Question: Can you tell me how to purchase a house using a Corporation?

Written by: Andrew Gale - Orange County Business Lawyer

Can you tell me how to purchase a house using a Corporation in Orange County? I sold my property recently and I needed to go through the “short sale” process.

Answer: How to purchase a house using a Corporation

The process to purchase real property within a corporation in California is fairly straightforward. It is critical that you refer to the bylaws of the corporation to make sure that there are no prohibitions against purchasing real estate or restrictions as to the requirements placed upon the corporation and the corporate officers to make such a decision.

Send A Notice To The Board Of Directors

In general, the corporation would send the notice to all of the directors on the board of the corporation calling a formal meeting of the board of directors. The board of directors would make a decision as to whether or not it was in the best interests of the company to make such a purchase.

If the board resolved to make the purchase, the corporate secretary would prepare corporate minutes of the board of directors reflecting the decision and who on behalf of the corporation was empowered to make the purchase.

Most likely, the president of the corporation would then move forward with the purchase of the real property using the services of qualified realtors in the area.

Does The Corporation Have Adequate Credit?

So long as the corporation has adequate credit and the purchase makes good business sense, a financial institution will likely lend on the property.

A problem in the lending process could arise as a result of your recent short sale. If the corporation does not have adequate credit, a financial institution will require the personal guarantee of someone who does have adequate credit.

If you are the sole shareholder and have recently gone through a short sale on another piece of real property, it is most likely that your credit is not in the condition that it needs to be in order to satisfy a personal guarantee required by the bank. In this situation, you are going to be required to look to another person who is willing to act as the personal guarantor on the promissory note to the bank.

Do Not Use The Corporation To Hide An Agenda

If you are attempting to repurchase the same property you just sold using a corporation to hide the fact that it is you who is making the purchase, you are going to run into some very serious problems.

It is essential that you speak with a qualified real estate or business attorney to review all of the facts in a meeting that is protected by the attorney-client privilege so that you can understand all of the potential negative ramifications of such a plan. Be careful.