Dodd-Frank Impact on "Seller Financing" for Buyers

[Nick Deshotels]

BP Nation,

From what I understand, the Dodd-Frank Act mainly effects the seller when it comes to a "seller financed" deal. Are there any impacts on the buyer? I will be targeting "100% seller financed" deals this year in order to purchase rental properties. Is there anything I should be weary of? I also don't want the seller to be at risk as well.

Thanks,

[Bill Gulley]

Actually Nick, there can be issues on the buyer side, the DF Act includes originators and the "maker" of loans, the "maker" of a note is the borrower, not the lender. The DF Act only pertains to consumer financing on home loans, not commercial loans, buying rentals will be a commercial aspect so long as you don't live in the property.

Another matter is who presents the deal, who constructs the agreements, who drafts the note, often it's an investor buyer who has the sales pitch and sells the deal to an owner. Doing so means you take responsibility for what you propose and get an owner to agree to, so if there are any financing snags ultimately you can be on the hook, that includes predatory dealing or financing.

Now, you said 100% financing and not putting the seller at risk. Don't see how that is possible unless the seller retains title until a certain amount is paid (down there in LA you have a Bond for Deed) otherwise you'd need to pledge other collateral sufficient to reduce the risks normally assumed by a seller financing a deal, if you don't and things go south, talking a seller into taking back all the financing without collateral and causing him a loss will be an issue for you. Good luck :)