Someone Help 1st Sub2 Deal
I had a very motivated seller call me yesterday to buy his home. He is behind $5,800 and owes the bank $73,000. The place has a good amount of equity (per my comps) and he has no other liens (verifying this tomorrow). I think this would be a good sub2 deal. Problem is I don't know how to do one. Moreover, I don't know how to take title in a land contract. Someone please help. I don't want this one to slip through my fingers.
Two different ideas.
Buying subject 2 is taking title to the property. Where the seller signs the deed subject too the existing mortgage.
Buying on Land Contract;
Means that you and the seller sign an agreement that states that when you full fill the terms of the contract THEN he will sign the DEED over to you.
If buying sub2 its pretty simple.
Sign the contract.
Check title.
Verify all assumptions
have deed signed
make up back payments.
Rinse and repeat.
Of course the steps and contracts are different.
If you feel uncomfortable doing the deal you can also birddog the deal to another investor nad make a profit that way too.
Oops. I meant to say land trust. I am completely confident in doing the deal. I need to know what docs I need to get the job done.
For a Land Trust...look up some of Derrick Ali's product's.
However, you will need:
Warranty Deed to Trustee (Seller is deeding the property into the trust and naming the trustee)
Assignment of Benificial Interest of Trust (seller now assigns the interest of the trust over to you)
Agreement and Declaration of Trust (the agreement between you and the trustee)
And of course you can fire and appoint new trustee as the days go on and there are forms to do this as well.
Order a course or find an attorney that can get your papers state specific.
Bill Bronchick also has a pretty good course on Land Trusts. He's an attorney and RE investor in Colorado.
His course has forms, a checklist, not mention a good primer on land trusts.
You should still have your attorney review the docs...however, I should warn you that you may have difficulty finding an attorney that knows specifically about land trusts. A lot of attorneys will balk at the idea of a land trust.
***The following is NOT intended to take the place of qualified legal counsel. I am NOT an attorney***
From what I gather from Bronchick's course, NJ has no specific land trust statute. However you may want to look at NJSA Sections 46:3-46:9. There is also case law that may help you: 29 A. 203, Martling v. Martling (1898)
Here is a brief checklist I found in Bronchick's courses:
1. Find an appropriate trustee. This probably should be you--unless you have a really good reason not be.
2. Execute the land trust agreement with trustee and motivated seller.
3. Execute and record deed to trust. If the title is taken in the name of the trust itself, then execute and record Trustee Certification and Affidavit form.
4. Have the seller sign a limited power of attorney and authorization to release loan info.
5. Get the seller's loan coupon book or monthly statement, then send in change of address.
6. Have seller sign whatever "CYA" letters you feel you need (e.g., Due on Sale, etc).
7. Obtain an new insurance policy on the property naming you as trustee of the trust as insured
8. Have the seller(s) assign his/her beneficial interest in the land trust to you (Note: Due on Sale is triggered at this point--but if you have done everything right, no one will know)
This should give you an idea of what is involved. Again, this does not cover everything. Find an attorney to help you.
Good luck!
[ Edited by Rogue on Date 11/30/2003 ]
I mentioned in the above post that the trustee should be you...
Well, I think I jumped the gun on that one as it seems some states do not allow the trustee and beneficiary to be one and the same.
Privacy is also a factor and should be contemplated fully before making a decision.
Again, always check with your attorney first.
After you have done a few (or if you are really serious and have extra cash), incorporate in a different state than you live (e.g. a Nevada Corporation, or a Delaware Corporation) and Name your Corporation as Trustee in the Trust, and you as the Beneficiary. You always want the Trustee to be located outside of the state your trust is in. This protects you from a court order demanding for the divulsion of the Beneficiary of the Trust. It sounds more complicated than it really is. All you really need to know is that it is EXTREMELY difficult for a court, or an individual, or a bank, etc. to find out who the beneficiary of the trust is if you do this correctly.
If you have your name on the deed to twenty different properties, you might as well put a magnetic sign on your car that says "Sue me I have money!".
Jace
I agree that the Trustee should be:
1. In another state, with out of state business address.
2. Not you because then, anybody suing the trust would sue you and could possibly "penetrate" the trust to get to you personlly...a very bad possible result.
3. Preferably a lawyer who'd know, instinctively, to NOT cooperate or give any info to anybody wanting same...heck, we all know better than to ask a lawyer a straight question about any client's business...the L cannot legally or ethically give ANY such info on any clent's business, as such is protected as confidential to client.