Finding the Right Building Contractor – Part I of II – Insight & Tips From a Licensed Contractor

PART One of a Two part article on How to Find the Right Contractor

When starting a commercial or residential real estate construction project “begin with the end in mind.”

Finding the right Licensed Contractor is very important to all real estate owner or commercial investors! Both homeowners and real estate investors have discovered that improving residential property by remodeling and updating kitchens, adding an additional bathroom, or installing new energy efficient windows may add a significant value and utility to the property. In most cases reasonable upgrades to a kitchen, adding that needed bathroom, cleaning up the exterior and yard of a house, and/or updating the landscaping will add value in excess of the investment in those types of improvements. Commercial investors face the same basic problem on their projects with fining the right contractor for the job!

Caveat Emptor or “Let the Buyer Beware” is good advice for both commercial investors & home owners! Unfortunately the biggest source of consumer complaints nationwide in the construction business is on home improvement, remodeling projects, or a commercial real estate project. Most complaints and serious problems come with the lack of research and diligence in the contractor selection process, which results in homeowners and commercial real estate investors being the victims of a dishonest, negligent, or unlicensed contractor(s). Most of the nightmare stories that I hear from homeowners and real estate investors about a home improvement or remodeling job gone bad was a direct result of the homeowners and real estate investors failure to check, verify, and to be clear as what is to done and how much it will cost.

Fortunately, most of the construction project problems and complaints could be avoided or at least seriously reduced if homeowners and real estate investors do their homework in advance and select a reliable, honest, and proven licensed contractor. It is a sad but true comment that most homeowners and commercial real estate investors spend less time choosing a contractor than they do planning a family vacation.

The process of hiring the right contactor for a project will take some serious and concentrated effort on the part of homeowners and real estate investors. Homeowners and real estate investors absolutely need to check and verify the potential contractor’s license status and should call and visit with the potential contractor’s references.

Homeowners and investors should have contractors give them a written detailed scope of work, time frames with deadlines, break downs of costs for materials and labor, and a written understanding of how and when process payments will be paid. All of these need to be part of a written contract.

Selecting a Licensed General Contractor or Licensed Subcontractor

General building contractors are basically project managers. They manage or supervise projects and they schedule and coordinate the use of appropriate subcontractors as needed for a particular construction or remodeling job. For example, if a homeowner or investor is doing a complete kitchen remodeling job which involves several “trades,” such as a plumber, electrician, and carpenter, the use of a licensed general contractor is appropriate and highly recommended. If the homeowner or investor is doing a single trade job such as putting on a new roof then a specialty or subcontractor could be hired to do that single project.

Check out and verify the Potential Contractor’s License Status

When do homeowners and real estate investors need to check and verify a contractor’s credentials for a job? Before a homeowner or investor even think of signing anything they should check to ensure that the contractor is licensed, bonded, insured, and has excellent local current references. Homeowners and real estate investors absolutely need to check and verify everything about the prospective contractor(s).

Homeowners and real estate investors always need to check and verify the potential contractor’s license status with their particular State’s, or Province’s, contractors licensing board or State registrar of contractors. Many of the registrars are online and the license status and history of the contractor(s) are available to check. Many states, such as the California’s Contractors State License Board, provide extensive information on the holders of the license, the license history, consumer complaints, and the bonding information.

Check out, verify and visit the Potential Contractor’s References

For the most part, licensed contractors with a track record of being in the contracting business at least five or more years are usually competent, ethical, honest, dedicated, hardworking, financially stable, and responsible in their business dealings.

Always ask the potential contractor(s) for at least three past, but recent, local references and one or two references of current jobs they are working on. Make sure and call the past references to verify that they were completely satisfied with the contractor’s work and the project overall.

Asking potential contractors for the names and addresses of their current local jobs will afford you the opportunity to “stop by” first thing in the morning to check out the work being done, and if the job site is clean and organized (it may need dusting and not be ready for company to drop by, but it should not be a total disaster). By “dropping by” a current job site you might just “run into” the homeowner before they go to work. That is a great time to just ask: “How is the job going?’ and “Are you happy with the quality and timeliness of the contractor’s work?” and “Would you recommend them to your friends?” and lastly “How were any issues that came up during the course of the project handled by the contractor?”

I recommend that homeowners and investors also check out the potential contractor(s) with their local city or county building department, the local city or county consumer protection agency, the consumer fraud department of the district attorney’s office or State Attorney General’s office, and possibly the local Better Business Bureau. This probably sounds like over kill, but better safe than sorry. Homeowners and investors should check with these organizations to see if they have any information, especially negative information, about the potential contractor(s) they are investigating. They should find out if there are any complaints about the potential contractor(s), or other relevant negative information on file about the potential contractor(s).

In addition to current and past references, homeowners and real estate investors need to get additional data from the potential contractor(s). Homeowners and real estate investors must obtain the contractor’s business address and their business telephone and fax numbers. Be sure and verify that they are not just a cellular phone with local private mail box. A potential contractor who essentially operates out of the back of his pickup truck and only has a cellular telephone may be very tough to track down if something goes wrong or there is repair/warrantee issues in the future.

One of the best ways to select a highly licensed qualified contractor is to visit a local investor club [check out websites for investor club]and ask experienced investors who they regularly use and recommend for your type of project. Some times the personal recommendations from friends or relatives, who recently had similar projects completed and were satisfied with the job, may prove to be worth checking out. Don’t rely solely on a recommendation from anyone, always check them out completely.

There are no short cuts of the verification process to finding the right contractor.

Homeowners and investors should not allow themselves to be high pressured into not checking references before signing a contract by a silver tongued, smooth-talking salesperson.

Proposed HUD Rule Prohibits Seller – Financing Without Licence Except For Family Or Own Residence

“The Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act), as a key component of the Housing and Economic Recovery Act of 2008 (Pub.L.110-289) enacted into law on July 30, 2008, directs all States to adopt licensing and registration systems for loan originators that comply with the minimum standards set by the SAFE Act. The Department of Housing and Urban Development (HUD) is charged by the SAFE Act with establishing and implementing a system for mortgage loan originators in States that do not meet the minimum requirements of the statute. So, HUD published its proposed Rule on the minimum standards under the SAFE ACT that States need to comply with in licensing loan originators, procedures and actions, as well as its enforcement authority in the Federal Register, Vol. 74, No. 239, December 15, 2009. Moreover, HUD proposes “to clarify or interpret certain statutory provisions that pertain to the scope of the SAFE Act licensing requirements, and other requirements that pertain to the implementation, oversight, and enforcement responsibilities of the States.”

The HUD proposed Rule, if codified as a Final Rule or regulation, would eliminate the business strategy of acquiring and reselling properties through seller financing without being licensed as a loan originator, unless: (1.) an individual offers or negotiates terms of a residential mortgage loan with or on behalf of a member of his or her immediate family; or (2.) an individual seller provides financing to a buyer pursuant to the sale of the seller’s own residence.

Proposed Rule Prohibiting Seller Financing Deprives Owners Of Property Rights Under The 14TH Amendment:

One of the cherished rights of U.S. citizens is property rights protected by the 14th Amendment of the Constitution from any state action without due process of law, which allows owners to dispose of their properties in any way they see fit.

One of their property rights is to sell their properties through seller financing to assist buyers who cannot qualify for bank loans. The usury provision (Article 15) of the California Constitution prohibits loan-shaking activities, charging in excess of 10 percent per annum, unless exempted by a finance lender’s license. Requiring owners of residential income properties to be licensed as loan originators in order to sell such properties through seller-financing directly to buyers interferes with property rights of owners.

The proposed Rule seeks to eliminate property rights exercised by property owners through centuries in favor of more regulations and of banks at the expense of home buyers with bad credit.

Proposed Rule Impairs Obligations Of Existing Contracts Protected By The Constitution:

The contract is the law among the parties. A property owner has the right to sell his or her property, including seller-financing to enable a buyer short on cash to consummate the sale.

Seller-financing likewise enables a seller to sell his or her properties faster, and earn income during the duration of the promissory note being financed.

The proposed Rule would impair obligations of existing contracts in cases involving contracts to sell with seller-financing, lease with option to buy with seller-financing, and other similar contracts.

Proposed Rule §3400.13 Requires Individuals To Be Licensed By States With Exemptions:

3400.13(e) of the proposed Rule provides that a State is not required to impose the prohibitions: (a) from “engaging in the business of a loan originator with respect to any dwelling or residential real estate in the State, unless the individual first registers and obtains and maintains a valid loan originators license for the State; and (d) complies with the same requirements in the case of an independent contracts engaging in residential mortgage loan origination, if: “(4) an individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual; and (5) any individual who only offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual’s residence.”….(underscoring supplied)

Loopholes To Proposed Rule:

A loophole to the proposed Rule is for the seller, who is amenable to seller financing of a residential income property, to hire the services of a licensed loan originator to offer or negotiate terms of a residential mortgage loan to a prospective buyer.

Another loophole is to retain “a licensed attorney who only negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client,” and who is not “compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent” thereof, pursuant to 3400.13(e)(6) of the proposed Rule.


The proposed Rule, prohibiting seller-financing without loan originator license except for family or one’s own residence, should not be codified into regulation because it deprives owners of their property rights to indulge in seller-financing, and it impairs obligations of existing contracts.

If it is found to be within the constitutional rule-making power of the Congress delegated to HUD, and not an over-reaching regulation beyond the scope of the SAFE Act, the loopholes of hiring a licensed loan originator or licensed attorney are available to owners willing to do seller-financing.

Starting Your Commercial Finance Consultancy Business

In theory, it’s great if your business can suit everyone’s financial needs but unless you have the proper support, financial and otherwise, you can find yourself walking a very tight rope.

There are commercial training companies that will not only show you the ropes but introduce you to lenders as well. I’ve worked with the team at Commercial Capital Training Group and they are one of the best in terms of support and practical application.

Once you’ve made the decision to start a commercial finance consultancy business, there are a few important steps you should take:

• Research License Requirements – Are there any certifications or special licensing requirements that are needed? I recommend checking your state’s laws on licensing to ensure that you can advise clients on their commercial projects without violating SEC regulations. What role are you playing in your client’s business? How will you be compensated for introducing them to a capital lender? Speak with your attorney.

• Research and Establish Your Company Name – Think of a few names that convey your businesses message and research them to ensure they’re not being used by someone else. Also, unless you have the ability to directly lend money, make sure your clients know that your firm is a consultancy. Once you’ve decided on your name, register your business. Legalzoom is a great one stop shop for legally creating your corporate entity.

• Create your business plan – As boring as it may be, you must have a business plan. I’m always astonished when I speak with new consultants and ask them about their company goals and they respond with “to close more deals”, yet they have no road map for this accomplishment. One of the keys to being successful in this field is having your goals written out. A business plan is not written stone, it can and should be modified as your business grows or changes direction.

• Create your marketing plan – How do you plan on securing new business? Without customers, you have no business, so it’s imperative that you have a plan in place for securing new clients (see our article on Finding Customers). Once your marketing plan is complete, it will also give you a good indication of what your company’s website should contain.

• Meet your Lenders – Here’s where attending the commercial training classes really come in handy. Aside from ongoing support, they can introduce you to a myriad of institutional and private lenders that want your client’s business. If you’re on your own, I would start locally with bankers and private lenders who specialize in corporate finance. Once you fully understand the type of financing they offer, you can seek out clients that fit their parameters.

• Design your loan packages – Now that you have lenders, you can create loan packages for your clients. Make them clean and as succinct as possible because you may also use them as marketing material on your website.

A consultant’s job is to consult. Nothing more, nothing less. But what will separate you from the pack is your passion and knowledge. Take heed to the above steps and you’ll be on your way to becoming a successful commercial finance consultant.

How to Choose a Car Finance Broker – Some Useful Tips

Financing a car is a very important process and today with the availability of numerous car finance brokers it has become an easy option to get secure car loans. Today these car finance brokers are also playing a vital role in assisting car buyers. In fact, consulting and taking help of car broker can definitely be most appropriate option if you don’t have any clue about what to look at according to your budget. A finance broker is the most experienced personnel and clued-up on how to approach the financiers in a way that can persuade them to approve the loan. They usually have good relations and reputation with the lenders as being reliable, and so they know which lenders are likely to be open to a client.

In general, they act as the key source and offer services such as finding a used or brand new car model that the customer wants and within a budget range. At times, these car brokers even assist car buyers in negotiating with a used car seller. However, these days there are many car finance services and making a proper selection is turning out to be a very complicated process. You need to understand that not all car finance services are fair. Therefore, if you are looking to finance a car or choose a car financing service then here are a few important points that you should keep in mind while making a selection:


You must confirm whether your car finance consultant or broker is a member of FBAA or COSL or both of these industry associations. While Finance Brokers’ Association of Australia Ltd. (FBAA) is one of Australia’s leading membership bodies for finance broking professionals, the Credit Ombudsman Service Limited (COSL) is an independent organisation that is mainly indulged in handling complaints about finance brokers. You can easily confirm finance consultant’s membership by searching through their member list. Adding to this, WA Finance Broker License is yet another additional requirement for finance brokers serving in Western Australia. Nevertheless, if you are looking for finance broker and residing in the state of WA or other states of Australia, it is essential that the broker must hold a WA Finance Broker License. A broker holding WA Finance Broker License entails passing a comprehensive range of checks, educational requirements and operational requirements.


While selecting a car finance broker also ensure you know about their range of lender accreditations. The range of accreditations held by a broker governs the range of options they can offer. You must note that a broker’s accreditation can not just change the range of finance options available to you, but it may even affect the quality of those options.

Experienced Staff

You must choose car finance service that recruits and retains professional and knowledgeable staff. The broker must be an experienced professional who can demonstrate and explain about why a particular product is highly recommended or even suites your specific circumstance. If possible make sure you even ask for testimonials from previous clients that in turn may help you in the confirmation of their experience.

Services Offered

As mentioned earlier, today there are many finance services available in the market. Therefore, you must find out more about any extra service that a broker can provide. You should expect your finance consultant to supply detailed information about timeframes, and any fees or extra charges related with your finance. The key point is if a broker is being able to clarify the comparison rate of your recommended vehicle finance and the overall cost of your finance package then it is quality sign of a good finance broker.

These are some important points that can help you in choosing your car finance services easily. Today a lot of responsibility goes along with buying a car and taking financial help through car broker. Just taking care of few essential steps can help you select your car broker and further purchase a nice new or used car.

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Do You Feel SAFE Now? The Fair Mortgage Act Not So Fair For Owner Financing

Well, those regulators should feel proud of themselves… do you think they just have to make it look like they’re justifying a paycheck or something?

Perhaps there is some good that will come out of the SAFE Mortgage Licensing Act, but the inclusion of owner financing in an effort to clean up all the hooyah that the big banking systems and Wall street created themselves is probably one of the most harmful attacks on the real estate industry I’ve seen.

All you buyers out there who can’t get a loan? Your government just made it a whole helluva lot harder for a seller to offer you financing so you can enjoy home ownership. Nice.

[Agents… you just lost out on some hard-won commissions. There are many agents who have businesses largely involved in dealing with owner financing. Call and thank NAR for helping you out. As far as I know, they did nothing to remove owner financing from the legislation… are there heavy mortgage interests whispering in their pocketbooks, or is there something else I don’t know?]

According to the regulation, if you’re an investor, you can’t sell your own residential properties (1-4 units) and offer terms to take advantage of IRC 453 (installment sale) unless you get a mortgage originator’s license. You can’t even get around it by hiring one to negotiate it for you (although I hear that lobby efforts have rallied this concession in Texas).

Isn’t this a nice attack on personal property rights?

This supposedly applies to you even if you’re not in the business of buying lots of properties and turning them around with owner financing like a lot of the guys buying REOs and short sales by the dozens.

You may only own one duplex, or you may be liquidating your family’s estate upon the death of your parents…

If the property is not your primary residence, or you are not selling to a family member, you have to have a license to sell your property with owner financing (but I guess you could get your attorney to negotiate the terms for you, as long as he’s not being paid by a licensed mortgage originator… heck, here’s what we do: have the attorney pay the LMO or note professional to negotiate the terms of the loan to make sure the paper will sell for the highest possible price in the secondary market!!!).

I can’t imagine that this is enforceable or that it would stand up in court. Going back to this: SAFE Mortgage Licensing Act… there seems to be a distinction between those engaged in a ‘commercial context’ and those who aren’t.

So, based on the perceived intent, it’s probably fair to say that it might be ‘safe’ to sell your own portfolio of properties (as long as you did it legally and ethically – and if you did it intelligently, you could even sell the paper down the road!). Or go the extra mile and have a licensed mortgage originator process the paperwork and put together all the Truth in Lending and other standard docs for your buyer.

If you’re in the business of buying and carrying on your properties, seems like there’s no way around needing to get a license. Hogwash. Pure hogwash. And I didn’t even grow up on a farm.

My take…

When you’re selling a residential investment property that you own and you want or need to offer terms to get a fair price, and/or defer capital gains, here’s what you could do…

just do it, business as usual (some people in the business are so convinced that it’s unconstitutional to restrict this basic right, that they’re not giving the whole conversation a lot of thought or concern… they’re just ethically putting their deals together for their investors and the grateful home owners that come to them)
hire a Licensed Mortgage Originator to negotiate and produce all the typical disclosures for the buyer – complies with the intent, if not the letter of the law (if they got this to fly in Texas, then it’s likely a precedent that will be followed). Ideally, this LMO understands the secondary trust deed market so they know how to craft a note that can be sold for the highest possible price (I’m in the process of getting my license in CA… what are the rest of you doing out there?).
I like my attorney play… that was kind of an accidental thought, but I think it could be a good one
get yourself licensed
use a Title Holding (Land) Trust instead (all the benefits without the risks of carrying paper – you just don’t have a note to sell)

I think the main intent of the regulation is protect homeowners from being taken advantage of when they’re buying a home to live in for themselves and their families. Investors buying with owner financing would probably be considered to be savvy enough to take care of themselves, just my opinion.

So, if you want to play it super safe, just use the Title Holding Trust when selling residential properties on terms.

If you’re an agent, you can do all your regular listing and sales activities on residential properties offering owner financing as long as the seller is licensed – (yeah, right) – you just can’t be involved in negotiating the terms… (which might not be a bad thing because agents don’t tend to know about crafting healthy notes for the secondary market).

For me, there is so much work to be done with:

the sellers of high-end primary residences, and
commercial properties, and
small business owners,

that there’s no way we’re going to run out of business.