DUE ON SALE, CONSENT BY LENDER - Posted by Jim

Posted by Bud Branstetter on March 23, 2001 at 20:35:26:

If the proper trust is used i.e. Pactrust then a neutral third party holds title the trustee. An assignment of the beneficial interest is purchased by you. The seller retains an interest. If you are going to maximize the income and down from the occupant buyer(RB) they they too will purchase an interest in the property. A beneficiary agreement is signed that says the property will be sold a a certain point in the future at FMV. The RB has the first grab and can get credit for appreciation if you so desire. The seller gets a certain amount. The mutually agreed value that you agreed to. In turn the buyer gets the property at an appropriate higher MAV and credit for appreciation. The seller can get the depreciation and the buyer can get the tax write off as if he owned it. Title does not pass until it is sold. If you or the RB do not perform the non-resident(original seller) beneficiary gets it back without foreclosing. This is just an overview.

DUE ON SALE, CONSENT BY LENDER - Posted by Jim

Posted by Jim on March 22, 2001 at 22:02:18:

I have a seller who will (Maybe) do an “Agreement for Sale” however, in the Deed of Trust that they have it says this:

A “Sale or Transfer” means the conveyance of real property or any right, title or interest therein; whether legal, beneficial, or equitable; whether voluntary or involuntary. Whether by outright sale, deed, installment sale contract, land contract, contract for deed, lease option contract or by sale assignment, or transfer of any beneficial interest in or to any land trust holding title to real property or by any other method of conveyance of real property interest.

Now as far as the land trust part goes, I understand that and is not part of this post.

What I am concerned about is the “Agreement for Sale” part. How do we hide this from the lender if we do in fact purchase on “Agreement for Sale”? Do we just (NOT RECORD) the “Agreement for Sale” ? or what?

Also another question I have on buying with an “Agreement for Sale” Do we just fill out the “Agreement for Sale” paperwork or do we still have to do a standard purchase and sale agreement? If we do, where is it listed on the purchase and sale agreement that we are doing an “Agreement for Sale”?

Thanks for the help

Jim

Re: DOS…only the serious need read (long) - Posted by Bill Gatten

Posted by Bill Gatten on March 25, 2001 at 17:33:25:

You know? (no offense to anyone. please…), but I truly have trouble with this line of thinking, and I see it and charge at it, Don Quixote-like, every waking minute of my post pubescent whiny little life (This is not directed at you Jim?you just stimulated it).

A guy says: "I know an Agreement of Sale violates the DOS, and I don’t want to violate the DOS. I know the co-beneficiary third-party trustee land trust concept can avoid the DOS and provide me exactly the same benefits (and then some) as the Agreement of Sale, but with tremendously more protection (i.e., “I know all about land trusts…”)…but I don’t want to do that! So how on Earth can I go about doing something that won’t violate the Due on Sale Clause, and still do the Agreement of Sale, which does violate the Due on Sale clause…but without violating it? ?

Why? Why? (?Why…? he screams silently within his muted rum-soaked grizzled old brain, as he clutches his throat and gasps for another breath, finally slumping to the floor. WHY WON’T THEY LISTEN?? WHY?)

If I post too much about the PACTrust, they delete the post. If I don’t post at all, folks run around asking, What?s the PACTrust? Or getting into jams that the PT could save them from. If I post just a teensy little bit, someone invariably challenges me as trying to advertise for my own benefit, or claiming the sky is falling, or something (…Joe).

Get this straight…you don’t need me to do what I do! The PACTrust has become (is becoming) as generic an instrument as a Lease Option, a Wrap, Option, Contract, etc… It?s not an alternative for any of these things…is another way to DO them ALL.

Someone…pleeeease get it!!! You don’t have to violate DOS’s, you don’t have to worry about who records and who doesn’t record; you don’t have to take chances; you don’t have to worry about someone else’s potential for legal and personal problems affecting your property. You don’t have to pay me or anyone else to do what I (and Bud Branstetter, and Jim Kenedy, and Randy Steadham, and Marty Weisberg, and Jim Pasquini, and Bill Young, and Bill Mc Kee, and Glen (OH), and Greg Makin and Tim Pannebecker)…and on and on…do. And, you don’t have to give up equity, appreciation, tax write-off or anything else if you don’t want to. The PT just allows you to conveniently do so, if doing so can make you a ho? lot more money with a ho lot more safety.

Get a trust agreement, an Assignment form, and Beneficiary Agreement and a Lease–dad gum it! And just do it! No matter what you’ve been told or lead to believe, it’s not complicated…it?s just more protective and uses a few more documents.

Bill Gatten

Corny Analogy Number 34

G.E. Makes a portable helicopter that will get you to work in back above the traffic…it has a tubular frame, a 50 hp motor and a bucket seat…that?s it. No windshield. No instruments. Nothing else. Just yank the rope and go. Kind’a like a flying motorcycle. AND it works and costs about $30,000 (less than a good car).

Now the Mc Cullough company has a portable helicopter of about the same size, made of the same tubular steel frame and with the same engine. This one, however, sports a high-gloss snazzy molded cabin enclosure, a tinted plexi-glass windshield (with wipers), a full instrument panel in a Mahogany dashboard, a parachute that deploys automatically through the top of the rotor shaft if something goes wrong, spare fuel tanks, titanium rotors and a CD stereo player.

Now…one can be seen as more complicated than the other (for a good reason…it has more stuff, it?s safer and better). But, think about it, if the cost were the same (you could hire pilot if you wanted to, you you don?t have to)…which one would you prefer to own? With either one you might need some lessons in the beginning from Bud Branstetter, or from one of the other folks I mentioned above: but wouldn’t that second one work for you?

Just think about it.

Re: DUE ON SALE, CONSENT BY LENDER - Posted by JPiper

Posted by JPiper on March 23, 2001 at 09:18:52:

Normally what I would suggest is that you leave the contract for deed unrecorded. However, in this case YOU are the buyer if I understand correctly. Leaving this unrecorded leaves you completely unprotected. More importantly, if you make a deal on your exit with a new buyer, your lack of recording leaves BOTH you and your new buyer unprotected…exposing you to a possible lawsuit if YOU don’t deliver the deed once your buyer performs on his side of the deal.

This leaves you in the quandry of either having your entire deal resting on feet of clay…or recording the contract, which exposes you to a possible DOS situation.

I agree with Bud, the deal of choice is deeding to a land trust. Absent this, you could do an unrecorded contract IF you record a performance deed of trust. This violates the DOS too (it’s linked with occupancy), but chances are high a lender, even if check title, will not read the document.

JPiper

Re: DUE ON SALE, CONSENT BY LENDER - Posted by Bud Branstetter

Posted by Bud Branstetter on March 23, 2001 at 08:53:58:

Most contracts for deed are not recorded in this situation because it is a violation of the DOS clause. A buyer that is unsophisicated doesn’t have a problem with this. They trust you. More asute buyer would want it recorded, the deed held in escrow, and their name on the insurance. You alert the lender this way. Your attorney will have a contract that is applicable in your state. It is always a good idea to fill out a sales contract that specifies what the intent and agreements are. Then the attorney can compose the terms legally.

You say you understand the land trust. A properly drawn land trust will not violate the DOS clause and would be my first choice to buy or sell when there is an existing loan. Even from the sellers point when using a contract for deed you are open to legal entagglements when they claim equitable interest. Divorce, bankruptcy, IRS, liens happen and can cause you a multitude of problems if you use the wrong agreement.

Thanks Jim & Bud (Much Appreciated) - Posted by Jim

Posted by Jim on March 23, 2001 at 18:07:33:

This will be a first (“Agreement for Sale”) and although I do understand Land Trusts when buying subject to, I guess my question would be… Once this person puts the property into the land trust how is this structured from there, when they don’t want to transfer title until they get their note paid off?

How is the Agreement for Deed handled? Is it just like any other agreement for sale only the names change to 123 Land Trust instead of John Doe as sellers?

Thanks Again

Jim