Will this work (Land Trust legality) - Posted by Dan (NJ)

Posted by Nate(DC) on March 04, 2002 at 22:10:43:

Well, theoretically, the beneficial interest is personal property, so it would have to be secured with a UCC-9 filing and not a mortgage. This raises some issues for the buyer refinancing later, because they will have difficulty finding a lender willing to refinance them if the property is held in a trust, particularly one with such onerous terms, and if the property were to be conveyed to them directly it would not be a refi.

I suggest you also talk to a lawyer about the arrangement being considered an “equitable mortgage” in the event something goes wrong. I am not a lawyer and therefore cannot give legal advice, but essentially this doctrine means that, despite the form of the transaction, the substance of it is a mortgage, meaning that if something were to go wrong, you would have to follow the foreclosure procedures as if it actually were a mortgage. In any event the buyer could hold things up in court for a long time, claiming there was an equitable mortgage. Walks like a duck, quacks like a duck. Why not just do a lease-option?


Will this work (Land Trust legality) - Posted by Dan (NJ)

Posted by Dan (NJ) on March 04, 2002 at 13:44:57:

Ok let say I buy a house for 200k, that is worth 250k, I place the land in a land trust. Then sell to a person with no down payment and 100% seller financing for 270k. The way I do the sale is by assigning the buyer as the beneficiary of the trust and I am the Trustee. In a separate contract I have the buyer give the trustee the right to sell the property back to my company for $1 if the buyer is late for 3 consecutive months. And that they then have to vacate the property. I explain to the buyer that this is a contract to protect him from foreclosure and further ruining their credit if they run into problems. I also explain that once they correct their credit they can refinance me out of the picture.