Posted by cpink on December 27, 2006 at 20:30:47:
Bottom line guys, to get out of this mess, should I go ahead and tell the mortgage company what is going on with the buyer(investor) or are ther any other options other than going to court?
Subject to with a Land Trust! HELP!!! - Posted by cpink
Posted by cpink on December 22, 2006 at 10:50:11:
Hello to all and Happy Holidays!
I had sold a property I owned about two years ago to an investor from Vancouver,Canada. The deal was subject to the mortgage with me being responsible for the mortgage. I did not get much out of the deal because I was very motivated to sell and just wanted to get it off my hands. When he took over the payments everything was placed in a Land Trust through a company in Florida. For two years now he’s been making monthly payments but every now and then he would miss a month and make up for it the next month. I am very concerned about my credit and do not like it when the mortgage company calls my home about the payments. It has become such a pain in the butt month after month having to monitor him. I’ve expressed my concerns to him several times but the late payments still continue. I’ve even tried to have him set up a payment plan online/echeck but he has not taken any action on it. My only other option is to call the loan due and I’ll be done with it.
My questions are:
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Can I call the loan due even with a land trust on the property?
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Will the mortgage company be able to track him down and inform him of this even if he is abroad?
Thanks
Re: Subject to with a Land Trust! HELP!!! - Posted by george
Posted by george on December 22, 2006 at 12:47:49:
cpink,
If you signed a deed, deeding the property to the land trust (I assume you did), then you are pretty much out of the picture.
Now everything is the trustee’s call. You are just on the hook for the mortgage, and there is little you can do about the late payments hurting your credit, outside of appealing to your seller’s sense of responsibility.
Your only out is if there are stipulations in your agreement which would allow you to reclaim. Then, you may have to go to court, meanwhile the lender could accelerate and demand full payment.
This is why, even tho I buy a lot of houses Sub2, I would never sell Sub2.
george
Re: Subject to with a Land Trust! HELP!!! - Posted by LeasePurchase
Posted by LeasePurchase on December 22, 2006 at 12:14:29:
- A properly formed Land Trust does not and cannot eliminate the ability of the Lender, not you, from calling the note due for cause. Now, depending on how your trust was setup may depend on your ability to remove the tenant from the property. But YOU cannot call a Lender’s note due, only the lender can do that.
The biggest mistake I see investors making when using Land Trusts to take properties Sub2 is simply creating a Trust and then having the Tenant do a Lease Option from the Trust. This accomplishes very little if nothing and may make things worse for reasons we won’t go into here.
I hope you have a Simple Straight Lease Agreement with the Tenant and not one that contains an Option to Purchase. If it does, you may have difficulty removing that Tenant which is what you have to do (eviction), not calling the note due. And if it comes down to it and the courts determine that the Tenant MAY, not does, have a claim of interest, then you may have to foreclose, not evict, even if it is in a Trust.
- Your Tenant has nothing to do with the Mortgage Company, only you do. It is your mortgage not his. There is no need or reason for the mortage company to “track him down”. It is you they will track down. It is you they will call the note due on and you will have to fight it, sell or refinance, not the Tenant.
When this was first setup, did you require an amount of money to be set aside in an escrow to make the payments on-time if he should not do so. Then when his payment does come in it would replenish the escrow, thereby always keeping your payments made on-time even if his weren’t?
In my deals all payments are due on or before the 1st of every month. If they are not, the escrow makes the payment anyway and the Tenant is charged a late fee. When their payment is recieved before the 10th, the fund is replenished and we are square. If the payment is not received by the 10th the Trustee automaticly sends a 3 day notice to vacate or pay.
If the payments is not received or arrangements made, an eviction notice is filed and then depending on the eviction process in your area it may only be a matter of 15 to 45 days to gettem out.
And, if you do what I do and have a payment or two in reserve or escrow, then the payment is there for at least one and maybe two months.
Just another point of interest. You did not sell the property two years ago, you only placed it in a Trust. The Tenant may be making the payments, but unless you did some type of a Lease with Option from the Trust, that does not make it a sale.
BTW: A Lease Option or Purchase is, in the eyes of the law, a Delayed or Disguised SALE, even if it is part of a Land Trust.
If it is determined that it is a Sale then you will have to foreclose on the Tenant even though you and only you are responsible for the mortgage.
Re: Subject to with a Land Trust! HELP!!! - Posted by LeasePurchase
Posted by LeasePurchase on December 22, 2006 at 17:02:01:
Sorry George but I don’t mean to disagree with you or be rude but you are wrong right from the start.
In a valid Title Holding Land Trust, the Trustee has absolutely NO Power of Direction. Only the Beneficiaries have the Power of Direction. The Trustee can only act by Express and Unanimous Direction of ALL the Beneficaries. As a Beneficiary he has ALL the control.
If his Trust and Occupancy Agreement were constructed properly there would be a provisions in place to handle a defaulting resident.
Even though I only do 3 or 4 dozen of these per year I would never ever do one without a valid Land Trust and very rarely do anything else but Sub2 as my exit strategy. Using a Land Trust to take a property Sub2 and sell as a Sub2 is in my opion the most profitable and safest way to do CRE.
Over 200 transactions and only one eviction with 90% plus being able to qualify for financing by the end of the term.
Re: Subject to with a Land Trust! HELP!!! - Posted by george
Posted by george on December 22, 2006 at 17:48:32:
LP, I didn’t say the trustee has direction in the trust. He is administering under direction of the beneficiary.
When you are talking about buying and selling thru the land trust, you do a pass through, without YOUR name on the loan. What pink has is a different situation. His name is on the loan. This is why I would never, ever sell Sub2 (if you are on the loan).
Re: Subject to with a Land Trust! HELP!!! - Posted by LeasePurchase
Posted by LeasePurchase on December 23, 2006 at 18:00:24:
You said, “then you (referring to pink),are pretty much out of the picture”. That is totally not true. He is totally in the picture unless he is not a beneficiary. If he is not a beneficiary then it is not a valid Trust anyway. If he is a beneficary then he has total control of his own trust.
I understand what you saying IF you buy using a Trust. Most lenders if any will allow a Land Trust to purchase a property with a mortgage. In fact a valid Land Trust can’t because it has NO Tax ID# and a Land Trust can’t own the property. The Trustee can own the property but can’t be on the Loan to be a valid Trustee.
Pink bought the house in his name with his credit and is on the loan. He then is allowing a Tenant to take over his loan using a Land Trust, valid or not.
Using a Proper Land Trust is the ONLY way I would ever consider allowing someone to ever do a Sub2 on my financing and I do dozens of them. Don’t properly there is actually less risk then the bank takes doing a mortgage for someone with excellent credit.
90% of the houses I buy are all sold or conveyed (Sub2) using a Land Trust instrument combined with a large contingency fund and triple net lease.
It looks like we are not disagreeing here, just misunderstanding each other except for how we would sell or convey a property or its deed with regard to Sub2.