Subject To Advice
I have a home that I purchased subject to the existing mortgage and
created a land trust, but I have not recorded the deed for the land
trust yet. The reason I have not recorded the deed yet is because I
am trying to work a short sale on it. I am just about there with the
short sale, and am just waiting on the mortgages companies to accept
my offer. In the mean time I am afraid that the owner might end up
with a lein or judgement against their name before I complete the
short sale.
1. Should I record the Deed to avoid a judgement attaching to the
house?
2. If I record the deed, what impact will that have on the shortsale
process?
3. Should I wait to record the deed and cross my fingers?
Tim
First, you should not transer the title into your name. Place the title into a trust. Then get the previous owner to sign over a POA. Use that POA to get the insurance in the homeowners name. You will have to call around to see who will insure a land trust property because the big companies like allstate and statefarm will not.
If you are worried about the tax bill, put the purchase price down as 0 or $10. The county will not think anything off since the property is placed into a trust.
Have your insurance company call the lender to notify them that the property has new insurance.
Make sure someone you can trust is the beneficiary of the trust. Like a spouse or family member. In fact once you assign the interest over to them, have them sign another interest assignment back to you or your company.
Now no one will know who owns the property. Having the insurance change to a new owners name will surely trigger the due on sale clause imo.
Let the homeowner know that they can sue you if you let their property go to foreclosure with their name on the loan. Instill into them that this is how you eat. You have to do the right thing, because or else johnny law will come for you.
yes it is.
John,
ask and you shall receive, but instead of court cases here are some of the US Codes that can be inflicted during a trial. besides who wants to be the first to feel the sword to their neck?
False statement (HUD loan) 18 USC 1012 false statement... influences such Department to...enter into any contract=1 year, fine, or both
False statement (conventional loan) 18 USC § 1014 knowingly...false statement...influencing in any way...federal...loan...or any change or extension...deferment of action=2 years, $5,000, or both
Mail fraud 18 USC § 1341 ...obtaining money or property by means of false or fraudulent pretenses...[sends]...or... receives...any...thing=5 years, $1,000, or both
Concealment 18 USC § 1001 ...in any matter within the jurisdiction of any department or agency of the United States...knowingly conceals or covers up by any trick, scheme, or device a material fact=5 years, $10,000, or both
Conspiracy 18 USC § 371 ...two or more persons conspire...defraud the United States or any agency thereof...and one or more of such persons do any act to effect the object of the conspiracy=5 years, $10,000, or both
Racketeering 18 USC § 1961 ...at least two acts of [mail fraud...within a ten-year period]=20 years, $25,000, or both
Under 18 USC 1964, a lender could sue you for racketeering and would be entitled to triple damages if they won
Note that virtually all institutional (e.g., bank, credit union, savings and loan) mortgages are federally related because of federal deposit insurance, federal mortgage insurance, government backed bonds, federal charters of the lender, etc. the previous federal laws, relate to this topic which can be considered federal crimes.
States also have similar criminal laws which are also violated in the typical mortgage scam. Common laws may also be violated. For example, if the borrower promised to inform the lender if the ownership, occupancy, etc. changed, and fails to do so, they have committed breach of contract. Persuading someone to commit breach of contract could be illegal interference on your part. Violations of common law are civil, not criminal, matters. That means you cannot be imprisoned for committing them, but you could be made to pay damages or forced to take some action.
For example, you getting the previous owner to keep the insurance on the property in his name to conceal the change in ownership from the lender is arguably conspiracy (two or more persons), mail fraud (something related to the insurance will go through the mail either from you or to you), concealment of a material fact, and false statement (to the insurance company about who is the current owner). If you do two such deals within a ten-year period, you have arguably violated the racketeering law.
In general, you should never do anything that cannot stand the full disclosure test. That is, if the deal could not be done if everyone involved, including all lenders, knew everything that was going on, the deal is probably unethical and illegal. The typical lease-option acquisition cannot be done unless the existing lender is kept in the dark about the change in control and occupancy of the property.
The bottom line here is that breaking laws or contracts is a serious thing.
Gurus respond by saying they have never heard of anyone being prosecuted or sued over a due-on-sale clause. First, note that they are not saying this statement is wrong, only that you probably won’t get caught.
Secondly, there clearly have been such suits, most notably the de la Cuesta decision itself. A 1999 case, Friery v. Sutter Buttes Savings Bank, 61 Cal. App. 4th 869, involved two sales. The lender sued and forced the owner to assume (become personally liable for) the mortgage and agree to move the balloon up by five years. The Wellenkamp case and its similar successors in other states all involved lenders suing borrowers over refusal to comply with due-on-sale clauses. William Bronchick says, “I have spoken to thousands of people across the country and every time I ask ‘how many people got a loan called for violating the due on sale?’ virtually no one raises his hand. Of the dozen or so people who have had a lender call it, they simply ignored it and the lender went away.” Note that he does not say no one raised their hand. I would also note that there may be some people in his audiences who should raise their hands, but do not because they do not want to go against the speaker.
The borrowers won the Wellenkamp case and some pre-1982 cases in the other states. However, those victories were short-lived from the perspective of real-estate investors in general because the de la Cuesta decision and Garn-St. Germain Act removed all doubt about enforceability of due-on-sale clauses.
At his Web page, Bronchick admits that his technique triggers the due-on-sale clause (actually, he says “violates”), but then he asks the rhetorical question, “...but who is going to tell the lender?”
William Bronchick says that lenders don’t care about enforcing due-on-sale clauses these days because market interest rates are low. He says, “This trend will probably continue so long as interest rates remain within a few percentage points of existing loans.” That may be true, but it implies an unspoken corollary: “This trend will probably NOT continue if [market] interest rates rise more than a few points above existing loan [interest rates].” As we all know that interest rates are rising now which could bring some attention to the subject to everyone is speaking of.
[ Edited by charlotteinvestor on Date 08/29/2006 ]
charlotteinvestor,
I salute you. Good job.
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I never deceive the lender. Those who use a Trust to conceal transfer of ownership are the ones who have to worry about fraud and conspiracy.
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Your Posts are brilliant as always, John!
_________________
"A deal is only as good as the quality of your Contracts." --Me[ Edited by LeaseOptionKing on Date 08/30/2006 ]
Since charlotteinvestor took this copyrighted information off of John T. Reeds site www.johntreed.com I guess who ever thinks this is what happens concurs and is a fan of John T.Reed. Thus far two of the posters in this thread must be fans of John T as they are supporting him.
charlotteinvestor, I suggest you brush up on copyright laws and not worry about the DOS.
John $Cash$ Locke
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And here is what Reed says about the PACTRUST:
http://www.johntreed.com/Gattentrust.html
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Maybe I should rephrase it. Would you consider renting a house you bought SubTo on a long term basis if your positive cash flow was $200 a month plus, after having to pay $2000 or so to reinstate the mortgage? Even if it was a section 8 renter?
Only with a term of one that can be renewed.
loon,
Here is a pretty good article on PMI.
http://www.ftc.gov/bcp/conline/pubs/alerts/pmialrt.htm
Since you have all the sellers info plus the POA, it would be as simple as writing the lender and ask them what they need to look at to cancel the PMI.
John $Cash$ Locke
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In a sandwich lease, the seller retains title until you exercise your option to purchase. You only need to exercise your option if your tenant buyer is ready to exercise his option to purchase.
If you are really in a sandwich lease, there is no magical one year long-term capital gain point.
In my opinion, even if you have the deed in your name, you are acting as a dealer to real estate for this transaction. Capital gains tax treatment does not apply at all. Instead, ordinary self-employment income taxes apply.
Just how I see it.
Is it a Sandwich Lease or do you have the Deed?
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