Owner Financed, Owner Occupant, Wholesale?

Question

From my mailing, I'm constantly being contacted by owners of free & clear property that won't come low enough on pricing for me to wholesale, but are more than happy to do super reasonable owner financing deals.

From advertising my wholesaling deals, I'm constantly being contacted by buyers with down payments that want owner financing (owner occupant).

How do I (legally) structure these deals to make it a Win/Win/Win?

Note: This is in Georgia where the owner financing laws have recently changed. Any info would be MUCH appreciated. Thanks!

Phil

Brian Gibbons · Answer

Bill Gulley could you talk about advising real estate investors being wary about marketing for buyers on seller financing?

Bill Gulley · Answer

Advertising by a wholesaler needs to address the opportunity to buy the property not holding the property for sale as an owner may or does. You can simply say that an opportunity to buy this property blah, blah, blah and the owner may consider financing. Leave it at that, buyers get it, don't get into specifics. :)

Bill Gulley · Answer

Big point being missed here is that you aren't the owner and YOU are not exempt from mortgage brokerage laws. While wholesalers ignore and seek loopholes in acting in the capacity of a licensed real estate agent, mortgage broker laws are federal and being in between the lender and borrower is much more strict than state agency requirements. You can not offer, present, process, underwrite or advise in the origination of any financing contract, exceptions are attorneys acting within their scope of related counsel and real estate agents in those transactions they are a party to, otherwise they need to meet state and/or federal origination requirements. In this respect, Dodd Frank does apply as well as mortgage broker laws. There is no exception to just one or three or five, any origination is covered.

Actually, this just dawned on me as we have had many wholesalers talk about rolling over financing agreements, those are usually canned due tie to the fact such contracts are unilateral and require the consent of the lender/seller.

This is a bit different, you're facilitating financing between an owner and an end buyer/borrower, that is a brokerage function.

If you don't own the property then you're not a party to the financing contract or arrangement. Best thing to do is to suggest the appropriate method to a seller, if they are agreeable to considering it, get them to see your RMLO. When you have an interested buyer, introduce them to the RMLO and get out of the way. You can assign your purchase contract but it should not contain any financing aspects, just leave that between the two parties and the RMLO. If your RMLO is any good, they can "have your back" on the marketing front. :

Scott Bottomley · Answer

Hi @Brian Gibbons ,First off thanks for all of your videos, they've helped me understand this a lot better. If I assign a contract in which the seller has provided owner financing (in any form i.e. wrap, sub-2, etc.) and I assign that to an owner-occupant buyer, am I providing owner financing or is the seller? I see where a double closing would likely be me providing the financing. the chain of title would go seller > me > buyer(owner-occupant) but with an assignment it would essentially be the seller owner financing to the buyer directly. And if they are selling their primary residence then they likely haven't and wont sell any other property with owner financing in a year then they'd be exempt and I'd be exempt.I'd love to know your thoughts

Terry Lewis · Answer

@bill g and @brian gibbons

You are both right on, each state will have it's own advertising regulations with regard to marketing for brokers and lending. California is very strict. The DFA sets minimum federal requirements and they are under the jurisdiction of the CFPB. I like to refer to the DFA as the Obama Care or Home Land Security of Consumer Finance. It is unavoidable and everyone in America must comply.

Terry Lewis · Answer

Thanks Brian,

Philip when you write a purchase contract you are an investor buyer so you are always exempt under the Dodd-Frank Act. If you assign the contract to a consumer buyer then you and probably the seller are in a consumer buyer transaction and will need to hire a MLO to bless the deal. Let me know if you need more clarification.

Terry Lewis

Brian Gibbons · Answer

Well here's the thing.

Dodd Frank has no history in the courts so it's all up to the interpretation of the judges.

To be perfectly safe if you use the RMLO when doing any kind of owner occupant seller financing even a regular lease option, you will protect both yourself and the seller.

Contact @Terry Lewis a RMLO.

Brian Gibbons · Answer

Hi @Phillip  Trujillo l
	 
	 What you're talking about is talking to the seller about selling on terms versus selling with an agent, and how can you sell on terms and make more money.
	 
	 For free and clear house, there is no due on sale clause as there is no mortgage or lien.
	 
	 The focus I have with free and clear houses is to help the seller understand that if they sell with an agent and paying the costs to sell they will incur commissions, closing costs, sellers concessions, holding costs, etc. adding up to 10 to 15% of the value of the house. They can save this money in the aggravation by using seller finance.
	 
	 Regarding Dodd Frank and seller financing, home sellers have a exception it there selling their residence with a 12 month period.
	 
	 I like a note and mortgage in first position to buy free and clear houses, and actually pay more perhaps than asking price but on my terms.

I like to get a cash flow of $300 a month on rentals or more, so I will offer a payment that will allow me to get that kind of cash flow.
	 
	 Remember, you can buy on terms as much is you want regarding Dodd Frank, you just can't sell on terms as much as you want.

Owner Financed, Owner Occupant, Wholesale?

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