Tag Archives: Finance

Mar
25
2023

Legal Financing: New Niche for Financial Services

How to finance a lawsuit is not common knowledge among the general populace, much
less among the legal field as a whole.
Pre-settlement lawsuit financing is a relatively new phenomenon in the financial services
sector that is a little over six years old. Basically if a lawyer has a case brought to his
firm and upon initial review determines it has strong merit – he will then need time and
money to develop and “flesh out” certain basic facts. This phase, called the “discovery
period” can last several months to several years depending on the complexities involved.

If the firm’s financial resources cannot sustain this expense, there are funding sources
that will advance the necessary capital. They specialize in finding cases that have a strong
likelihood of being winners and have an in-house staff of attorney’s that review such cases. Once the law firm is confirmed as a valid risk by the funding source, money is
advanced, normally in stages up to an agreed-upon limit. A lien or legal claim is then
created so that upon settlement the principal and fees are dispersed to the funder. In the
event the case is lost; most funders have no recourse – so obviously their legal team will
look with hawk eyes to the merits of the case.

Another recently created niche in this arena is personal injury lawsuit financing, also
called pre-settlement legal financing. Look in any major yellow pages under attorneys
and personal injury law firms will predominate. Many people who have sustained an
injury – be it in an automobile accident or slip and fall, etc. – cannot because of their
condition continue to work. Their lawyers can fund items directly related to the case but
cannot directly give personal advances to their clients in most states because doing so would be a conflict of interest.

The same basic procedure applies here in that these funders have lawyers in-house that
are familiar with these cases and can determine the odds of a winner fairly quickly. The
injured parties are advanced money that allows them to pay their bills and survive until a settlement is reached. For most people in this situation, going up against an insurance company means deep pockets and lots of patience.

An important point should be noted here – these funds are not loans. A loan normally has a well defined payback schedule, usually on a monthly basis and there is an agreed upon date for final payment. The correct term is called an advance and the fees are based on the amount of risk involved. A case could conceivably run from several months to several years – there are no hard and fast rules. The advance has no “up front” fees or monthly payments due and again if the case is lost the client is under no obligation of repayment.

For the reasons just stated, these funds are priced according to the risk involved. However, for many people who have run out of resources, this does give them staying power to go up against deep pockets and very possibly receive a larger settlement. The lawyer may also be helped by not having to settle quickly.

Some have expressed concern that this type of service will lead to a further growth of litigation and “frivolous” lawsuits. Actually the opposite is true. Attorneys for the funders
must judge each case with very clear eyes or they stand to lose not only all money advanced but possibly their own jobs. They act as a kind of sifting mechanism separating the wheat from the chaff.

This service is not for everyone – however for attorneys that come up against massive pre-trial expenses and for their clients that have no other way of sustenance until a settlement is reached pre-settlement funding does offer a viable alternative.

Sep
03
2022

Owner Financing Assistance – What Is It and How Does It Work?

The local real estate market may not look bad compared to many harder-hit locations in nation, but if you find yourself waiting a lot longer to find a buyer for your home, then it may be time to offer owner financing assistance. Owner financing can be offered to a potential buyer and help you move your property much faster in a sluggish market. It sounds pretty simple, but in reality it requires a thorough understanding of the risks.

Before you can put the offer on the table for owner financing assistance, it is important to protect yourself both legally and financially. This starts by doing a thorough review of the buyer’s personal background, including their financial assets and employment records, references, credit scores, and other relevant information. There is no reason why you shouldn’t perform as rigorous a review of the potential buyer’s qualifications as any other financial institution would.

Secondly, when offering owner financing assistance, the purchase contract must be very carefully prepared, including the details of the owner-financing loan. Be sure to include a “deed-in-lieu-of-foreclosure” clause in the contract, as well as the amount, interest rate and specific terms of the loan. This way, if the new owner were to default on his or her loan, you would be able to take the property back from the buyer. An agreement should also state that the sale is “contingent upon the approval of the buyer’s financial information”.

As tempting as it may be, do not enter into a situation where the buyer avoids a down payment. By investing a lump sum amount in the property, the buyer is more likely to feel ‘invested” in the property and this lessens the risk of default.

Also, remember you can ask for professional help in executing the contract and closing the sale. You may require the assistance of a title company and a loan servicing company, as well as a real estate attorney to help you with the closing paperwork and financial aspects of the sale.

A Realtor may be your best source of advice and support when you offer owner financing assistance.

Summary

Offering an owner financing assistance to a prospective buyer could be the fastest way to sell your home so that you do not have to wait too long. However, there are risks associated with this transaction, so you are expected to make the necessary review of the buyer’s personal background which includes financial background, credit score and others. You should also ensure that the purchase contract is very carefully prepared, including the details of the owner-financing loan. Lastly, the services of a real estate attorney will be very helpful in this case. It is worth the time, money and effort you will spend.