e080822 Does an IRA Loan Make a Purchase at Arms Length?

Identifier: e080822

Date: 08/22/2008

Question

Can my IRA loan money to aninvestor to buy a house that I inspected and use the house as collateral on theloan? I can’t see where a positive or negative inspection result could have anyinfluence, but technically it is a “financial interest” at arms length.

“Financial interest” is verybroad. If my IRA loans money, my family and I cannot own, manage or work on theproperty once the loan is made. The only connection is that my IRA’s loan hasthe house for collateral – very arms length, but still a financial connection.

Response

As you state, loaning money to a buyer for a realestate transaction does result in the inspector having a financial interest inthe property. As the owner of the funds in an IRA, you are not at arms lengthin the financial transaction, therefore this is prohibited by the Code ofEthics in Paragraph 1.A.

This does not prohibit aninspector from investing in property, however any inspections would beperformed as a part of the inspector/investor’s own due diligence and not as afee paid arrangement with a client. 

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