A simultaneous closing, sometimes called "table funding," is a transaction in which the seller sells the property, carries a note, and then sells the note at the same time the property sells, or within a very short time afterwards. This type of transaction falls in a gray area of the law. It could be considered a loan disguised as a sale.
The logic behind this questionable condition is that the seller never intended to carry the note, and if we bought the note, we could be considered a lender because we would be the first party to provide money.
If the transaction is judged a loan, the note broker and the note buyer could be required to comply with all licensing and disclosure requirements of the law. Failure to do so could result in severe penalties.If the transaction is judged a loan, it could also be considered as a usurious loan, charging an illegally high interest rate. This could also result in severe penalties.
Therfore, we only buy notes that are "old and cold," where we entered the picture after the note was created and one or two months have gone by.
Lorelei Stevens is president of Wall Street Brokers, Inc. in Seattle, Washington. She has been a licensed real estate broker (Washington State Real Estate Brokers License WA-LL-SB-*275LD) and a discounted note buyer since the 1970s. She has worked her entire adult life with Wall Street Brokers negotiating millions of dollars of paper and is a nationally recognized expert.
Lorelei has taught Legal Continuing Education seminars and has written numerous articles for legal, real estate and other professional publications on the subjects of seller-financing, managing, reinforcing and buying paper. She is the author of two books, one on seller-financing and another on note buying. She also writes a monthly column for Noteworthy Newsletter and is a frequent contributor to The Paper Source. Her web site is www.WallStreetBrokers.com.
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