Posted by Tommy T on March 26, 2006 at 21:00:16:
WA
Trust problem - Posted by Tommy T
Posted by Tommy T on March 26, 2006 at 03:00:05:
Just got a P&S signed by seller in foreclosure, we plan to purchase/discount
the first and a couple judgments. Seller then disclosed they had been talking
with another party that “just wants to help them negotiate a short sale” (for a
$15K fee!!!) when seller finds a buyer. Third party talked seller into signing
property into a Trust “to protect prop. from further liens”, and assured seller
that seller would be Trustee and therefore could take prop. out of the Trust at
will. I went and recorded Memorandum of Agreement to protect my position
until close, and found that the third party had recorded the WDTT and the
Trust agreement (!!??). The third party is clearly the Trustee (I am drafting a
note to seller now to give them the news), and it gets worse, the WDTT and
Trust agreement are the ones most of us are using that literally gives us
power to do anything we want to with the property without being challenged,
i.e., sell it. There was not an Assignment of Ben. Interest recorded, and seller
doesn’t think they signed one (I’m going to look at their docs soon). No P&S
between Seller and 3rd party, who has a year-old LLC and is clearly a RE
investor or wannabe. I told the seller I have concerns about the 3rd party’s
intentions and that red flags are going up bigtime for me. My concerns are,
#1, 3rd party is trying to steal this house from seller (there is definitely some
equity with a little negotiating work; my offer to seller gets seller a nice chunk
of cash), and #2, 3rd party is going to mess up this deal ( I was there first).
My inclination is to immediately record an Appointment of Successor Trustee
and get the seller on record as intending to get themselves into the Trustee
position (to cloud title a bit until they get the Trustee to deed the property
back to seller). Also a good chance seller hasn’t fully disclosed what they’ve
been up to, and are playing musical offers. I’ve been doing the RE investing
for a long time but have never run into one like this. Never a dull moment.
So, after all that, my question for the esteemed panel is: Any suggestions/
comments on the best way to handle this? “Next!” is not an option here, I’ve
spent some time on due diligence, done a face to face with the sellers and
helped them analyze their postion, and made them an offer that I believe
exceeds the net over any other exit they may have. It’s a good deal for me as
well. Also, they have some very serious medical issues pending, need to sell
and get their cash, and they’ll be in a world of hurt if someone steals their
only asset from them and in turn makes us legit investors look bad.
Like they say, if this was easy, everyone would be doing it… although lately,
it seems like everyone IS doing it, but that’s a different post! Thanks in
advance for any input.
Re: Trust problem - Posted by colvegas
Posted by colvegas on April 02, 2006 at 19:10:35:
Tommy,
First off from the sounds of your description whomever setup the trust looks like a dry or abusive trust that would most likely be pireced if a charging order or judge looks at the setup on it so all the better for you. Has the trust been setup as of yet or no…??
The seller being the trustee is sounds legally incorrect since whomever is on the deed or title will vest to his or her desginated trustee the seller would NOT be a trustee…the seller however will of course be A beneficiary thus following the Garn St Germain Act of 1982 usually min beneficial assignment is 10% just a rule of thumb BUT the investor being the trustee is a red flag as well not that you can not do it but the transaction does not look ethical or legal at all…and it definitley would not be an arms length transaction, you would want the trustee to be a 3 rd pary and preferably a out of state corp that is a non-profit entity.
The second item is the assignment of beneficial interest is a silent transfer so it is not on the public record you will however see the trustee name and of course the name of the subject trust…
Even if the trust is dry you will probably need to prove it or go after the investor or seller and no legal adivsed is intended just my view on it.
Any professional trustee can NOT accept the title vesting if there are liens already on it so if the trust is not yet done I would try to record on the property…
If these investors are equity stripping or illegally taking claim to the sellers property then you should report them to the attorney generals office in your state…I like to hear from the legal eagles and attorney on this one…
NO legal advice is at all intended just my suggestions
If I can help further please feel free to call me at 702-400-7632 I like to see how this was done…
Good luck!!
Re: Trust problem - Posted by Darryle-Ca
Posted by Darryle-Ca on March 26, 2006 at 20:49:36:
Which state are you in?