Sometime real estate transactions fall apart on some detail that nobody has predicted, often concerning the money to be paid by the buyer to cover not only the purchase price but also all the closing costs that belong to him, plus any possible lending fee.

When selling to international buyers, the transaction often happens with a cash payment, since the buyer has money available personally or because he has secured a loan in his own country: it is increasingly difficult to get US banks to lend to US citizens, much less to foreigners.

But there are three factors that play an important role when the buyer transfers his money to the title company from his European account.

1. When he goes to his European bank to order the transfer, the buyer has to specify the exact amount of US dollars that he wants to transfer and give immediate authorization to his bank to perform the conversion between euro or pounds and dollars at the rate available at the moment.

   If he forgets to give his consent, the European bank will transfer the corresponding amount in euro or pounds to the intermediary US bank, the one that acts as a middle agent between the European bank and the final US bank holding the escrow account. There are always at least three banks involved.

   The intermediary bank will hold the money waiting for the authorization for the converting it to dollars at a defined exchange rate. The authorization will never arrive because your buyer will know nothing about it and the money will remain floating for one or two months in the international bank system and the it will return to the original European account. And the closing will be impossible.

2. The European bank wants to be paid an hefty fees for the transfer and the currency exchange, so your buyer has to have the money to cover also that (make sure he checks his bank fees ahead of time).

3. For some strange reason the intermediary bank always collects an additional fee of approx $35 or $50 therefore the buyer should transfer just that much more money.

These simple concepts will allow you to avoid pitfalls and get to your closing smoothly and successfully.

Roberto Mazzoni

After a major financial or social disaster you can always count on somebody to comer along and advocate for some new drastic measure that unbalances everything. This is the case with a bill that has been approved by the House of Representatives and that is currently at the Senate. The name of the bill is HR 1728 “Mortgage Reform and Anti-Predatory Lending Act”. It amends the “Truth in lending Act” by specifying more restrictive rules for the originators of residential mortgages.

This bill is creating ripples of alarming comments in all real estate investor associations throughout the nation, particularly because, amongst many things, it limits the ability of an individual owner to owner finance one property only once every 3 years.

There are people who are already talking of possible ways to work around the obstacle and others who are advocating urgent lobby actions with senators so to remove of change the few sentences that effect private owner financing.

These are the types of transaction you would be restricted from doing: sell your own home with a land contract or with a mortgage held by you, doing any kind of installment sale of any kind of residential property. To do more than 1 owner financed deal every 3 years you would have to follow the complex requirements set forth in the proposed law, and maybe get additional licenses.

With this piece of legislation the US gets closer to Europe where NOBODY is allowed to owner finance ANY type of property. Only banks are entitled to issue loans and private individuals can only accept cash payment for their properties. If the bill passes the Senate, the US real estate market is going to change. Many creative exit strategies for sellers and investors will go out of the door and some markets will probably reduce.

In Europe today the real estate market is very slow because it is becoming more and more difficult to sell properties since the banks have tightened their already strict lending policies. The bill seems conceived to protect the weakest buyers and tenants, those who got themselves into dire straights because of poor money management and careless house purchases. You might watch out to the consequences it will have on the free open market.

Roberto Mazzoni

P.S. My friend Sam Bell made a much more extensive exam of the bill and the possible counter actions on his site http://sambell3rd.com/realestatementor/real_estate_financing/90/us-senate-seizing-control-of-real-estate-investing/