Seller Financing

[Joshua White]

Hello All,

Last night I scoured BP and found so many different things on the Seller Financing process. That the awesome thing about BP, you get so many different persepctives! However, right now my head is spinning because Im trying to lock down somewhat of a standard way of doing things as it pertains to seller financing.

1. Has anyone adopted this sort of financing as their primary method of financing your real estate investments ?

2. Is there an actual step by step outline of the seller financing process somewhere ?

Thanks in advance for your help!

Josh

[Terry Lewis]

Hi Joshua,

Seller Financing is driven now by The Dodd Frank Act, DFA and it's creation of the Consumer Finance Protection Buerau, CFPB to enforce the DFA. Imagine going down a seller financing road and you are the seller. You will come to your first fork in the road and you will need to decide if you are selling the home and seller financing to a consumer or investor. The DFA defines a consumer as an owner occupant personally and or family members. You can go to the CFPB web site consumerfinance.gov for the complete definition. The easiest way to answer this question is, is the buyer and investor to hold as a rental for income and investment. Anything else is going to be consumer. You need to have this answer in writing from the buyer at the inception of the negotiations so you have proof you are not violating the DFA. If you are selling to an investor you are free to make your deal subject to all the other guidelines of your state for loan brokerage, Etc. 

If you are going down the fork in the road that is the consumer you need to follow the DFA. There are some exemptions but the law forces you as the seller to hire a Mortgage Loan Originator MLO to underwrite the loan specifically for the borrowers ability to repay, ATR. Again this is a very simple answer and the CFPB web site is the best place to go for answers. 

Because it took 6 years to roll out the rules and guidelines of the DFA there is a lot of misinformation on the internet and BP. 

Terry Lewis 

Seller Finance Consultants, Inc