Posted by Stacy (AZ) on January 26, 2000 at 22:57:03:
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Land Trust (vs) Lease Option - Posted by Jim LaVerdi
Posted by Jim LaVerdi on January 26, 2000 at 19:06:14:
What is the big difference between a Land Trust and a Lease Option?
In a Land Trust, the homeowner has to first be educated how it works, then they have to place the property in a Trust (and they still worry about the DOS) They worry about their name remaining on a loan that you are responsible for paying. They have this worry in their mind that “what if he don’t pay” what will I do. Should I trust this person whom I don’t even know with my property?. We as investors know the answers to all of these questions, through many hours, weeks and months of education on the subject, but trying to educate a seller about this is almost impossible!
I have found that a Lease Option is so much easier to explain to a seller and basicly is not very different. So what are the big advantages of these Trusts?
In a L/O we take over their property. … In a Land Trust we take over their property
In a L/O we make monthly payments…In a Land Trust we make monthly payments
The sellers main concern is that their mortgage payment is made on time and that it is made every month, and that you pay what you agreed to pay at the time of your agreement. This can be spelled out clearly in a L/O agreement as well as a Land Trust. The only problem with the Land Trust is that of the sellers ignorance to such an agreement. It just sounds to them that there is too much involved with this and their uncertainty prevents them from proceeding with this type of agreement. (FEAR and UNCERTAINTY) prevents people from investing in Real Estate.It also prevents sellers from doing this type of transaction called the Land Trust. They are so much more willing to do lease options because of the simplicity of it . You are still agreeing on a set price to pay for their property, . I say “Keep it Simple” Lease Option it and avoid all of the skeptisizm of the seller and get on with your life as a successful investor.
I know there will be some reprecussion on this so here we go.
Jim LaVerdi (Phoenix Arizona Investor)
Re: Land Trust (vs) Lease Option - Posted by JPiper
Posted by JPiper on January 27, 2000 at 10:03:51:
As I read your post I came to the conclusion that you?re laboring under some mis-impressions.
Let me remind you of an important principle in the event that you?ve evidently forgotten. That principle is that NO ONE TECHNIQUE IS SUITED FOR ALL POTENTIAL DEALS. The point of these techniques is to understand them sufficiently that you can use one when the situation lends itself to that technique. The point is NOT to force fit any particular technique to every situation?.this will never work. So the point to acknowledge here is that a lease/option is not better than a subject to assumption (using a land trust), or vice versa. We can?t know which is better until we know the situation.
Here?s the next point to acknowledge. Each technique has it?s advantages and disadvantages?.just like everything else in life. To further complicate matters, what?s an advantage to the buyer may be a disadvantage to the seller. I would say that it?s vital to your success to understand these advantages and disadvantages from both the perspective of the buyer and the seller. It?s clear to me that you don?t at the moment?.and that therefore this leads you to some incorrect conclusions.
And one additional point to acknowledge is that the type of interaction that you have with the seller is key in either of the mentioned techniques. Techniques of the type that you mentioned are going to require some element of persuasion, and unless you make this an important part of your presentation, you?re going to fail with either of these techniques. The conclusion that I reach from your post is not that one of these techniques is inherently more difficult to present than another, but you may not have acquired the knowledge about how to present, or for that matter, sufficient knowledge about the technique.
Now let?s clear something up. Either a subject to assumption or a lease/option will trigger the DOS clause. So if that is a concern of yours, neither of these techniques will solve that problem. In fact, Bill Gattens opinion notwithstanding, my own view is that every creative technique will run the risk of triggering the DOS clause.
To the extent that this topic is going to arise with a seller, you?re going to have to become conversant with DOS clauses. Now guess how often it will come up. Virtually never. People out there aren?t Philadelphia lawyers, and they aren?t focused on DOS clauses necessarily. So it?s not going to come up unless you bring it up. Now you should bring it up of course?.but there?s a talent as to how to bring these types of issues up, how they?re explained, and so forth?.and all of this is well beyond the scope of a post on a newsgroup.
A subject to assumption gives you a deed?in other words, ownership. If you think there is no advantage to ownership over ?control?, it?s time to hit the books again until you understand the advantages. One of the disadvantages to a deed however is that the seller remains on the loan. Keep in mind, that?s not necessarily a direct disadvantage to you?.just to the seller. The reason this might be a disadvantage to a seller is that you might default, while the seller has no way of getting the property back since they have deeded it. Can you handle this objection? If you can?t, you?ll never be able to do a subject to deal. But the fact that you can?t do one doesn?t mean they can?t be done?.I?ve done lots of these. But again, there?s a talent in the presentation of these?.something you have to learn. I generally handle objections of this type with a credit report and a financial statement?.so that I directly address the fact that default is not something I do?and that the seller therefore is relatively safe.
Here?s another point. My strategy is NOT to allow the seller?s objections to drive me to using a technique that won?t be advantageous to me. Here?s an example. Let?s say you?re looking at a foreclosure deal. Let?s say the guy doesn?t understand a trust, and that therefore you decide you can?t explain, and that therefore it?s easier to do a lease/option. In my opinion?.you?ve just made a big potential mistake. That guy in foreclosure is apt to have other financial problems?.they don?t just foul up on the house alone typically. Therefore, if you lease/option from him, YOU may potentially have problems somewhere down the road when he has further problems. More power to you if this is the way you go?.it?s not the way I?m going to go in most cases.
On the other hand, I do like a lease/option for low equity deals. Here I?d prefer not to have the ?disadvantage? of having the deed and not having an equity cushion. See what I mean? There is no one technique for all circumstances.
My suggestion would be to learn these techniques inside and out. Further, you may need to spend some time learning about ?sales??.because it?s in the field of sales that you?ll learn about effective presentations, objection handling, etc. And finally, because you?re having difficulty presenting a technique doesn?t mean it can?t be done?.perhaps you just haven?t learned it yet.
Finally, here?s a comparison between marriage and co-habitation.
Marriage Co-Habitation
You live together every day You live together every day
You share living expenses You share living expenses
Gosh?.I guess marriage and living with someone must be the same.
JPiper
Re: Land Trust (vs) Lease Option - Posted by Ray S(FL)
Posted by Ray S(FL) on January 26, 2000 at 22:06:29:
Jim,
You are talking about two different animals. A L/O is a way to buy and sell RE. A complete method for buying, renting, and selling property.
A land trust is an insturment to hold title to a property. It also can hide the fact that you have violated the DOS Clause.
What I don’t understand is why you are talking to sellers about the DOS clause and Land trusts. If a person is seriously concerned about the Land Trust DOS clause violation thingy then that is the wrong seller for that method of purchase. Which you have already found out. Also, if you can’t get the deed what about an agreement for deed or land contract. This is also a great method to buy and sale Real Estate.
There is so much more to a land trust than just using it to hide the fact that you violated the DOS clause. When someone is ready to sign the deed over to you THEN you use the land trust to take title. It will keep your name off of the public record as to who really owns the property. (asset protection)Who cares if you violated the DOS Clause. How many posts have you seen on this board about lenders calling the loan due? Many, and we are still looking for the infamous lender that called a loan due to a DOS violation. You might say that you are not concerned it is the seller that is concerned. Again, wrong seller for that method of purchase.
So many more reasons that I don’t have time to explain in this posting. This is really why you need to buy a course or attend a seminar or the convention.
Good Luck to you!!!
Ray S(FL)
Re: Land Trust (vs) Lease Option - Posted by Stacy (AZ)
Posted by Stacy (AZ) on January 26, 2000 at 19:19:22:
Just my opinion (by the way…good question, Jim)-
Any way you feel comfortable making deals is fine! just make some money for your time and effort. Each has its place. But, what if the MTG payments are so high that you can’t expect a tenant/buyer to become excited about the prospect?
What happens when the seller is so motivated that they don’t care how you answer their questions, as long as you answer them (pre-foreclosure)? In these cases, having a deed is the most powerful position you can achieve, and you should go for it.
Lease options have pitfalls, plain and simple. What happens if the owner declares bankruptsy, and you have signed an option with the T/B? What happens if the owner decides he doesn’t want to deed you the property when you exercise your option? Court case!
Not to say one is better than the other, but each has it’s place and should be used when appropriate.
Stacy