Real estate investments are often significant purchases ranging from at least a few thousand dollars to multi-million dollar deals. This is where an experienced real estate financing lawyer can help make for an easy transaction throughout all phases of the process.
5 Things You Should Know About Real Estate Financing:
- Federal law (the Dodd Frank Act) places substantial limits on sellers’ ability to provide financing when property is sold. The penalties for violating Dodd Frank can be severe. You should consult an attorney before committing to providing financing for a borrower.
- The Dodd Frank Act prohibits unlicensed lenders, other than limited exceptions for seller financing, from making loans secured by residential real estate. There are no exceptions for making loans to family members.
- If the seller is providing financing for a purchase, the real estate sales contract must contain all loan terms such late fees, prepayment rights, prohibition on resale until the loan is paid. Failure to include these provisions in the sales contract means the seller has no right to insist on their inclusion in the loan documents.
- Contracts for deed and leases with purchase options should not be used in residential transactions. There are stiff penalties resulting from the improper use of these financing techniques.
- Using wrap around financing will almost always violate the terms of any existing loan secured by the residential property being sold; however, it may be the best way to provide owner financing if the buyer cannot obtain a traditional loan. You should seek legal advice to insure that both buyer and seller know the risks involved in wrap-around financing.
Real estate financing is an increasingly complex practice area involving ever changing state and federal laws. At Hancock McGill & Bleau, we approach each situation as a chance to help our clients successfully navigate these intricate transactions.