Re: Double Closings and Assigning Contracts - Posted by Wayne
Posted by Wayne on March 06, 2010 at 17:22:31:
WAREIA wrote:
“The title is not considered transferred when placed in a valid trust.”
Do you know of ways that a trust can be considered not “valid”?
WAREIA wrote:
“Anyone can create their own RLT and name anyone they want as
beneficiaries and assign them a specific interest or equity in the trust
(not the property).”
So the seller is in control. How can you be sure that you can trust the
seller to assign you your equity interest?
WAREIA wrote:
“It can be used to ‘mimic’ any sort of real estate transaction. Rehab to
Wholesale for example…”
And what about the whole process of:
seller -> wholesaler -> rehabber -> new owner?
Essentially, I’m asking: after the Settlor assigns you (say) as a
wholesaler an equity interest, can he then assign a rehabber an equity
interest as well? And of course we have the issue of trusting the
Settlor, when presumably the Settlor, wholesaler, and rehabber are at
arms length.
WAREIA wrote:
“If a Seller owes $100k and will sell it to you for $150k, and you can
sell it for $175k…”
Then you have to wait til you know what you’re selling for before the
seller can assign you your interest. This is where you are at risk, I
would think. Do you keep your buyer’s identity secret from your
Settlor until your equity interest has been assigned? And I would think
you would want a contract for the $150k purchase price in order to
lock it in, yet several times you have said “no contracts”…?
WAREIA wrote:
“However, if you are going to take the property “Sub-To” and then put
another person in the property on a Lease-to-Own type arrangement,
you may agree to split the future growth and appreciation with the
Settlor by agreeing to share the beneficiary or ownership interest
50/50.”
Again, you have to trust the Settlor. What is the advantage of the Trust
if there’s going to be such a long time between putting the property in
the Trust and eventual sale to the new owner (no seasoning issues)? I
guess the answer is: there are no closing costs at the beginning,
because there’s no sale of the property.
You “MAY agree” to split future appreciation? How would you handle it
if you don’t want to do that?
WAREIA wrote:
“In a few years you can both agree to sell the property and after your
Equity Interest in paid, the remaining ‘Net Proceeds’ of the sale would
be split according to each of your respective beneficiary or ownership
interest in the trust. In this case whatever is left over after closing
costs, real estate commissions etc, you would split 50/50.”
And who’s getting the lease payments on the Lease-to-Own
arrangement? I guess if you don’t want to deal with this type of stuff,
you would just buy it yourself instead of keeping the property in the
Trust.
WAREIA wrote:
“A THLT is an excellent and simple alternative to ‘Partnership’ and
‘Joint Venture’ Agreements. It ELIMINATES all the risks associated with
those type of arrangements.”
But doesn’t it introduce other risks?
WAREIA wrote:
“I would NEVER do a Seller Carry, Flip, Wholesale, Long Term Hold,
Sub-To or any other Real Estate Transaction without a THLT in place.
The only exception would be a Short Sale. However, I know people who
have used it for that too.”
Can the Settlor assign other interest in the Trust? Or change your
interest in the Trust? Who has control of it?
WAREIA wrote:
“With regard to using a THLT in a Sub-To arrangement, and according
to the Garn-St.Germain Act of 1984, if the Grantor/Settlor remains ‘A’
beneficiary of an ‘Inter-Vivos Trust’, such a transfer of title does not
violate your lenders Due-on-Sale provisions.”
Huh? “Due-on-Sale provisions” is a new term for me. Have we talked
about that in this thread? Or is it a new advantage of the THLT? (What
are Due-on-Sale provisions?)