Are you selling a residence or mobile home with a land contract or other secured seller financing? In addition to dealing with normal land contract terms, you may need to comply with the new federal regulations under the Dodd-Frank Act. Dodd-Frank was in response to lending practices in the residential mortgage market. It has been applied to many sellers as well as lenders.
The statute and regulations apply only to residential property. But this includes traditional houses as well as mobile homes and manufactured homes.
Are you regulated by the statute and regulations? The answer is yes unless you fit within one of two surprisingly narrow exemptions.
Will you sell only one residential property with seller financing during a 12 month period? You might be exempt if you did not build the property, meet certain conditions and do not own it through a company (i.e., not owned through a partnership, corporation or LLC).
Will you sell not more than 1-3 residential properties per year with seller financing during a 12 month period? You will be exempt if you did not build the residence, meet certain conditions and there is no balloon payment.
Even If you are exempt, you need to address the certain requirements under the statute and regulations. You may need to investigate whether the buyer can afford their payment obligations (including any balloon payment) and comply with certain other requirements.
What if you don’t comply? Under Dodd-Frank, the buyer can cancel the transaction and has the option to get his or her money back.
These increased federal regulations mean it is more important than ever to get advice from counsel knowledgeable about seller financing.