Posted by Devon (Buffalo) on April 14, 2002 at 20:21:32:
Thanks, Stacy for your advice and wisdom. I appreciate it.
Devon
buying on land contract with land trust - Posted by JC
Posted by JC on April 08, 2002 at 09:58:56:
When I’m buying with a land contract and I want the seller to place the property in a land trust, the seller is the original beneficiary right? Am I the trustee? Then, do I have the assignment of beneficial interest placed in an escrow account for me?
Thank you all.
Re: buying on land contract with land trust - Posted by Bud Branstetter
Posted by Bud Branstetter on April 08, 2002 at 21:11:57:
One the owner put the real property into a land trust it becomes personal property. The land contract could really be a contract for the beneficial interest in the trust. The beneficiary could direct that the trustee enter into a land contract for the real property.
And how about your interest via contract for BI be secured by a UCC filing.
You are in an inferior position when doing a land contract. You should try to exercise more control. But that’s another whole story.
Re: buying on land contract with land trust - Posted by Stacy (AZ)
Posted by Stacy (AZ) on April 08, 2002 at 11:05:11:
JC, that’s how I do it. The sellers place the property into a land trust with them as beneficiaries, and me as the trustee. The assignment of beneficial interest to my corporation is signed and notarized, and held in escrow. In most cases, “escrow” is a file in my file cabinet.
I don’t know if there’s a different or preferred method other than this, but this satisfies my needs.
Stacy
Why buy on a Land Contract - Posted by Devon (Buffalo)
Posted by Devon (Buffalo) on April 08, 2002 at 12:18:42:
What is the benefit of buying on a land contract? I thought you only wanted to sell with Land Contracts. I know you would use a land trust to hide the DOS violation, but why would you want to buy on a Land Contract?
Thank You,
Devon
Re: Why buy on a Land Contract - Posted by Stacy (AZ)
Posted by Stacy (AZ) on April 08, 2002 at 12:41:08:
Devon, there are different reasons to buy on Land Contract depending on your personal tastes, the deal, and your state’s statutes. Here are a few of my own personal reasons.
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On a VA loan, a land contract does not violate the dreaded Due On Sale clause. The reason to place the property into a land trust in this case, is to keep the seller from getting any liens attached to the property after you’ve bought it.
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Some sellers will not go for a straight subject-to sale, but will go for a “secured” position in a land contract. They can get the property back if I stop paying their underlying loan(s) through the foreclosure process, and it makes them feel better.
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If you’ve been reading about Countrywide challenging subject-to transactions, you may also have read that they probably would NOT have called the loan due if legal title remained with the original borrower. A land contract satisfies that need. An AITD or wrap-around mortgage would have also satisfied that need.
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The main differences between buying subject-to, and buying on land contract are that 1) the buyer gains legal title in a sub-to, and 2) the seller has no recourse in a sub-to. I’m in a position where when I buy a property, I have no problem guaranteeing I will make the underlying loan payments. I have reserve funds to cover holding costs if I have trouble with my buyer, and I know I can follow through. Therefore, I have no problem signing a land contract to buy a house on a wrap.
By the way, even with a subject-to transaction, the investor should have the necessary reserves to ensure the loan gets paid. So, I don’t see a major difference, in my situation and in my state.
Re: Why buy on a Land Contract - Posted by Devon (Buffalo)
Posted by Devon (Buffalo) on April 09, 2002 at 12:16:11:
Thanks very much for your response. Do you find that many of your subject to sellers are wary of giving you the deed? The courses I’ve read make it sound like they’d like nothing better than to throw the deed at you and be done.
I guess in the real world it’s harder to convince someone to let you control their credit.
Thanks again for your help,
Devon
Re: Why buy on a Land Contract - Posted by Stacy (AZ)
Posted by Stacy (AZ) on April 09, 2002 at 12:52:43:
Devon, I usually try for the deed first. Getting the deed is the ultimate position to be in as an investor, since it grants you all control and power over a property, and virtually no legal responsibility (or that’s the theory, anyway). However, I would lose many deals if I was only interested in “getting the deed.” To tell you the truth, in my opinion there is too much emphasis on straight Subject-To transactions. I can understand why: it’s an incredibly powerful and sexy strategy. But there are MANY ways to skin a cat.
There are some deals, where I won’t try to get the deed, for example when the underlying loan is a VA. I love VA loans, since there’s no need to worry about the lender calling the loan due if sold via land contract. I can change the hazard insurance to my policy and maybe save a few bucks in the process, I can call the bank and speak to them if I need to, all without a worry. That’s just one example.
It was Ron LeGrand that wrote about the investor becoming a “transaction engineer” who could find several different ways to try to make a deal happen. That’s my goal.
To answer your question, you really don’t have to do much convincing to get the deed when you’re in front of a truly motivated seller. When you’ve finally found one, you’ll be surprised how easy it is. Then you’ll be able to recognize and target them. It’s the ones who aren’t as motivated that you may have to try a different strategy to make a deal happen. When you can do that, there are more opportunities for deals.
If you’re a beginner, focus on a single strategy for a while until you’ve mastered it, and then try to add to your box of tools. If you think you have to know it all before you start, you’ll never start.