Can a listing agent advertise the terms of owner-financing being offered by their client?

QUESTION: We have a seller client who is willing to offer owner financing in order to attract potential buyers. She has asked us to advertise the terms of the loan she is willing to make including the minimum down payment, the term of the loan, and the interest rate. Are we permitted to include these loan terms in our MLS listing? If so, what are the applicable guidelines?

ANSWER: While the advertising of credit terms is permissible, there are specific disclosures that are required and the Real Estate Commission expects brokers to be familiar with the rules relating to advertising credit terms.

The rules in question are set forth in the truth in lending laws and in regulations promulgated by the Federal Reserve Board. Those laws and regulations apply to anyone who advertises a real estate mortgage loan, including real estate brokers, regardless of the amount of the loan, unless the loan is for business, commercial or agricultural purposes. The purpose of the laws and regulations is to inform the potential borrower of the true cost of credit.

To prevent misleading advertising of credit terms, the Federal Reserve Board approved what is known as Regulation Z. It governs any advertisement for consumer credit, regardless of who places the advertisement. Regulation Z requires that all advertisements for consumer credit include some very specific information if any of four “trigger terms” are included in the advertisement. Those trigger terms are the amount of any required down payment, the amount of any other required payment, the number of payments (or the term of the loan), and the dollar amount of any finance charge.

If any of those trigger terms are present in the advertisement, Regulation Z requires that three specific disclosures be included: (1) the amount or percentage of any down payment (or a statement that no down payment is required), (2) the terms of repayment, which reflect the borrower’s repayment obligations over the full term of the loan, including any balloon payment, and (3) the annual percentage rate – using that specific term or the abbreviation “APR.” With regard to the last of these requirements, the Real Estate Commission has written that unless a broker has a background in finance, the broker “almost certainly will need a lender’s assistance to properly calculate the APR.” In their Real Estate Manual, the Commission has also suggested a safe harbor: “[Brokers] may avoid Regulation Z issues by not including any numbers in their advertising, other than the list price.”