As most of you are aware, more and more investors are coming to this area to invest in distressed properties. The result is an increasing number of short sale contracts in which the buyers are entities (such as LLCs) rather than individuals. Typically, short sale lenders require the seller to provide a slew of documentation, including personal financial information, in order to consider a short sale for approval. However, many people do not realize that most lenders require documentation from the buyer to consider a short sale in which the buyer is an entity.
The following is a list of documentation lenders are currently requesting from entity buyers:
LLC required documents
- Fully executed Articles of Incorporation / Organization and Operation Agreement (contains Members Agreement which lists Officers and their ownership interest in the company)
- Proof of funds in the LLC’s name
- Proof of the buyer’s connection to the LLC
Corporation required documents:
- Copy of Articles of Incorporation
- List of Shareholders and Officers
- Proof of funds in the Corporation’s name
- Proof of buyer’s connection to the Corporation
Whether representing a buyer or seller, it is important for both parties to ensure that an entity buyer is aware that the lender will require these documents before the contract is signed. This eliminates the element of surprise, as we encounter that many buyers express concern and even irritation when they are suddenly requested to provide these sometimes sensitive documents to another individual’s lender. This can lead to delays or in worst case scenarios, termination of the contract. Further, notifying the buyer up front of this requirement can avoid additional delays in the negotiating process due to the time it can take to accumulate and send the documents.
As always, should you have any questions regarding any of the foregoing, please do not hesitate to contact Berlin Patten, PLLC.
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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