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Loan Assumptions in Real Estate Transactions: Benefits, Restrictions, Strategies, and Risks

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Tuesday, February 13, 2024

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This CLE webinar will discuss how the unprecedented rise in interest rates has led many real estate investors looking to acquire real property to consider assuming a seller's existing debt with low fixed interest rates. The panel will discuss the unique considerations for buyers, sellers, and lenders in such transactions, including negotiation tactics for the purchase and sale agreement, diligence with respect to the existing loan, and the advantages and disadvantages of a loan assumption versus seller financing.


As interest rates remain high, one option for investors seeking financing for real estate acquisitions is a loan assumption. A loan assumption occurs when a real estate buyer purchases a property and takes over a seller's existing mortgage loan through the lender. Many types of commercial loans can be assumed, including most Fannie Mae, Freddie Mac, HUD multifamily, and commercial mortgage-backed securities.

A loan assumption has many benefits for the seller and buyer. The seller can exit the loan earlier, avoid prepayment penalties or premiums, and in some cases, also avoid deadlines for repairs and other items that the seller is unable to meet. For the buyer, a loan assumption may include lower interest rates than the current market rates, reduced closing costs as compared to a newly originated loan, and the buyer is given a clear understanding of the expectations under the loan as the terms will likely remain the same after the assumption.

One downside for the buyer is payment of an assumption fee which usually falls between 0.5 to 1.0 percent of the original loan amount. Another drawback is the extensive and rigid financial evaluation process by the lender to confirm that the buyer is a solid candidate and worth the lender foregoing the considerable fees associated with originating a new loan as opposed to approving an assumption.

For lenders, the processing of loan assumptions involves many of the same regulatory considerations as originating a new loan. However, because of the varying requirements under agency and investor guidelines, there are several unique aspects to processing assumptions that may pose challenges to servicers that do not regularly engage in mortgage origination.

Listen as our authoritative panel discusses the opportunities and challenges with loan assumptions versus seller financing and provides tips for negotiating specific terms into the purchase and sale agreement and related lender approval documents to ensure adequate diligence of the loan documents before closing.



  1. Overview: current market conditions and the potential of assumable loans in real estate investment
  2. Benefits of a loan assumption for the buyer and seller
  3. Downsides to a loan assumption for the buyer and seller
  4. Purchase and sale considerations
    1. Seller's representations and warranties regarding the existing debt
    2. Lender's approval of the loan assumption
    3. Loan assumption timeframe
    4. Assumption fees and other costs
    5. Assignment of reserves
    6. Survival period of loan assumption provisions
  5. Diligence best practices when an acquisition includes a loan assumption
  6. Steps, strategies, and mitigating risks in executing assumable mortgage deals
  7. Loan assumptions vs. seller financing: pros and cons
  8. Lender and loan servicer considerations with respect t to mortgage assumptions
  9. Key takeaways


The panel will discuss these and other key issues:

  • What makes the current market conditions ripe for an increase in loan assumptions in real estate acquisitions?
  • What are the benefits and drawbacks of mortgage assumptions for buyers and sellers versus seller financing?
  • What are the diligence best practices when a real estate acquisition includes a loan assumption?
  • What are the key factors for lenders and loan servicers to consider when evaluating a loan assumption?


Demirchyan, Andrew
A. Andrew Demirchyan

Senior Counsel
Allen Matkins Leck Gamble Mallory & Natsis

With a strong background working in nearly all aspects of real estate in California – from property management,...  |  Read More

MacPherson, Scott
Scott (Mac) MacPherson

Senior Associate
Patel Law Group

Mr. MacPherson represents clients in finance, commercial real estate, and various other types of business transactions....  |  Read More

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