Guide to Building a Seller Financed Business

[Chris C.]

I have been doing Lonnie Deals for a little over a year and have so far been quite successful. I want to take my business to the next level by establishing the documentation and processes that insure compliance with state/federal regulations and create notes that are marketable to note buyers. As I plan to move into land/home packages and SFR this becomes more important.

I would like this thread to detail how someone might go from where I am to offering financing like any other established financing company.

The only rule as we create this list is the reply to get a lawyer doesn't cut it. How can anyone evaluate whether an attorney is providing them what they need with out at least some base knowledge. On that note the information gathered should be used to select a good attorney to assist with developing the business.

How are you pros managing your seller financed business?
What, if any, 3rd parties are you using and how?
Any tips, pointers, etc.

[Chris Martin]

With the national and state bank regulation changes, the proposition of building a seller financed property business certainly got more difficult. Your state, like mine, allows up to five sales per year to be exempt from the South Carolina Mortgage Lending Act but it sounds like your plan is to ensure compliance and become a registered lending institution. You'll need to follow the SCMLA and the state Office of the Commissioner of Banking regulations.

For my business, I came to the conclusion that my seller financing activities would be focused more to investors and less to home owners. Yes, I changed my business model based on SAFE Act legislation and it's ripple effects on my state's foreclosure laws (and documentation, workout requirements, etc.) Lending (and lenders) is an evil business anymore when dealing with owner occupied property. I'm staying within the exemptions.

So, if you know anyone who has an established financing company... that's the person to talk to. How much did their physical office overhead cost? How much do MLO make? How many other deals does my business need to cover the overhead? On and on. Best to see if they have a business plan they would share with you.

The financing business is not REI... so maybe that's why I am the first to respond. Other options: talk to a small local bank where they may have some options that can help achieve your goals. I am going down this path but have yet to find common ground. It's not my highest priority, but again for OO deals of businesses >5/year this may be a better alternative.