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License Requirements Loosened For Seller Carry Financing

Imagine a scenario where you own a property free and clear of any mortgage and you find a buyer who wants to buy the property but doesn’t have the entire purchase price in cash or the ability to get financing. Prior to 2010, regardless of what type of property you wanted to sell, you, as a seller, could agree to take a certain amount of money down and carry back the financing for the remainder of the purchase price. In this situation, you make the decision that you are willing to accept the role traditionally taken by institutional lenders by becoming the mortgage holder on the property. An advantage to both you, as a seller, and the buyer is that a sale can occur even in a tight credit market.

In 2010, the Colorado Legislature modified laws relating to this type of seller financing to require licensed mortgage broker involvement on residential property. This rule excepted only those transactions in which the seller was carrying back financing on a dwelling that served as the seller’s residence. So, for example, if you owned a condominium as an investment property, under the 2010 law, you could not offer or negotiate the terms of carry financing on the property without being licensed by the State of Colorado.

Now, with the Governor’s signature on an amendment to the existing law, any seller in Colorado can once again offer, negotiate and accept a sale involving residential seller-carry financing without involving a licensed mortgage broker. The new law does limit this type of financing to a maximum of three properties per seller in any twelve month period. For those sellers looking to self-finance the sale of a residential investment property or a second home, the 2011 amendment frees up another possible avenue for a sale.

For a discussion of potential tax benefits to seller-carry financing, see Jonathan Goodman’s article “Tax Benefits of Seller-Carry Financing.”

For questions, please contact, Jonathan Goodman.

William Robinson is no longer with the law firm of Frascona, Joiner, Goodman and Greenstein, P.C.
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