Clients purchasing assets privately need to be aware of the greater risks involved with these types of transactions. As the seller is an unknown party, extra precautions need to be taken to protect both the financier and the client. For this reason it is important to ascertain that the asset is appropriate security for its value and age. This will
Help protect the client from buying a ‘lemon’!
The following must be considered when financing a private sale:
- Clear title on the asset.
The financier must establish who has clear title on the asset being purchased. If the seller’s bank has an “all monies clause” or fixed and floating charge, the bank must release their interest in the asset.
- Inspection of the asset.
In some cases, an inspection of the asset will be required. The financier’s staff may complete the inspection or in some cases you may be able to provide an inspection report for the financier.
- Additional costs
Financiers impose additional loadings for privately financed assets due to the extra work involved.
- Refer all private sales to financiers
You must refer all private sales to the financiers. The financiers can inform you of additional costs/loadings on the finance. The additional requirements are in the client’s best interest.
- Expect a longer Timeframe
Timeframes for private sales are longer when you factor in determining clear title and the inspection ofthe asset. Ensure you communicate this to the client to set realistic expectations