Related Party Loans / Seller Financing
We Are Related Party Loan / Seller Financing Experts
When you’re considering seller financing or structuring loans between related parties, you’re entering territory where the IRS applies heightened scrutiny and where improper documentation can trigger severe tax consequences. Related party loans face a rigorous “debt vs. equity test” that examines factors like repayment history and fixed maturity dates, and failure to meet these standards can result in the loss of interest deductions, reclassification of payments as taxable dividends, and unexpected penalties. You need experienced legal counsel who understands both the federal tax implications and state-specific regulatory requirements that govern these transactions. Our practice helps you structure seller financing arrangements that comply with Truth-in-Lending Act requirements, ensure proper borrower ability-to-repay determinations, and create documentation that withstands IRS examination while protecting your financial interests and maintaining the integrity of your transaction.
How We Can Help
- Lender representation
- Ie – if parents want to lend child $ to buy home and secure with note and mortgage
- Friends who want to finance a purchase for another friend and secure with note and mortgage
- Preparation of note/mortgage and other loan documents
- Lender can charge interest, origination fees etc.
- Fees typically paid by borrower
- Investor representation
- Strategy planning
- Seller Financing
- Sellers who do not need all proceeds from sale and would rather invest in note/mortgage to secure property and receive their proceeds over time with interest.
We Work Closely With Homeowners, Property Managers, Condo Associations, Real Estate Agents & Lenders
Why Consider Acting as the Lender?
- Create a predictable monthly income stream secured by real property.
- Earn competitive interest returns that may exceed traditional savings or investment vehicles.
- Maintain flexibility to structure the loan terms in a way that aligns with your financial goals.
- Expand the buyer pool (for sellers) and facilitate a successful transaction.
- Retain leverage and security through a recorded mortgage against the property.
- Great for pre-existing relationships – ie: related party loans (parent lending to child, trustee lending to beneficiary etc…)
Key Financial Advantages
- Negotiable Interest Rate – You determine the rate of return.
- Must comport with Usury Laws – generally cannot be more than 18%
- Custom Loan Term – Short-term balloon or long-term amortization options.
- Down Payment Control – Larger down payments reduce overall risk.
- Security Through Real Estate – The loan is backed by tangible property.
- Potential Installment Sale Benefits (Seller Financing) – Spread receipt of proceeds over time (consult tax advisor).
Common Loan Structures
- Fully Amortizing Loan – Equal payments over time until paid in full.
- Balloon Loan – Lower payments with a lump sum due at maturity.
- Interest-Only Loan – Monthly interest payments with principal due at maturity.
What This Means for You as the Lender
- You receive a promissory note outlining repayment terms.
- You receive a lender’s title insurance policy
- Your loan is secured by a recorded mortgage against the property.
- You receive agreed-upon monthly payments pursuant to the loan terms.
- In the event of default, you retain enforcement rights under Florida law.
- Collect late fees and penalties
- Foreclose on the property and take back ownership
Ideal Scenarios for Private or Seller Financing
- Buyer does not qualify for traditional financing but has strong cash flow.
- Seller wants to maximize return instead of receiving a lump sum at closing.
- Family member assisting with purchase while earning a secured return.
- Investor seeking steady yield backed by real estate collateral.
- Lender must not be a “creditor” as defined by the Truth in Lending Act
- Lender cannot regularly extend consumer credit, does not advertise these
services
- Lender cannot regularly extend consumer credit, does not advertise these
Costs
- Typically, loan preparation/origination costs are paid by the Borrower, not the Lender
- Loan under $300,000.00 = origination fee of $3,500.00
- Loan over $300,000.00 and less than $1,000,000.00 = $5,500.00
- Loan over $1,000,000.00 shall be quoted on a case-by-case basis
- Additional costs may include:
- Recording fees
- Lender’s title policy
- Rush fee, if applicable
- Seller closing costs (if seller is providing seller financing)
- All lender costs should be paid by Borrower
About Estevez Law Group
Kristie Michelle Estevez-Puentes
Skillful legal representation can simplify complex real estate transactions and solve problems that frustrate all parties involved. At the Estevez Law Group, our real estate law firm and title agency assists clients with all types of residential and commercial property matters. Having worked closely with South Florida buyers, sellers, and realtors, we understand how difficult real estate transactions can be and are committed to relieving the burden on our clients. Whether you are a first-time buyer or someone with an extensive real estate portfolio, we will give you the legal support you need to achieve the result you seek.
Why Choose Estevez Law Group?
- Our Strong Reputation — Our firm has earned praise from current and former clients for providing exceptional legal guidance and service in handling their real estate matters.
- Our Responsive Representation — At every stage of the process, I communicate openly with clients and answer their questions promptly. By learning about your priorities, I can tailor the process to meet your specific needs.
- Our Affordable Fees — Property transactions are expensive enough without having to pay hidden or unnecessary costs. My commitment to affordable representation includes outlining each specific closing fee so that you have a clear understanding of your financial commitment.