bank. The funding contract states the exact minimum payment which will be made to designated escrow.

What is the Seller’s risk when becoming a party to the funding contract?
  None. The only risk to the Seller is the cost of the appraisal. The Seller does not sign a promissory note(s) nor is the property pledged as collateral for a loan. There is not a loan or credit decision in the transaction at any time.

What is required of the Seller to become a party to the funding contract?
  Even European banks have regulatory requirements, including the Patriot Act, that the bank must “know their client” when dealing in the United States. The Seller will be asked to provide generally exactly the same type of personal and background information required to open a bank account or large investment account. Confidential information is sent only to the bank.

Who is the Buyer?
  The Buyer is ACQ Capital, together with their silent partners.
Where does the money come from?
  ACQ Capital is being backed by a major European bank, ranked by assets in the top 50 banks in world.
If ACQ Capital is backed by this huge bank, why not pay all cash?
  That would require a loan. Rather, the Seller’s payment is the result of bank earnings over the course of a year..
How can there be enough profits to purchase the property?
  The bank’s internal operations are confidential, however, all banks are not created equal. European banks operate under different regulations from American banks, including the definition of what is an “asset”.

How can there be enough profits to purchase the property?
  The bank’s internal operations are confidential, however, all banks are not created equal. European banks operate under different regulations from American banks, including the definition of what is an “asset”.

The bank funding contract is very similar to an insurance policy. When an insurance company issues a policy, certainly they have a contingent liability to possibly pay a claim, but they also create an asset. Based upon their portfolio, the value of the created assets exceeds the liabilities by a substantial margin and in addition, earning substantial investment profits. The insurance policy is only a contract secured by nothing – only the written promise of both parties to do something.

In this transaction, the bank does much the same. The bank enters into an agreement with the Seller in which both parties make certain promises. It is an agreement, not a loan, and therefore, is not required to be secured by the real estate or any other asset. The value of the funding contract with the Seller is “supported”, not secured, by the real estate and verified by the appraisal.

European banks are able to list this contract on their balance sheet as an asset, enabling the bank to earn additional profits, while American banks cannot. In return, the bank promises to pay money to the Seller, just like an insurance company distributes a portion of their investment earnings to policy holders. It is on this basis the bank is able to provide funds for this transaction.

 
Is this transaction legal?
  Yes. Although the bank operate their internal affairs under European law and regulations, when a transaction is within the United States, they comply with all appropriate Federal, State, County and City law and regulations, including the amendments to the Patriot Act effective January 1, 2007. Sellers and real estate brokers should always seek advice from a competent real estate attorney pertaining to this or any real estate transaction.

If the property is an investment property, can I exchange under IRC 1031?
  Yes, however the escrow structure and how funds are delivered is slightly different. One benefit is the Seller can have 9 – 18 months to find their exchange property.
Does ACQ Capital provide expansion capital for business?
  Yes, but in narrow and specific circumstances. The business must have substantial real property assets or an investor willing to provide the assets.
Will property outside the United States be considered?
  Yes, but the preference is property located in the United States. Transactions are possible in the industrialized countries of Western Europe, and Pacific Rim as well a very limited number of third world countries, including Mexico. Management and use become the key decision issues.

Does ACQ Capital consider joint ventures and/or longer term development(s)?
  Yes on a case by case basis. Competent, experienced entrepreneurs, builders and developers with creative ideas for creating a sound, fun project is constantly sought as potential partners. Projects do not need to be huge to be considered. ACQ Capital has considerable experience and resources available.
Will ACQ Capital accept direct submissions?
  Yes, however submissions from seasoned real estate professionals are preferred, but not required. ACQ Capital acts as a principal. Brokers are always protected.
Can multiple properties be purchased? What about partnership interests?
  Yes. Each property must be the same ownership entity and individually appraised. In the case of a fractional interest (partnership), yes, on a case by case basis. Cooperation of the other partners is necessary.

What are the bank requirements for approval?
  The typical real estate transaction is based upon a combination of credit evaluation and the appraisal of the property. The success of this type transaction is NOT based upon credit at all, only the appraised value property. The requirements are:
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Provide a good appraisal performed by a reputable MAI appraiser.
Debt does not exceed 30% of the appraised value.
Clear title (same as with any real property transaction)
No change in title, meaning title must remain as it is during the term of the contract.