Q: How is real estate financing like a roller coaster?
A: You just hold on and try not to puke.
In The Story of Doctor Doolittle, the mythical pushmi-pullyu is a gazelle-unicorn cross with two heads at each end of its body. When it tries to move, both heads pull the body in opposing directions. A true metaphor for getting nowhere.
In the world of real estate finance, it seems as if we are batted about daily with news both bad and good. Recent headlines include:
What a lot of this adds up to is the rising popularity of seller financing, which has become a necessary evil for many sellers in this tight credit market. Whether you are a broker representing the buyer or the seller, there are some important rules to follow when it comes to seller financing:
- Both parties need to do the due diligence that is normally done by a bank lender. That usually means involving other parties, like attorneys and appraisers, to be sure everything about the asset being transferred is known.
- Both parties need to practice full disclosure regarding the facts of the transaction.
- Both parties must file the proper paperwork required by the state, IRS and other public entities.
- Both parties should document the transaction fully, even (and usually, especially) if the parties involved are related. Being family doesn’t make you exempt from the rules.