All Forum Posts by: Barry DeGroot

I am an attorney and agree with many of the comments above. Yes, the LLC will provide liability protection for you personally. To the extent you are sued, or involved in a litigation, your personal (non-LLC) assets are protected. And, if the need arose, the LLC could seek bankruptcy protection (something you would not want to do personally). You just need to ensure that you treat the LLC as a separate entity (i.e. no commingling assets, etc.) It is fairly simple to form an LLC at nominal cost and there is no real tax downside because it is taxed as a partnership. Insurance would be about the same as if you acquired additional insurance for your own benefit. Also agreed the you would want to form your LLC prior to taking title to a property as a post-closing transfer could incur transfer tax depending on the state. We also do HML's and we will only lend to entities to ensure that there is no characterization of the loan as a consumer loan. Traditional lenders will in fact lend to your LLC, they will just require you to personally guaranty the loan.

We are a HML as well and while I agree with the above, that the specific property itself will be underwritten and is collateral based, there are some time sensitive advantages to establishing a relationship prior to locating a property. Most of our borrowers are line of credit borrowers and by establishing the line in advance, we are able to get through the borrower/entity financials, background checks, etc. and clear the borrower for the line, subject only to underwriting the property once it goes under contract. This puts the relationship in place and speeds up the process as many times, investors need to close quickly on a particular property.

Yes, we use electronic signatures extensively and have never had an issue with it. It is extremely convenient especially when we are dealing with people and companies in various locations. We rarely use hand signatures anymore except in cases where it is required.

We manage several of our own in house offerings with roughly 170m in assets under management at this point. Aside from entity formation, the only real startup cost is the preparation of your offering documents (i.e. private placement memorandum, subscription documents, operating agreement, etc.) and the legal advice along the way. You're probably looking at several thousand but nothing exorbitant. Although we are in PA, we use a securities attorney in Oregon who is very good. Although he drafted the original docs for the first fund years ago, we now prepare the docs on our own and just have him scrub through them as a final review. I would be happy to share his contact info if you would like. Just drop me a message. 

I don't practice in FL, but here is an excerpt from the FL Statutes which may be on point for you. Based on my review, it appears that you should have been afforded prior notice. See below: 

CONSENT TO TRANSITION TO
TRANSACTION BROKER

FLORIDA LAW ALLOWS REAL ESTATE LICENSEES WHO REPRESENT A BUYER OR SELLER AS A SINGLE AGENT TO CHANGE FROM A SINGLE AGENT RELATIONSHIP TO A TRANSACTION BROKERAGE RELATIONSHIP IN ORDER FOR THE LICENSEE TO ASSIST BOTH PARTIES IN A REAL ESTATE TRANSACTION BY PROVIDING A LIMITED FORM OF REPRESENTATION TO BOTH THE BUYER AND THE SELLER. THIS CHANGE IN RELATIONSHIP CANNOT OCCUR WITHOUT YOUR PRIOR WRITTEN CONSENT.

As a transaction broker, (insert name of Real Estate Firm and its Associates) , provides to you a limited form of representation that includes the following duties:

1. Dealing honestly and fairly;

2. Accounting for all funds;

3. Using skill, care, and diligence in the transaction;

4. Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;

5. Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;

6. Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and

7. Any additional duties that are entered into by this or by separate written agreement.

Limited representation means that a buyer or seller is not responsible for the acts of the licensee. Additionally, parties are giving up their rights to the undivided loyalty of the licensee. This aspect of limited representation allows a licensee to facilitate a real estate transaction by assisting both the buyer and the seller, but a licensee will not work to represent one party to the detriment of the other party when acting as a transaction broker to both parties.

As an additional consideration in re-drafting your lease, you should designate the order in which payments are applied if you have not done so already. For example: "All payments received shall be first applied to outstanding late fees and charges in any order as determined by landlord prior to the application of such payment to rent." or something like that. 

It would really depend on the terms of your contract and whether it was enforceable aagainst the seller. The earnest money deposit is not an "absolute" requirement, although it is good practice. There have been decisions that found that your promise to purchase alone was sufficient consideration. Again, without seeing the actual contract, it is hard to give an opinion. This may have merely been an invitation to make a binding offer at a certain price. 

On a related note: The PA department of revenue has found that transfer tax was due both on the original transaction (between seller and wholesaler) and the assignment (wholesaler to investor). Need to be careful on these because if the title company were audited, you may get stuck with paying transfer tax twice. 

Being a PA attorney and broker, I am very familiar with the PAR form. While it is true that there is a lot of language that applies where brokers are involved, there is also a lot of good language and time-frame flows designed for the buyer and seller as well. It is however, bulky as it is designed to cover multiple types of transactions. I agree with the above, that a Realtor could give you some great insight. Another option is that there are You Tube videos out there where PA agents have given short tutorials on the agreement. Putting my "disclaimer" hat on though, it is still a contract and to the extent you do not feel 100% comfortable with it, you should consider consulting local counsel to either review it, or as suggested, draft one for you. Best of luck!

If the property was inherited, you may want to search the register of wills at the county courthouse for the last name. If you are able to find that the decedent's will was probated, the records may reflect the contact info for the representative of the estate and/or the person who inherited it. Also, pull a copy of the deed. There may be information and contact info when the deed was passed from the estate to the beneficiary. Good luck!