Hiding Behind A Land Trust
This land trust thing is primarily used to avoid the DOS clause. By not being able to be seen as the owner. Does this mean that this is a non recorded transaction?
If it is recorded then how does this not trip the clause?
If it is not recorded then how do you keep the previous owner from scamming and selling to 5 or 6 guys, collecting 5k from each and taking off, whom he knows is not going to transfere title?
[addsig]
As I understand it, the house is transferred to the land trust. You are buying the house from John Doe. Therefore, the land trust is 'john doe land trust'. This doesn't trip the DOS clause because, legally, for tax and probate planning, you can place the house in a land trust.
THEN, the land trust owner (The soon to be previous owner of the house) gives you power over the land trust. That is the part that could, if discovered, trip the DOS, but is not likely to be discovered.
From everyone I've talked to, as long as the payments are made, nobody cares squat about the DOS unless interest rates make a dramatic increase.
The new insurance policy (Which has to be reported to the bank) is for John Doe Land Trust. Since the bank sees John Doe's name (even though you control the trust) on the policy, they're happy.
Again, this is just what I know.
Ronnie
[addsig]
So then it is recorded just in the name of the previous owner with you as benificiary (the controller)
The purpose of a Land Trust has nothing to do with avoiding the DOS. A Land Trust is essentially a revokeable trust established to hold title to real estate.
As it happens, you can transfer beneficial interest of a trust without it being a matter of public record, resulting in transfer of the property without notification to the lender that a transfer has occured. (There could actually be no change in the title when this happens)
Or, if so desired, you could use a Land Trust to obscure your ownership of a property(ies) from public records. (One of the things recommended to avoid lawsuits is to appear as if you have nothing worth being sued over)
The Land Trust Documentation is not a matter of public record. It stays in your filing cabinet, or wherever you decide to keep it. The property is deeded to the "Trustee" of the trust. (The title is a mater of public record) The Trustee is a person or entity designated by the Trust, and should act only as a result of written instructions by the owner of the trust. As a matter of fact, the Trustee would be committing fraud if he/she/it transferred title of a property held in your trust without your permission.
You can make your own choices with regards to using Land Trusts. You can do Sub2 deals with or without them. They are simply a tool. As with any tool, if used correctly, they can offer benefits.
Good luck,
Jeff
Quote:
On 2003-12-20 00:02, jeff12002 wrote:
The purpose of a Land Trust has nothing to do with avoiding the DOS. A Land Trust is essentially a revokeable trust established to hold title to real estate.
As it happens, you can transfer beneficial interest of a trust without it being a matter of public record............ The property is deeded to the "Trustee" of the trust. (The title is a mater of public record) ..................Jeff
So the trustee is of public record but the bennificiary is not?
[addsig]
That's right. The trust agreement is not public record. The title to the property always will be. When you establish the Land Trust, the title transfers to the trustee (i.e. "John Doe - Trustee - 123 Main Street Trust"
The actual name of the owner of the trust never appears in public records with regards to the trust.
My personal recommendation, and this is just the way I've decided to do it , is as follows.
I take title in a land trust, and disolve the trust when I sell the property. If the new owner wants the property in a Land Trust, let them establish their own Trust.
Good Luck,
Jeff.
Jeff,
you sound very versed in the proceedure.
What is the difference between title and a deed?
If title transferes to a trustee does he have any liability's ? can he be sopoena'd (bad spelling sorry) to disclose the benificiary?
also, what if the trustee doesnt do what the benificiary wants him to? Say your trustee is your best friend and he looses a bet with you and decides to hide from you?
_________________
B.G. & Wheeler D. LLc Inc.
(A division of: Half Vast Enterprises)[ Edited by WheelerDealer on Date 12/20/2003 ]
Not vastly experienced, but I try to understand as well as I can before I do something. Funny thing about that though, Every time I think I've really got something down, someone proves me wrong.
, that the Trust itself esentially carries the liability. It's my understanding, that the trustee can't be forced to disclose information about the trust, but I suspect that's kind of like a reporter not having to expose their sources. (They can ask, and hold you in contempt, but if you don't talk....) Generally in order for the courts to get this far, the attorney for the plaintiff has to present strong evidence that there is a need to do this. Most of the time the assets of the trust are the limits of the liability.
My understanding of the liability to the trustee is that as long as he is acting as trustee, and signs everything he does with (Name, "As Trustee"
(In my opinion, that's a pretty strong argument for using separate Land Trusts for each property I own)
The trustee you designate should be someone you trust completely. You should reserve the right to fire the trustee, and assign a new one whenever you feel it's appropriate, as part of your Trust Agreement. If you ever feel that it may be time for a change, make the change. A "Warranty Deed" in the name of the new trustee, filed at the recorders office should be all it takes.
You may have to take your Trust agreement, and the documentation firing the old trustee, and assigning the new trustee down to the recorders office for review (NOT RECORDING) down with you . You should not allow them to make copies of your trust agreement, or the documents regarding the trustees if you don't want them to become public record. This is to show them that you indeed do have the right to do transfer title to the new trustee only. If you can get the old trustee to transfer the title for you, you won't have to drag all of your paperwork down there yourself.
I am not an attorney, and my understanding of this might be flawed. I'd recommend finding an attorney that understands Land Trusts to explain them to you and answer any questions you may have.
Good Luck,
Jeff
Title and Deed in this case are esentially the same thing. It all depends on the documents used in your state.
very interesting, thank you.
where did you get your education from?[ Edited by WheelerDealer on Date 12/20/2003 ]
Ron Legrand, and Derrick Ali have info regarding land trusts in their courses. Ron Recommends using them on every properrty you buy, and stresses the ease of transferring property in trusts, Derrick Ali does some other creative things with them.
Jeff
I almost forgot the book "Wealth Protection Secrets of a Millionaire Real Estate Investor" By William Bronchick Really Good, and Easy to understand. [ Edited by jeff12002 on Date 12/20/2003 ]
Blind Trusts, Land Trusts, Trustee on behalf of Client. These items designed to hide owner. As they say remove your Name from attack from an unfriendly and litigus society.
The question is asked how do you research these items to find out the true parties or designated Beneficiaries.
You examine the recorded documents and as they are recorded they are notarized. That notary is located and nine times out of ten an examination of the notarial record exposes the players. If not it exposes the attorney who is acting for and a quick check of court records and other recordings you begin to see who is the client.
The weak link in all such items are the players. People are stimulated by money and property and sides are changed. Its like the little insurance agent who as time goes by builds up a really big trust account. Soon begins to believe that those funds somehow or other belong to him and woops he dips.
You look for repeative recordings from one designated Escrow Company, One Notary www.etc.etc. and soon it pops. A pattern.
Years ago there was an elderly Broker who attended Foreclosure sales and bid in and took title as Abraham Fowler Trustee. Never designating for whom he was acting. Stimulated by political considerations the Real Estate Commissioners office sent an investigator to audit Mr. Fowler. It all came out. Mr. Fowler was holding and fronting for a nice man who owed Uncle Sam a considerable amount of unpaid taxes. Liens were recorded against the properties involved and a real donnybrook developed as all properties in the trust went into foreclosure. The purpose of the foreclosures was of course to eliminate the liens which were junior in recordation. What a screw up. Now those were sales well worth attending.
Lucius
I imagine they were. Did you get any?
So, Lufos
Are these trusts over hyped?
[addsig]
Lufos is correct.
Where there is a will, There is a way. However, after you have an attorney draw up the first one, there is little additional cost besides the paper and the toner used to print up the documents. when you establish the trusts that follow. Most of the time it's not the contingency lawyer doing the research, it's an underpaid clerk, and chances are good (not absolute) that the initial public records search will not turn anything up. The result of which has the contingency lawyer asking his/her perspective client(s) for a retainer. Quite often this will leave the "get something for nothing" crowd out in the cold, and they'll move on their merry way, searching for an easier target and less expensive meal ticket.
No one thing is absolute protection, but this one is a pretty inexpensive step in the right direction.
Jeff
[ Edited by jeff12002 on Date 12/20/2003 ]
Trusts are used for Probate situations as well. Easier and less costly to sign your interests over to your love ones than to go to probate.
Tom
We always deed a property into a land trust. You can look up to see who ownes the property and banks can't call the loan due for transfer into a land trust. We mainly us it for the privacy. Use a deed to tranfer the ownership and a trust unregistered at the court house to hold the property. We uae it as a pricay idea to get the seller to give us the house "subj. to". Keep the bank from worring about the ownership.
Sire
Sire,
you transfere a deed into what name?
[addsig]
132 Main Street land Trust. That is who or what ownes the property is the land trust.
Sire
If a deed is transfered into a name other than the current owner, even if it is a land trust, why doesnt that get a lenders attention alone?
_________________
B.G. & Wheeler D. LLc Inc.
(A division of: Half Vast Enterprises)
[ Edited by WheelerDealer on Date 12/23/2003 ]
First, how would the bank no of the change? They can not check every deed in every court house that they have the mortgage. Second,(this never comes up but) the only way they can call the loan if transferd into a Land Trust is if the benificial intrest has changed. We use that as a seperate document. Therefore if really needed we could fax the Land Trust to the mortgage company with no worry.
Best to you,
Sire
I was told that in certain states, when a deed is recorded, all lien holders on that property would be notified which would include the lender. Any truth to this ?
Thanks !
Jason
Hello Guys,
I yet have to do my first Subject 2 deal but I have been reading and talking to several investors in our local club here. According to my understanding following could be a route to successful deal :
Ask sellers to deed a property through a warrnty deed to trustee of a newly created land trust. Record that warranty deed in the county records. Also create a power of attorney with proper lingo for your trustee of a land trust. Ask sellers to make you a beneficiary of a land trust. In this situation bank can come and ask a few questions to sellers.
Make sure your sellers do not say anything about a sell or property and if asked to you while talking to a bank on behalf of the seller, you do not mention anything about a sell. Just mention about estate planning as a reason. It is not necessary to take your land trust documents to county auditor while you are recording the deed.
Also ask seller to sign a letter which simply states that your company will be managing the property from now on, so please send the payment coupons to your address, and that is anothe way to calm down the bank.
Also ask your sellers to sign a letter which states that they know about the loan in their name and your (buyer's) assets are covered in case if something to happen down the road.
Also ask them to sign a letter which states that if there is anything in escrow a/c that will be applied to final loan balance and not refunded to them.
Do not forget to ask sellers to sign an authorization document for you to talk to bank so that you can get more info on the loan when needed.
Good Luck......
We use trusts for several reasons, the primary ones being asset protection (each property is titled in an individual trust) and privacy (no one knows who the beneficial interest of the trust, owner, is).
A side benefit of using the trust is the appearance to the mortgage company when doing a sub2 deal that the owner is simply using a trust as an estate planning tool. I do not tell the mortgage company this is what is happening but if they choose to think so, let them.
What keeps the seller from deeding it to several people is the fact that once they deed it to a trust, especially the way I handle a trust which is different from what any GURU will tell you, they no longer "own" the property and cannot deed the trust to anyone else. Only the trustee can do this.
Trusts are great. I use them no matter how I acquire, sub2 or cash. It's all good.
William Tingle
WilliamGA
So the deed is re-recorded into the land trusts name naming the trustee as public record
then, the paper with the bennificiary is locked away in a file cabnent at home/ office somewheres else.
what keeps the escrow in tact for taxes?
What do you do with the insurance that is currently in effect? or for renewal when it is up?
[addsig]
WD:
The Taxes are kept intact by having the original owners to keep at least 10% of the Beneficial Interest in the Trust.
see IRC 163 Sect B
The Owners of course would also sign an agreement to Forefeit their 10% upon termination of the Trust
As far as insurance goes...
Just name the Trust as an additional beneficiary (co-Insured party) to the existing policy. Not much of a problem nor expense.
Hope this helps!
Happy Investing!
Derrick Ali
little bits of information keep dripping in
thanks,
if the mortgage company is in charge of the escrow and you are not telling them the prop is sold (in a sub2 deal) why the 10%?
[addsig]
The 10% retention of ownership sounds like a PacTrust scenario.
Is this correct, Derrick?
Alot of people use this type deal and seem to like it. I prefer another approach.
I do not have the sellers retain any ownership. Doing that just seems to be opening yourself up to big problems later.
I get 100% ownership (actually the trust does) immediately. Me sellers get to get on with their life and forget about the house. The cleaner the break and the transaction, the better for all.
William Tingle
WilliamGA
Wllaimga,
how do you handle deed tranfere? insurance? and their equity?
[addsig]
Dealer,
Most times, I draw the deed myself and file at the courthouse. Rarely will I have my attorney do the closing and file it.
As for the insurance, there are several ways to go with this one, depending on which carrier the seller is already using. In GA, State Farn will grandfather in a LL policy if they are already insuring the property, otherwise, I have to get an appraisal to get them to insure it.
Some people just get a second policy on the property. Some insurance companies do not like trusts. Insurance is a tricky thing right now. Whatever you do, just make sure that the owner of record (you, your trust, your entity) is the primary loss payee or there is a good chance your claim, if you have one, will be denied. Do not leave the existing homeowner's policy in place.
As for the seller's equity. We negotiate that in the deal and I generally will pay them all of it up front. If it is a substantial amount, I may pay them with cash from a private lender (lower interest than hard money) or I may pay them with my own cash. It just depends on my mood. I believe that the sooner the seller "mentally divorces" the property the better for all concerned. Keeping them waiting for their equity with seller financing or such just drags out the process.
Joel will be offering my product here soon that lays out in detail how I handle subject to transactions.
Merry Christmas!
William Tingle
WilliamGA
WOW so many questions. What keeps the taxes intact for escrow? If they are escrowed, just make the payment. The mortgage company wants money not houses. As long as payments are made the esrcow is paid.
The Deed transfer? please explain
Insurance DerrickAli had this one just additional insured "land Trust" a good agent will understand. I ask the buyer to do this before we take over then follow up.
jhadd
even if the mortgage company is notified there are a few reasons they can not call the loan due. One being a transfer into a Land Trust. Unless the benificial intrest is changed. I don't point that fact out.
Just remember this the mortgage company makes money on the payments not the house, and a foreclosure is the worst of all for them. Just make the payments.
Best to you
Sire
"This land trust thing is primarily used to avoid the DOS clause. By not being able to be seen as the owner. Does this mean that this is a non recorded transaction?
If it is recorded then how does this not trip the clause?"
As per Fed Law (Garn St. Germaine Act), the mere deeding the RE to a trust CANNOT legally trip the DOS. Lots of posts on this so suggest you read same.
"This land trust thing is primarily used to avoid the DOS clause. By not being able to be seen as the owner. Does this mean that this is a non recorded transaction?
If it is recorded then how does this not trip the clause?"
As per Fed Law (Garn St. Germaine Act), the mere deeding the RE to a trust CANNOT legally trip the DOS. Lots of posts on this so suggest you read same.
The Deed into the Trust is recorded, the Land Trust its self is not. First it can't be recorded, second if you record this it counters the privacy factor. Place the actual document in you r desk or in a filling cabnet and don't pull it out until closing.
Sire
I would like to clear up one minor detail I noticed at the beginning of this thread.
The trustee can in fact be forced to tell who the beneficial interest holders are.
THis usually means he has to be tortured under oath and that once directed to tell in court he has to do so or be held in contempt.
When choosing a trustee for a trust it is often helpful to get an out of state relative with a different last name (i.e. brother in law) to act as trustee and then whoever the litigous party is has to pay for an attorney in that state to subpoena him and find out who actually has beneficial interest in the property.
[addsig]
Quote:
how do you handle deed tranfere? insurance? and their equity?
We transfer the deed using a quit claim deed. We pay no transfer tax in my state this way. Change insurance to renters policy with land trust as add insured. As for equity, we pay for that if any before the deed even transfers.
Sire
The Quit Claim deed only states that the sellers release, remise, and forever quitclaim unto (The Buyer) All right, title and interest in (the property).
A Warranty Deed Will CONVEY to the buyer All right , title and interest to and in (The property)
AND
further states that the seller WARRANTS The title against all persons whomsoever, subject only to those encumbrances or liens of Record, or as above set forth in any.
There are strong differences between what's being said in these two documents. The quit claim deed basically states that the owner will walk away, and whatever protion of the property that was his, is now yours. Nothing more. It does not indicate that he is the only person that has claim to the property etc. This document may work for you on most deals, but it is not the correct document to use. it doesn't really convey title to you. (Ask your attorney to look at both documents and offer you an opinion)
When the warranty deed is used, they are attesting in writing that they and only they have the right to transfer title, and that no one else has claim to it other than specified liens. There is actually wording stating that it conveys title to you. If you ever need the addtional protection, you;ll be glad you have it. Do yourself a favor and equip your attorney with the ammunition he needs to do the best job he can for you.
USE A WARRANTY DEED!
Trusts are actually a great way to avoid the due on sale clause in addition to giving someone a little more security if a home is purchased subject to. One can simply shift beneficial interest instead of going through the foreclosure process if the buyer isn't paying.
There are many good courses out ther and I have read several but prefer the Bronchick stuff as it seems to be the most detailed not to mention entertaining.
Randall
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Also ask seller to sign a letter which simply states that your company will be managing the property from now on, so please send the payment coupons to your address, and that is anothe way to calm down the bank.
Also ask your sellers to sign a letter which states that they know about the loan in their name and your (buyer's) assets are covered in case if something to happen down the road.
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Good practical advise but keep in mind the legality parallel to the practicality. Any deceptive document/s having yours and seller's signature that might land in hands of a bank, unless truthful, may be considered a bank fraud if there is enough proof of intent to defraud. I wouldn't worry much about the above but remember, keep changing the pattern once you become successful ( in reference to Lucius post above).
Okay now we are talking about deeds:
if there are 2 people on title only one has to sign a quitclaim deed and the other has to sign a quitclaim deed AND a warrenty deed or just a warrenty deed?
If there is ONE owner do they have to sign BOTH types of deeds at the same time?
Another question: What if one person is on title but 2 people are on the mortgage?
[addsig]
We do our own title search and so a warrenty deed or quit claim doesn't change the deal. We use quit claim do to the tax issue in my state. I will agree that a warranty deed is better protection, but if they will lie about the ownership the will not mind signing any deed you place infront of them.
All that a side, we always get both parties on the deed no matter what. If you are doing a quit claim or warranty always get both signatures. As for the mortgage it only matters who is on the deed. That is ownership. Now to get the information on the loan we always get both parties (for safety)Besto you
Sire