The RE/MAX of Boulder Podcast continues to keep the Boulder community and future home buyers and sellers updated with the latest information regarding the real estate market. Duane Duggan, a RE/MAX of Boulder Broker Associate and REALTOR® with 40 years of experience speaks with a variety of dynamic, accredited industry leaders.
RE/MAX of Boulder Podcast host and RE/MAX of Boulder REALTOR® Duane Duggan (left) and
Attorney Jon Goodman (right)
Duane Duggan sat down with attorney Jon Goodman to discuss the topic of owner financing or “seller financing” when purchasing a residential property.
Over the last 30 years, Jon Goodman has worked for Boulder-based law firm Frascona, Joiner, Goodman and Greenstein, P.C., which has been providing quality legal services in Colorado since 1974. The firm's attorneys work with highly trained staff to create cost effective solutions. Goodman specializes in Real Estate, Real Estate Finance, Association Law, Broker Representation, Business Law and Litigation.
What is Owner Financing?
When purchasing a residential property, owner financing is when the owner of a property can act as the lender to the purchasers in an owner-financed transaction. In this financing option, the buyer pays the seller over time rather than a bank. This type of option carries strict consumer financial protections and regulations.
What Regulations Apply?
After the financial crisis and subsequent housing collapse in 2008 “there was a regulatory reaction,” according to Goodman. Extensive Federal regulations were created in order to protect consumers and avoid another housing crash. Goodman and Duggan explained that a major component of the regulations was enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act into law.
Created in 2010, Dodd-Frank aims to ensure with greater certainty that borrowers can repay their home loans, and that owner financing transactions must comply with Dodd-Frank lending requirements. Owner financers must also comply with separate state-specific regulations. Michael Smeenk, an attorney with Frascona, Joiner, Goodman and Greenstein, P.C. law firm, has written a summary of these rules. You can read Michael’s article entitled “What do Dodd-Frank and Consumer Financial Protection Bureau Regulations Mean for Owner Financing in Colorado?” by clicking here: http://www.frascona.com/resource/mas0114_owner_financing_seller_Dodd-Frank_loan_colorado.htm
Why Choose Owner Financing?
Buyers can be motivated to obtain owner financing because it is the only way for some buyers who do not qualify for institutional financing to buy property. Because the seller knows the property, most sellers who carry financing are willing to do so at lower interest rates than other lenders who make loans to buyers with lower credit ratings. Sellers are also often attracted to owner financing due to the higher returns on this type of financing as compared to other investments with similar risks. In addition, sellers can be interested in the tax benefits that this type of financing can offer. In other cases, owner financing may be the only way to sell the property.
However, there are risks when a seller carries financing. Sellers and buyers should consult their attorneys about how to document these deals, and to identify all liabilities and how to manage them.
Disclaimer: This is general information, not advice in particular circumstance. Goodman encourages people to talk to their lawyers as circumstances come up case by case.
To view the podcast, please visit RE/MAX of Boulder’s podcast channel on Youtube.com and search “RE/MAX of Boulder owner financing.”
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