Stopping LOC on Subject To - Posted by Augie (So. CA)

Posted by Marty Weisberg on October 24, 2000 at 18:04:41:


I believe that you, with the Seller’s consent, can have the line of credit frozen as it currently stands. I am not sure how you would go about setting it up so that it cannot be reactivated but I would guess that can be done.

A PACTrust is a Land Trust. But a land trust is not necessarily a PACTrust. A land trust is living, revocable, beneficiary-directed trust in which a designated third party trustee holds both legal and equitable title to real estate. Thus converting the beneficiary’s ownership of real property to ownership of personal property.

The PACTrust takes the land trust steps further. In a PACTrust after establishing the land trust, the grantor (Seller) sell a portion (not more than 90%) of their beneficiary interest to another person (this could be an investor or a resident beneficiary). If it is resident beneficiary, then the resident beneficiary would lease the property from the trust. If it is an investor, the investor would then find a resident beneficiary to purchase a portion of his/her beneficial interest in the trust. In either case the resident beneficiary would then lease the property from the trust. I know I have made this sound more complicated than it is.

The bottom line is that through the PACTrust the resident beneficiary can get:

  1. No bank qualifying
  2. Low, minimum or no down payment (up to seller)
  3. Income tax deduction for mortgage interest and
    property tax payments
  4. Equity buildup as the mortgage is paid down
  5. Appreciation
  6. Protection of the property form creditor judgment,
    tax liens, lawsuits, bankruptcy, divorce, etc.
  7. Pride of ownership
  8. No negative impact on financial statement
  9. Protection from illicit acts of a not so honest

The Seller gets also gets many benefits and the same protections as the Buyer.

I hope this helps.


Stopping LOC on Subject To - Posted by Augie (So. CA)

Posted by Augie (So. CA) on October 24, 2000 at 10:32:01:

Two questions:

  1. How do you stop the seller from writing more checks from a Line-Of-Credit account after the property has been sold to a buyer in a “Subject To” transaction?

  2. Could someone please explain how a PACTrust works? How is it different from a Land Trust? When would you use one over another?

Thanks in advance.

Still Learning,