Owner Financing in Colorado

Excerpts from this article was taken from the Bronchick & Associates, PC website at (http://bronchicklaw.com/)

Owner financing in Colorado has changed drastically. Since the new provision of the Dodd Frank Act went into effect in January 2014, the Colorado Real Estate Commission has decided to remove the standard financing provisions from the CREC contract and require real estate brokers to hire lawyers to draft the appropriate provisions to comply with the law.   This article will discuss the different types of owner financing transactions and the practical and legal issues involved.

“Traditional” Seller-Financed Transaction

The so-called traditional seller-financed deal involves a seller who owns a property free and clear (without a mortgage) and is willing to carry the buyer with a small down payment.  At closing, title transfers to the buyer and the buyer signs a note to the seller for the balance of the purchase price.  The buyer also signs a deed of trust (mortgage) to the seller, which is recorded as a lien agains the the property.  Thus, the buyer is the owner of the property, and the seller is a lien holder (lender).

If the buyer defaults on the payments required on the note, the seller must file a foreclosure proceeding to get the property back.  This is done through a Public Trustee foreclosure, which is essentially a non-judicial process.  The process of foreclosure will usually take about 4 months.  After the foreclosure, the seller will also have to evict the occupant of the property in a regular FED (forcible entry and detainer) proceeding in County court.

Seller Carry Second

With a seller-carry second, the buyer gets a loan from a third party (usually a bank or mortgage company) for most of the purchase price.  The buyer will have title to the property, and the third party will have a note and deed of trust on the property as a first lien.  The buyer will execute a note and deed of trust to the seller for a small amount (usually 10-20% of the sales price), which will be a second lien on the property.

If the buyer defaults on the seller’s note, the seller would have to foreclose and pay off the first mortgage in front of his lien.

Wraparound AITD

A wraparound AITD (all inclusive trust deed) is where the seller deeds the property subject to the existing loan and the buyer signs a note to the seller secured by a deed of trust on the property.  The deed of trust is second (junior) to the existing deed of trust lien.  It is called “all inclusive” because the payment is for the ENTIRE amount.  For example, if the sales price is $100,000 and the seller owes $80,000, the buyer may put $10,000 down and sign a note for $90,000.  The seller collects on the $90,000 note (with principal and interest) and continues to pay his underlying loan, pocketing the monthly spread.

Sometimes the wrap is a “mirror”, that is, the all-inclusive note is the same as the underlying note.  In the above example, the seller pays $20,000 down and signs a note that mirrors the balance and terms of the seller’s underlying $80,000 loan.

If the buyer defaults on the note, the seller must foreclose the property through a Public Trustee auction.

Wraparound Land Contract.  

A wraparound installment land contract (aka “contract for deed”) is the same as a wraparound AITD except the title remains in the seller’s name until the debt is paid in full.  Typically the seller signs a deed that is placed in escrow with a title company to ensure that the buyer will get title if the seller disappears.

Upon default of the land contract, the legal process for the seller getting the property back is unclear under Colorado law.  The court could allow a forfeiture of equity and permit an eviction by the seller, or the court could require a JUDICIAL foreclosure (longer and more expensive process than a Public Trustee foreclosure).  The court’s decision is based on equitable factors, that is what is fair in the situation considering the buyer’s equity (size of down payment, accumulated equity, improvements, etc).

Lease/Option

A lease/option (aka “lease purchase”) is simply a lease with the option to purchase.  It is not a sale, like a wraparound land contract, although a long-term lease/option can begin to look like a land contract, hence make it more difficult to evict the tenant if he defaults on payments.  In rare cases, a court may treat a lease/option similar to a land contract, requiring the landlord to file a judicial foreclosure as if the transaction were a sale.  A properly constructed lease/option transaction will help avoid this characterization.

Safe Act and Dodd Frank The Colorado SAFE Act requires that a seller use a licensed mortgage loan originator to “underwrite” the loan, that is, qualify the buyer and prepare various disclosures.  Colorado law allows up to three owner financed transactions a year by a seller without having to comply with this requirement.  Investors who sell many properties will need to become licensed mortgage loan originators or hire one for their deals.

The Dodd Frank law is a federal statute that requires sellers to qualify buyers for owner-carry deals.  This includes wraps and contracts for deeds, but not lease/options (unless the lease/option is considered a “sale”, which can be the case for a long-term lease/option with a declining purchase price option). Dodd Frank only applies to transactions where the buyer will live in the property as their primary residence, not purchases by investors. Dodd Frank essentially gives one “free pass” a year to sellers who are not corporate entities, as in the case of someone selling their primary residence. This exemption puts minimal burdens on the seller and does not require the use of a licensed mortgage loan originator.

Corporate entities and/or investors who sell multiple properties a year (including mobile homes) must follow strict processing and documentation guidelines or face civil damages from a buyer for non-compliance.  Further, the seller must use a licensed mortgage loan originator if it does more than three deals a year.

Conclusion

Sellers and brokers engaging in owner-financed deals should seek legal counsel to discuss the implications of Dodd Frank and SAFE Act on their transactions.

When Gallagher and TABOR Collide Video

Colorado Fiscal Institute

Published on May 22, 2017

This video explains how the collision of the Gallagher and TABOR amendments in Colorado has been not only cutting funding for K-12 schools, but also for fire, police, ambulance and other local governments.

Outdoor Recreational Spending Dominated by Motorized Usage

Conclusions of Department of Commerce Research

Denver, CO, February 14, 2018 – Department of Commerce research commissioned by Secretary of Interior Sally Jewel to determine the value of outdoor recreation as part of the Gross Domestic Product was released today. The research identified that outdoor recreation accounted for 2% of the GDP or more than $371 Billion in spending annually and that this value was steadily increasing from 2012 to 2016.

This research further concluded that motorized spending was the dominant portion of spending for recreational activity, and almost exceeded all other spending sources combined….

“COHVCO/TPA representatives were always aware of the strong relationship motorized recreation played in outdoor recreation but even we were surprised at the values established in the Department of Commerce Research. This is welcome information and will be very helpful in undertaking land management decisions on public lands moving forward and confirmed what many in the industry had believed for many years” said Don Riggle, TPA President. “Additionally, this information will be very helpful for communitites that are targeting recreational activity to replace tax revenue that has been lost when other industries have moved out of the communities”.

“COHVCO/TPA believes this is valuable information for the OHV community, members, and industry and expands on the conclusions of the 2014 COHVCO OHV Economic Contribution study for Colorado. A formal study conducted by the Department of Commerce solidifies the economic significance of motorized recreation and the importance of keeping public and private lands open for access”, said COHVCO Executive Director Gerald Abbound.

A complete version of the Department of Commerce research is available here:  https://bea.gov/newreleases/industry/orsa/2018/pdf/orsa0218.pdf

If you would like more information about this topic, please contact Scott Jones, Esq. at www.cohvco.org

Dave Roberts Joins Hall Realty

Dave Roberts Joins Hall Realty 

After much thought and consideration, Dave Roberts, owner of Royal Elk Realty has decided to close his Independent Broker office and join Hall Realty as a Broker Associate. Hall Realty is celebrating their 40th year and is thrilled to welcome Dave to the office.

Hall Realty was established in 1978 by Bill and Ruthanna Hall and is currently owned and operated by Jeff and Danielle (Hall) Worthen, alongside Broker Associate and Vacation Rentals Manager, Annette Anthony.

Roberts first came to Lake City with wife and County Clerk, Joan Roberts, in 1989. Together they owned and operated the Lake City Resort for 15 years. Dave obtained his real estate license in May of 2006 and was a Broker Associate with United Country Blue Moose Realty. In 2009, Roberts ventured out as an Independent Broker and opened Royal Elk Realty.

“It’s been 9 years,” Roberts said, “and it’s been very successful. But the business of real estate is very time consuming and a lot of work for just one person. It just makes sense to join with Hall because we have worked together for years. I think we can do a better job together and offer an even higher quality experience for our clientele.”

Roberts and Worthens agree that the ultimate goal in marrying their like-minded real estate business approach is providing excellent customer service. “What we strive for are satisfied and loyal real estate sellers and buyers,” Danielle said. “Dave is such a great addition to the Hall Realty family. We’ve shown properties and closed transactions together for years, and feel we are very well matched.”

Roberts reports that this new endeavor has left him feeling re-energized with a fresh outlook. WORLD asked him what the biggest lesson is that he has learned during ownership of Royal Elk. He replied, “Whatever you do, do it honestly. The difference is caring. You have to treat others the way you want to be treated. I intend to carry that philosophy with me to Hall.”

“It’s that attitude, how Dave wants clients to have a quality experience – the fact that he wants to be the difference, and his professionalism – that’s exactly why we want to bring him on,” Danielle said.

Roberts asked that WORLD express his sincere thanks to everyone who supported Royal Elk Realty knowing that he could not have succeeded without his loyal clients. He looks forward to continuing those relationships in his future real estate success with the Hall Realty family.

(As reported in the Lake City Silver World Newspaper, Friday, March 16, 2018)

 

 

Colorado Real Estate Network Local Market Update for November 2017

Comparing the percent change from November 2016 to Novmeber 2017, New Listings remain the same for single family homes and townhouse-condo properties.

The Median Sales Price was up 32.5% to $334,500 for single family homes and Days on Market decreased 72.4%.

New tax legislation could have ramifications on housing. The White House believes that the tax reform bill will have a small impact on home prices, lowering them by less than 4 percent, and could conceivably boost homeownership. The National Association of REALTORS® has stated that eliminating the mortgage interest deduction could hurt housing, as the doubled standard deduction would reduce the desire to take out a mortgage and itemize the interest associated with it, thus reducing demand. This is a developing story.

Lake San Cristobal Overlook October 21, 2017

Photo taken by A. Danielle Worthen

Colorado Real Estate Network Local Market Update for September 2017

Comparing 2016 to 2017 in the Lake City area, New Listings were down 9.1 percent for single family homes. The Median Sales Price for single family homes went from $525,000 in 2016 to $262,500 in 2017 which is down 50 percent. The Average Sales Price for single family homes went from $575,000 in 2016 to $288,500 in 2017 which is down 49.8 percent.

Last year at this time, the national storyline was about how high demand was propping up sales and prices despite low inventory and months of supply. That has actually continued to be a familiar refrain for many months in 2017 and now for the past couple of years. But with the likes of Hurricanes Harvey and Irma, different employment outlooks, disparate incomes, varying new construction expectations and potential housing policy shifts, regional differences are becoming more prevalent and pronounced.

Lake City/Hinsdale County OHV Regulations

OHVs are allowed on all Hinsdale County and Town of Lake City roads.

OHV Regulations include:

  1. Must comply with all Colorado statutes pertaining to motor vehicles in motion. Must follow posted speed limit (all town streets are 15 mph, HWY 149 varies) and any other traffic laws.
  2. Vehicle operators must have Valid Driver’s License in possession.
  3. Proof of minimum liability insurance for each vehicle.
  4. Helmet is required for riders under 18 years of age unless in a child restraint (a bicycle helmet will NOT suffice).
  5. Motor vehicle child restraint laws apply.
  6. Eye protection for EVERY rider (prescription glasses, sunglasses, goggles, etc.  A vehicle windshield also satisfies this requirement.)
  7. No more occupants than OHV designed by manufacturer.  (ATVs may have 2 occupants.)
  8. If provided by the manufacturer, seat belts must be worn.
  9. Stay on designated roads.
  10. Highly recommended – rear view mirror.

San Juan Ranch Estates Fishing Report for May 4, 2017

Here is Hall Realty Broker, Scott Williams’ fishing report for May 4th from the Lake Fork of the Gunnison River semi-private section in the San Juan Ranch Estates Subdivision:

“In case anyone is asking…  Fishing was GREAT today at San Juan Ranch.
Here are several Becky took.

What a place”

Fishing Update from Broker Scott Williams on April 11, 2017

Fishing at San Juan Ranch today continued to impress.  The fish were hitting
small nymphs (as you can see in the photo.)

The river is still wade worthy which makes it easy to get to the good spots!


Photo by Becky Williams

Realtor, Equal Housing, MLS