Regarding DOSC, I didn’t mean it was something new that hasn’t been
used before. I meant new in this conversation. I don’t think we
mentioned it before, at least not explicitly.
Wikipedia tells me that Due on Sale Clauses are common now, and
they are simply a clause that says if/when you sell the property
securing the loan, you have to pay off the loan; whereas at some time
in the past mortgages were usually assumable.
Good article, Due-on-sale clause - Wikipedia, and
it’s only a stub. If anybody here (who knows more about it than I do)
wants to expand it, that would be a good thing to do.
Regarding risks, these Trusts don’t need to be zero risk in order to be
useful, they only need to be less risky overall than the alternatives.
Would someone please tell me if I understand this right? If I find a property that’s worth 80K and am able to purchase for 30K for some unusual reason, if the seller agrees to sign a Agreement to Sell contract and agrees I can give them $1,000 down and have 90 days to have the full amount of 30K and in that 90 day period I find another buyer who agrees to sign a Agreement to Purchase contract for 50K and do what I believe is called a Double Closing in my lawyers office to close the deal where my purchaser gets their property, I get my 50K from which the original seller is paid their 30K leaving me with a 20K profit? If so, is this legal in West Virginia and how would I go about writing up the contracts or are there prepared contracts out there I can use? Thanks! Bob
If you’re buying from an individual you enter into a purchase and sale agreement and then you can assign it to your end buyer for the diff. If you’re purchasing from the bank, hud whatever then its a little different(more complicated). What are you doing? Herbster
I have been handed or told about deals from friends and family who know I am in to realestate. Deals that are easy to make a good profit from. Although there is a very slim chance of not making a profit,I would like to make this profit by doing the paperwork and not tieing up any more of my money than I have to. Instead of paying 30K to purchase this property, going through the deed work, recording fees, etc, simply lock the property down with 1K and do the paperwork with my buyer. I would at least have a deed search done first. I would possibly find a buyer and at least get a verbal agreement before I’d even make an offer to the seller. There’s still lots of those properties out there.
Put the property in a Title Holding Land Trust (no seasoning issues). Have the seller assign you an interest in the trust. Direct the Trustee to sell the property and distribute the proceeds. One Sale, One Close. There’s no need for a Double or Simultaneous Closing, ever! And, no need to assign or sell a contract. It’s that simple and how I’ve done it for over 20 years.
Thanks for your response. A Title Holding Land Trust is one of many things I am not familiar with. It does sound like a simple process if it can be done here in West Virginia where we have Deeds of Trusts. Could you elaborate a little about the Title Holding Land Trust and how to go about forming one? I am currently out of town but will consult with my good friend and attorney when I get home. Thanks again, Bob
It’s as simple as creating a THLT and deeding the property to the Trustee. The Trustee will “hold the title” until such time as the beneficiary/s direct it to do something, like sell the property.
The transfer of title to a valid THLT does not create any seasoning issues as long as the one transferring title remains “A” beneficiary. Smart and knowledgeable Title Companies and Lenders know this. Sometimes it takes you giving them a little education on this point but I’ve never had any real problems with it.
Once the deal is done (property sold), the trust terminates and the title is transferred to the buyer, just like any other sale. In order to keep the trust “in place”, it would require a purchase of your interest in the trust, not a sale of the property.
Each trust is created specifically for that deal or property and only costs a few hundred bucks, if that much. I have always had the End Buyer paid for the setup and creation of the trust when we accept their offer to purchase the property.
I’m sure someone else has answered the question… “what is seasoning” but I haven’t read their replies yet so I’ll answer too.
Seasoning is simply the amount of time each party holds the title and the next party it is transferred to. If you took title today, you may not be able the property tomorrow. Depending on the next buyer’s financing, their lender may require that the seller have own the property or held the title for 30, 60, 90 days or even longer before the buyer’s lender will allow them to purchase the property and take title.
For example, FHA (until recently) has had a 90 Day Seasoning rule. You could not purchase a property and resell it to an FHA buyer until you have held the title at least 90 days. You may have also been required to justify the increase in the sale price from the time you bought it to the time you sold it. You may justify it by showing that you “improved” the property and increased it’s value for example.
Re: Double Closings and Assigning Contracts - Posted by SedonaSam
Posted by SedonaSam on March 05, 2010 at 08:36:23:
You appoint a Trustee and deed the property to the Trustee, both legal
and equitable title. NARS provides the documentation and has been
around the longest. Bill Bronchick also creates land trusts. I wouldn’t
trust anyone but those two.
It can be done in any state. If you want, I can provide you with a list of questions to ask your attorney friend. If he can’t answer them you may need to get a new attorney. lol! Just drop me an email.
I hope to learn more. Sounds easy if it can be done here in West Virginia. Legal systems seem to differ from State to State sometime. I’ll be glad to listen to any advice I can get. Thanks, Bob
Thanks again for your response. I would be happy to relay any questions you would e-mail me to my lawyer. Although he has been an attorney for over 35 years with realestate being one of his main areas, he is open minded and would be glad to learn more if he is not already aware of your system. Sounds like he should be? Thanks, Bob
Re: Double Closings and Assigning Contracts - Posted by SedonaSam
Posted by SedonaSam on March 05, 2010 at 10:26:49:
Wrong. You deed it to a professional corporate Trustee. Equity
Holding Corp. is a trusted non-profit corp that does a great job. In a
land trust, the Trustee MUST do as instructed by the Beneficiaries. Yes,
NARS is North American Realty Services and I’ve used their
documentation and legal services for many years without a hitch.
You don’t give the property away, you simply convert it from real
property to personal property through the Doctrine of Equitable
Conversion. You are still the owner in the eyes of the IRS.
As I understand the Doctrine of Equitable Conversion, it says that
between making a contract to buy/sell real estate and actually closing,
the buyer is considered the “equitable owner” but not the “legal owner”
and the buyer has real property but the seller now has personal
property.
How is this used to eliminate the need for double closings?
Also, as I understand it, the legal owner must deed the property over
to the equitable owner at the time of the closing, and then the
equitable owner becomes also the legal owner.
So who deeds what property over to the corporate Trustee?
Does this method work in New York, where they don’t recognize
equitable conversion? Or in states where they have adopted the
Uniform Vendor and Purchaser Risk Act? (ref http://en.wikipedia.org/wiki/Equitable_conversion)
The transfer of ones own property to their own Revocable Living Trust, does not create a seasoning, issue as long as the Grantor/Settlor, remains “A” beneficiary of the trust.
The may then name or assign an interest in the trust to anyone or anything they like, after all, it is their own trust. That means it could be you. As “co-beneficiaries” or remainder agents, you may direct the trustee to sell the property and distribute the profits of the sale to the beneficiaries according to their respective interests in the trust.
This is not a State issue. THLTs are nothing more than a variation of a standard Revocable Living Trust and is valid and legal in all 50 states, period. Don’t let anyone tell you any different.
The DOEC just states the there must remain an “Arms Length” relationship between the Beneficiaries and the Trustee or the trust can be deemed dry or invalid.
You cannot be both “A” beneficiary and the Trustee or have any relationship with the trustee whatsoever. That is why it is important that you have a Trustee that you can “Trust”.
Re: Double Closings and Assigning Contracts - Posted by SedonaSam
Posted by SedonaSam on March 05, 2010 at 13:30:43:
The seller puts the property in his own Title Holding Land Trust which
eliminates any seasoning issues. The seller assigns you an interest in
the trust. You then instruct the Trustee to sell the property and
distribute the proceeds. There is just One Sale and One Close. There’s
never a need for a Double or Simultaneous Closing, ever! And, no need
to assign or sell a contract. It is legal to place your property in trust in
all 50 states but Louisiana and Tennessee have some restrictions that
may limit its effectiveness. The UVPRA has no effect in these
transactions.
Hi, thanks for the info. I’m very new to real estate, so I still have
questions.
How does the Trust eliminate seasoning issues?
The seller assigns you “an interest” in the trust? What exactly does
that mean? Does it work like owning shares in a company? Does the
seller assign you an interest that somehow determines how much
you’re going to get when the sale happens?
I found the website of NARS, but the Overview info looks like a sales
blurb directed at distressed homeowners. Can you tell me where to
learn more about the mechanics of this type of deal?
“Can you tell me where to learn more about the mechanics of this type of deal?”
There are many resource for additional information, including at the nars website. I have a myriad of detailed articles, case studies, books and links I’d be more than happy to email you. Just drop me an email and I’ll send you some.