For those that follow my blog regularly or have otherwise consulted with me, you know thaty I oftne advocate transfer of real estate as an asset through an LLC or other business entity. There are various sound and legal reasons for this. There will be even more valid reasons in the future.
Many will also recognize that I am not a proponent of the "trust" model.
One of the challenges (both legal and practical) is that when the LLC or other business entity is transferred to the end buyer (frequently referred to as a "C' buyer) the agents need to be paid and protocols must be established to avoid UPL (unauthorized practice opf law statues).
When the real estate is transferred via asset purchase agreement (APA), it is not a typoical real estate transaction. There are many benefits to this but one of the challenges is that the agents cannot negotiate the terms of the APA. That is tantamount to practicing law without a license. The prudent thing to do is to negotiate a standard real estate agreement and for the attorney to incorporate it by reference into the APA. Bear in mind that the attorney(s) cannot negotiate with the agent and the agent should be willing to allow his or her client to speak directly to the attorney (the agent can certainly be on the call).
I -had a call today in which the 'C" buyer agent was dictating terms and requiring certain terms. This is not appropriate and can get you into a lot of trouble with your license. The LLC model is an exellent way to convey distressed real estate, but it is not perfect. BTW, the agent(s) can get their fees as described in the real estate purchase contract. That is one of the reasons that I interpret the real estate contract into the Asset Purchase Agreement by reference. The "closing" attorney will disburse the funds in the same manner that an escrow agent or closing attorney in a typical real estate transaction would.
There are title issues in this type of transaction and I will discuss those in a blog later today or tomorrow. As with everything in life, there are advantages and disadvantages in this type of transaction.
Paddy Deighan Esq
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