Jeff:
Not sure where exactly these properties are located? (in some states a warranty deed is used, others a grant deed, etc.) - but generally speaking YES you need to;
Have LEGAL TITLE to the property transferred to you via the appropriate deed subject to the purchasers rights under the Land contract (which I assume was recorded)
You also need to have an ASSIGMENT of the Land Contract to you take place.
As for Title insurance insuring the conveyance of the LEGAL TITLE to you- I would GET IT. Last thing you need down the road is to be put in a position of being asked to deliver marketable legal title to the purchasers under the Land Contract only to find out that you may not have MARKETABLE title.
As for the mobile homes- At one time there WERE TITLES. Oftentimes the mobile homes are converted into “Real property” for taxing purposes and the titles are destroyed. When this happens some sort of affidavits of affixture or other paperwork is filed. Again best to confirm this throught the title company you choose that will also be insuring title.
TIP: In some states is possible to combine these (2) two elements of what you need to do into (1) one document sometimes called; “Deed & Sellers Assignment of Real Estate Contract”
eg. We are currently purchasing a recorded Real Estate contract in the State of Washington. We are having the
the owners of the RE Contract execute a “Deed and Sellers Assignment of Real Estate Contract” to us which will be recorded which is recognized to transfer BOTH the legal title of the Real Estate to us as well as the interests the owners of the Real Estate contract have to us all within this one (1) document which will be executed and recorded.
Best to your success;
Michael Morrongiello
Author of the Unity of Real Estate & “Paper” study course
Buying L/C notes secured by MH on Land - Posted by JeffB (MI)
Posted by JeffB (MI) on June 09, 2007 at 06:28:03:
I’m a regular over on the MH forum and do a lot of Lonnie deals, but I have an opportunity to purchase a couple of land contracts from note holders that responded to my direct mail soliciation to purchase their mobiles w/ land. These are unfamiliar waters for me and I have some questions which I haven’t found answers to in the archives.
The two properties (unrelated to one another) are located in a MH subdivision w/ deeded lots. Here are the details of the notes I’m purchasing:
10 yr fully amortizing, 96 payments remaining, $450 per month, approx $32,000 payoff. Purchasing for $21,500 for a 20% ROI. Property is worth more than this to me as a rental or by comps so I’m okay if the note goes south.
8 yr balloon note, payments of $320 per month with a $47,500 original balance. Note was created about 18 months ago and the buyer has only paid ONCE. Note holder is on the other side of the country and can’t deal with this issue. I’m looking to purchase the note for $15k, not for the cash flow but for the underlying property. My thought was once I purchase the note to immediately declare it in default and get the buyer out.
I like these types of properties and try to keep my basis at about $25k or less – they rent for $550-600 a month including home payment and lot rent (I don’t rent the homes, I lonnie them off and collect lot rent).
I have never bought a land contract before and am not familiar with the process. I’m assuming I’d use a form for assignment of L/C? This would need to be recorded as well, I assume. Since the deeds are in the original seller’s name I would also need to get that signed over? Or does it just transfer directly to the buyer upon payoff?
How can I be assured that the seller’s statements regarding payment history are correct? For example, what if, on note #1, the buyer made additional principal payments that the seller didn’t tell me about? I’m concerned about that one in particular, that small deviations in the numbers really impact the returns. I’m used to Lonnie deals where I make 100-200% so I’m used to dealing with a lot of fat on the bone where precision isn’t so important.
As you can probably tell I’m very green on this subject so if there is a book, article, etc that I should be reading please point me in that direction. Sorry for so many basic questions.
When I’ve bought notes secured by RE or MHs, I’ve asked the seller to supply me with proof of payments made, AS WELL AS getting an estoppel letter. The Estoppel letter is essential, but copies of checks showing payments made by the payor is a bonus, and the lack of such proof can sometimes be used to get a little bit further down on the price.
This is one reason I make copies of all checks I receive (stapled to the original postmarked envelope)- in case I ever want to sell the note, I can demonstrate that the payor has paid on time, or not (sometimes a consistent late payor with late fees is a bonus).
Jeff:
When buying and investing in “paper” (mortgages, Trust deeds, or Contracts) suggest you use a good “PSA” purchase & sale agreement and also consider obtaining an ESTOPPEL affidavit signed by the payee. (such documents exist in the forms section of my; Unity of Real Estate & “Paper” study Course materials)
If you can also get the Payors to execute an Estoppel as well that would be extra assurance- however given the circumstances in the one non performing Note that may be difficult to achieve.
These documents; the PSA and Estoppel(s) will contain representations and warranties that deal with and are about confirming;
The oustanding balance of the Note, the interest rate, the installment payment amount, the paid through date and next due date, Whether the account is current or not, and also that no undisclosed gratuitous credits or principal reduction payments were given the payors. Additionally they will assert that No defenses of offsets exist with regard to future payments, etc.
If you are purchasing a Land Contract or Real Estate contract type instrument you want to have at least (2) things take place;
Get an assignment of all rights from the Contract holder to you.
Get the LEGAL TITLE to the real property also deeded to you as well so that in the future you are in position to be able to deliver LEGAL TITLE to the purchasers when they fufill their obligation under the terms of the Land Contract.
One additional item - you need to look into since apparently this collateral invovles “wobbley boxes” (Mobile homes) is to have the Title(s)to the mobile home transferred to you as well - again so when the debt is paid you are in position to convey title to the mobile homes as well.
Hope this helps…
Best to your success;
Michael Morrongiello
Author of the Unity of Real Estate & “Paper” &
Paper Into Cash- the Convertible Currency study course materials
Re: A Good Purchase & Sale Agreement is useful - Posted by JeffB (MI)
Posted by JeffB (MI) on June 10, 2007 at 04:12:39:
Michael, thank you very much for your detailed response to my question. I’ve been long interested in getting your course and this seems to be the kick I need to go order it.
With regard to your statement about acquiring legal title to the property, is it correct to assume I only need to get a warranty deed from the seller but not necessarily go through a formal closing w/ title insurance, etc? The buyer of the property must have equitable title to the property so I’m unsure how this affects the conveyance of the deed. I realize these are probably some basic questions, so if there is somewhere you can point me to educate myself (until your book arrives) I would appreciate it.
In most cases these homes are affixed to the land (therefore no titles to MH’s) but I do appreciate the heads up.