Land Trust Agreement
i have been studying subject to deals for several months and have a negotiated a few deals. i have used guru information on buying properties in land trusts. my question is what do i do with the actual land trust agreement that has been signed and notarized? does it get recorded? what about the assignment of beneficial interest? do i just file that document in my property files?
My first question to you would be how do you plan to have your trust take title of the property?
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i have a warranty deed to trustee that i record at the courthouse. but the trust agreement is a separate document, does that get recorded? if not is it just part of my personal file?
Ok just checking!
Your trustee should hold the other documents, along with copies to you and your customers.
In using LT's it is best for you to not be the trustee to avoid any perceived conflict of interest if this is a shared deal.
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My personal preference is to hold the trust agreement and other assiciated documents myself.
My reasoning is as follows. The trustee is an employee of the beneficiary of the trust, and as such there may be a reason sometime in the future for you to change your trustee. In essence, you may decide to fire the original trustee.
The trust agreement is the document that gives you the right to do this. If for whatever reason the trustee decides to challenge you on this, who do you holding your trust agreement?
Jeff
I noted that this document made reference to lack of disclosure regarding their existing loan, and also the fact that the sub2'ers weren't making the loan payments in many cases.
Sounds like a sloppy outfit
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what's a sandwich lease option?
shasty,
Glad to meet you.
When anyone uses any method when real estate is involved and cheats the houseowner then the approriate agency is going to become involved. Subject To was a method they were using to defraud people, in reading the State Statutes of NC, I did not see that a person who purchases a property and re sells the property is violating any law on the books of NC without using a realtor.
The article your refer cites one company who by reading it was only out to cheat someone from the git go.
So If we are going to jump on any group as a whole because of one bad egg then look at the following from only one state of several states I looked at:
Steven M. Glass, license nos. RM-061409-A and RS-141842-A, and Steven Glass Property Mgmt. Corp, license no. RB-061447-C of Philadelphia, Philadelphia County, voluntarily and permanently surrendered his licenses, because Glass made substantial misrepresentations, pursued a continued and flagrant course of misrepresentation, failed to retain all deposits or other moneys pending consummation or termination of the transactions involved and account for the full amounts at the time of the consummation or termination, charged undisclosed expenses for principals, and engaged in conduct during real estate transactions that demonstrated bad faith, dishonesty, untrustworthiness, or incompetency. (02-11-04)
There are hundreds more like the above cited case in every state in the United States, so with this mentality of punishing all because of one example, the above person was a Real Estate Broker, need I say more.
John $Cash$ Locke
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Joel,
I have long been an advocate of using a third party Loan Servicing Company to collect payments from the buyer and make the payments to the lender. This is a protection for the seller, buyer and investor.
This shows good faith on part of all parties concerned that the payments will be wind up where they belong and not in the investors or anyone elses pocket except where they really belong.
As you know I and my students use a presentation in the house that covers every phase of what is going on, then the paperwork signed by the seller re-inforces exactly what is happening.
A little tough to video each presentation so I am going one better because of statements like shasty made:
"It's only a matter of time when subject to deals will be against the law in NC and this will spread to other states unless the players with deeper pockets (i.e. trainers of Subject To deals) step up to the plate and support the cause."
There soon will be a way to stop the above from happening, although I am not at liberty to discuss how this can be accomplished presently, because within a few weeks I am taking my Subject To method to the highest level, where there will no longer be, he said, she said.
I was thinking maybe I should sign on as an expert witness, they would have a tough time with me proving that Subject To investing is a scam. I have enough testimonial letters and deals behind me and my students also, to prove that even beyond reasonable doubt, that Subject To investing done properly is helping thousands of sellers, who have no one else to turn to.
It sounds like NC has a very strong realtor and real estate agent lobbying organization that is kicking in.
We never really read the whole story when it is told by someone who is against or for something, some facts mysteriously are not written about. I see these people who where brought to task use trusts, well there are many types of trusts, so this again leaves alot to the imagination.
In the case you cite, a mortgage broker was at the bottom of the deal, so to many variables to determine who is telling the truth on what really happened or where the blame really falls.
John $Cash$ Locke
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ncboater,
Glad to meet you.
You have seen the power of the written word when someone wants the "Fear Factor" to stop creative real estate investing.
In America today, you can purchase and sell houses as an individual, albiet the Subject To method or not. It is difficult to argue against if you are employing the proper methods to be held accountable for someone eles's action only your own.
What I see is the confusion and it probably started with the illegal "flipping" fiasco, no one has really spoken out and said we don't operate this way, so they are trying to lump us in to this group who did violate the law.
Only flipping or wholesaling in its own right is not against any law, yet most law makers do not understand the difference.
I am thinking I should start a Lobbying Organization for creative investors, we at this time do not have anyone who supports our cause, I have long been thinking about this, not so much for me but the future creative investors of America.
As a matter of fact I am so serious about this, that I asked John LV who is our reasearch expert to look into the possibilities of doing this.
In the mean time do what you feel as an individual is right for you. Unless there is a law against Subject To investing, which I can see there isn't then if you handle yourself in a professional manner it would be difficult for anyone to chastise you for adhering to the law.
John $Cash$ Locke
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Hello all,
I hope you don't mind me chiming in here a bit.
This NC AG thing should not worry those folks who conduct honest business etc and here is why.......
First, as Cash said, making payments and upholding your end of the agreement is crucial.
This seems to be where the folks who are in trouble fell.
It happens sometimes.
However, I also know from experience that in NC as well as many other places, attorney's and govt. folks who don't understand creative real estate methods are confused, so they say 'no, you cannot do that.'
No license is needed to buy and then resell a house, no matter the method, in any state.
To prove this in NC, reference my forum where a student of mine just completed 18 months battling in court with a seller and other parties.
It was not a sub2, but a pure straight option agreement that the seller backed out of and sold around my student.
Because my student had a closing set with an end buyer, he HAD to defend his option and go to court.
One of the things claimed during the court case mess by the sellers and the buyers the seller sold to instead of my student was that my student was acting as a broker without a license.
They were wrong and a jury sided with my student, giving a verdict in his favor.
Here is the cool part, right before the judge signed off on final judgements etc, he gave both parties a chance to settle.
The defendants took it, since the outcome of a settlement was cheaper.
Bottom line, my student and creative real estate methods WERE backed up and proved to be correct in the way we teach them........with a winning case and nice payday to back it up for my student.
Bottom line, if the AG calls, get an attny and take action.
As long as you are honest, upfront with disclosure on EVERYTHING, and fulfill your obligations, you will be fine.
And yes, I'm a sub2 teacher as well, and DID participate in the lawsuit with depositions and testimony.
Does that count as 'stepping up to the plate' to back the method(s) I teach?
I'd not give this another thought, and ONLY deal with the AG IF they come calling.
Something EVERYONE in Creative REI needs to remember, if you do enough deals, sometime, somehow, you WILL have to deal with lawsuits and court actions.
Just part of doing business.
Good luck, and keep on investing,
Jim FL
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Jim,
Thank you for sharing this with the members here at TCI.
I was following this thread on your Subject To discussion board and was going to email and ask if either you or David would post what happened. Since this thread is about North Carolina, anyway you guys faced the the AG's office attorney's testimony and won.
I wonder if he limped back up to the State Capitol and said you know those creative investor fellows do abide by the state statutes and law.
Thank you again Jim FL,
John $Cash$ Locke
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Thats a great idea about the Lobbying Organization for creative investors I'd join www.John.This is good stuff!!!!! :-D
????
As John said, there are always 2 sides to the story. In the case of the refenced couple, they went out of business because they could not afford a fight. The AG ALLEGED dishonest practices but never proved them. Based on what I've seen and heard to date (facts change with time), there was no deception, fraud or breach of contract. The NC AG appears to be targeting Sub2 REGARDLESS of the facts involved. This is not uncommon....AG's run to the paper ASAP and shout victory, because they all want to be Elliot Spitzer and run for higher office. The truth is usually the first casaulty in such a war. I've seen other AG's nail investors, evidently with some justification because of dishonest practices. In this case, I think that both the dishonest practices and the justification are missing. In my opinion, the NC Assistant AG involved is playing hardball politics, not enforcing the law, as is her job.
John Hyre
Here, again, is an example of an unethical investor making the rest of us look bad. In recent months in Cincinnati, there have been a slew of articles of the FBI investigating real estate investors because of a few appraisers, title companies and mortgage companies who were artifically inflating house prices (for example, purchasing for $25k, getting a false appraisal for $65k and selling to someone who couldn't afford the house, which was in run-down condition anyway). Similarly, another person was getting owners to sign quit-claim deeds and then not making their mortgage payments...after they paid him to help solve their problems.
My strong personal belief is that if you run your business etically and honestly and disclose all the facts, that you have nothing to worry about. Actually, it might be good to weed out the bad, unethical investors anyway.
As a relatively new investor is news of the FBI investigating investors scary? Sure. Am I worried? No...because I am not trying to get something for nothing and am offering full disclosure to those I am dealing with. If, after full disclosure (in writing, by the way), they still want to move forward, great. If not, then the deal probably isn't woth it anyway.
Just my 2 cents
John
Jwalko,
Being ethical, honest and documenting all of the above go a very long way towards nipping problems in the bud. Unfortunately, honesty & ethics are no guarantee that problems will not arise.
As I stated in my post, based on the facts as I understand them so far, neither Dianne nor the other couple run out of business by the AG deserved such treatment. While I think that the paperwork could have been stronger, they disclosed what they were doing and deceived no one. In short, I do not believe this to be a case of bad investors getting what they deserve.
John Hyre
the ag's office has time and unlimited pockets. if they find a vent for trouble that they see can advance their cause lookout they will unlease all at there disposal,at the tax payers expense i might add, to prove there point. right or wrong. so if the ag's office looks your direction with questions. you must strike first, get a attny. the best in the field and meet them head on. if you don't they assume so are guilty........been there.....even if we don't have intentions of doing sub2 we need to support john his students and other re sub2 investors. its not "the sub2 guru's" or anyone, it involves all of us. at this time we need to keep a close watch. if it turns into a "cancer" we all need to get involved because it will effect us all. so we "all" will be needed........kenmax
Maggy?,
You should not worry about doing sub2 deals in yiur area.
I noticed you are in Aurora, IL.
I am from there, well, next door anyway, and did a TON of sub2 deals in McHenry, Dupage, Kendall and Kane counties.
In fact, I miss that market.....big dollars there.
If you want to discuss your market, ask away.
By the way, where in Aurora are you? East side? West? Waubonsee Valley area?
Keep studying and market hard, deals are in your area a plenty.
Also, don't rule out the tri-cities.
Randall rd. corridor was booming when I left 4 yrs ago.....should be ripe for the picking.
Feel free to drop me a line, but no pm's here, since I don't pay to join this group, I won't get them.
Good luck, and if you need local referals, I can help there too.
Take care,
Jim FL (formerly Jim IL)
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Posted on Legal Forum as well
I believe Russ (or Diane) Barberio is about to post my response to the causes of action re. a recent lawsuit that was filed by the Assistant A.G. (Harriet Worley). I am not an attorney and am borderline stupid, but have written several books on the subject and pretty much tend to know what I'm talking about (and a fighter), and know enough to spot a ding-bat..
In the Complaint, the (asst.) AG's charges are baseless and ill-conceived in almost every single instance. Upon reading the charges, I couldn't believe they were actually written by a college graduate, much less the (supposed) #2 attorney in the state. She misquoted and misunderstood several laws and tax codes and apparently did no research at all on the subject before preparing the complaint.
These people are trying to set themselves up as despotic rulers and law-makers, rather than as caretakers of the laws promulgated by the people they are supposedly employed by and responsible to. In the 10th century it was the despotic landowner who ran the world; in the 14th century it was "the Church"; today it's the lawyers...and I, for one am sick of this, and ready to fight it.
I think all the investors, investor clubs and affected and/or interested parties should join together with money and effort to stop what these bozos are trying to pull off for their own self-aggrandizement.
The AG’s contention is that one should not be rewarded for helping another fellow human being out of a bad situation (e.g., by paying for them to put a property in their own land trust, in their own name, so that they and their benefactor investor cannot violate the law, the lender’s regulations or be taken advantage of or cheated out of anything). 'Lord knows that doctors don’t make any money buy curing illnesses; lawyers don’t make money by saving money for their clients; and public officials don’t make a dime either…so why should an investor expect to receive any financial reward for helping someone out of a bad situation.
And, re. those attorneys who are telling you that subject-to arrangements are illegal across the board, they are in one of three camps: 1) uneducated (i.e., NOT informed), 2) improperly educated MIS-informed, or… 3) cowards.
Bill Gatten
Thank you, John, for your rsponse to my original post. It's difficult for anyone who hasn't dealt with a government regulatory agency before to understand the depth of this problem. The highest level of honesty and ethics does NOT preclude anyone from liability. Considering the AG's office stupid, ignorant,ect is also, in a manner of speaking, putting your head in the sand. As the saying goes; "Power courupts and absolute power courupts absolutely". Regulatory agencies have the power...to turn anyones life into hell unless they have unlimited pockets to fight back with.
Also,thank you for standing by Diane & Russ. I know from personal experience they are wonderful peope with the highest level of ethical and moral standards. They are NOT alone, but one of many being targeted by not only the AG;s office but the NC Real Estate Commission. In my original post, I stated there has been discussions about licencing...i.e. One "should" have a real estate licence to transact subject2 and lease options!!! Sounds far fetched but it's possible...
Discussing this problem is a start but it's going to take alot of money to make this problem go away.
The AG in Oregon closed down to businesses operating ST deals where they did not perform.
In the published comments from the AG's office it was made clear that the OR AG does not have a problem with ST or Land Contract deals that are clearly disclosed and where the parties perform.
I do not have the references and it was a few months ago. The discussion on the events took place on a Yahoo group that is specific to OR investing.
Now, OR has a long history as Land Contract state so maybe the understanding of such deals is a bit more established.
John
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John H,
Have you heard of anyone having any problems doing Subject To in Columbus Ohio?
There was a news story about an investor that bought a house subject to a few years ago. The homeowner was mad because the loan remained in her name. She claimed that she didn’t find out until she applied for a new loan. She was several months behind on her mortgage payments. The investor brought the loan current, made all payments on time and eventually paid the loan off. Her only complaint about the investor was that the loan remained in her name.
Does the Attorney General have an opinion on Subject To?
[ Edited by nash87 on Date 09/22/2004 ]