New York - Rent Credits, Dodd Frank?

2 Replies

I'm a little confused as to the legality of Dodd Frank and whether or not rent credits can even be utilized when wholesaling lease options. 

Rent credits would be an easy selling point with WLO. 

Can someone clear up the use of rent credits for me? Particularly within NY

Well Justin, it's been mentioned, described and detailed in the BP forums for almost 2 years, at least a hundred times, so I'm not sure what is not clear about it. 

Sometimes, when we really want to do something we just don't want to believe that we are not suppose to do it like we want to. Is that the case?

Any credit that is given by a seller from payments that reduce the sale price is a financing agreement. Any financing agreement of any kind from a seller to an owner occupied buyer for a residence falls under Dodd-Frank, forget NY, that's federal law. There are exemptions, such as you living in the property when selling your own home.

There may be exemptions for dealers, as to the number of transactions in some states, but my question would be, how do you prove you met that exemption if you have a number of properties, since a lease-option does not require any filing, it can be a "hip-pocket" deal. 

I'd suggest before you try it, to get competent legal advice, and that does not come in forum posts, blogs, podcasts, or any other media other than from the mouth of your legal counsel or in writing as an opinion. 

Rent credits have always had financing issues when it came time for a buyer to obtain a loan, which is the reason most deals fail with investor sellers. What you might credit a buyer with is not necessarily what lender will credit them with and then they are short on the down payment they thought they established. 

Start giving too much in credits, you have a disguised sale issue, you may not be evicting a tenant buyer but foreclosing on their interests. You can also have tax issues and the ever loved due on sale issue that you can't avoid. Can you pay off a loan and continue selling as agreed? Most can't. Now, you have other legal matters with your buyer!

Lease options can be accomplished, just don't give rent credits to the purchase price, then you don't have the financing issues. Good luck......and read some more! :)    

Hi Justin,

I would do the following:

1. Get licensed - Agent in NY

2. Get a RMLO

3. Get a 1003 app filled out on the tenant buyer

4. Have the RMLO look at the 1003 app, talk about the Ability to Repay Rules

The RMLO knows Dodd Frank, Safe Act, RESPA, and TILA.

5. Get a contract attorney that understands leases, options, subject to existing financing, wrap around mortgages, creating private first and second mortgages, etc.  Also make sure the attorney can help you with joint venture agreements.

If I sell on owner financing or lease option, I need that RMLO to look at the 1003 app.