All Forum Posts by: George Creel

Thank you all for your answers.  I just spoke to an attorney and (oh boy) he agrees with Joe Gore (and Bill Gulley.)  He said to transfer the deed from the seller to the buyer. 

He said my Trust idea (acquiring and then financing beneficial interest) could be done, but it is unnecessarily complicated and the buyer would not be able to refinance if all he had was beneficial interest.   Since I eventually want the buyer to refinance so I can get paid, the end justifies the means.

I specifically asked how the lender can pay for a Sub2 buyer's taxes and insurance from the seller's escrow account (after all, isn't the escrow account in the Seller's name?), and he said they "just do". I gave up there. I still don't understand it, but if they do, they do!

I wanted him to provide me all the docs necessary, but he said to take my contract & addenda to a Title Co. and they will prepare the docs and disclosures.  

His advice was not to try to hide from the Due-On-Sale, just disclose and make sure the payments are made on time.  I've heard that before, but I resisted accepting it until now.

And so, (I say with some regret), my obsession with Land Trusts is over.  

@Bill Gulley

If what you say is true, then much of the reason for using the trust on the acquisition side is lost upon owner financing.

The new owner finance buyer will have the deed passed in his/her name recorded at the county.  His tax bill  will be sent to the lender, and insurance bill showing him/her as the named insured will be sent to the lender for payment from the original seller's escrow account.  I've heard people say that the lender will "just pay it", but I don't understand how they could legally pay bills for one person from an account they have with another person.  Maybe if my seller signed a power of attorney for my new buyer, but that opens up another can of worms.

If I knew how to smoothly maneuver that part of the transaction, maybe I'd give up the trust idea altogether.  I thought using a trust would help me acquire and sell without having to make those T&I changes twice or make clear to the lender that they had a due-on-sale option.  If not, then I agree with Joe Gore, why use it?

Dan,

It seems like on the acquisition side there are many benefits, but I get all hung up on the sale side.

1.  Some cover from the Due-On-Sale clause with a land trust (Garn St. Germain).

2. Transferring the taxes and insurance. I hope to continue to pay those through the Seller's escrow account for T&I. But, if the tax bill is in MY name, and the "Named Insured" is in My name then why would the lender pay MY bills from the Seller's Escrow account. If the owner sent a letter with POA stating that a trustee will manage his property, the problem would be solved.

3.  Also, if I closed the purchase without yet having a buyer, there would be two transfers (owner to me, and me to buyer).  Too many changes too quickly might raise red flags with the lender, but if I had a trustee and sold BI, then only one transfer ever takes place.  The subsequent sale of BI isn't recorded and wouldn't require a transfer of T&I.

I want the same benefits from a traditional transaction.  A down payment, monthly cash flow from a 2-point hike in interest rate, and some equity capture to be made upon a refi or sale.  Maybe refi isn't possible with only beneficial interest though, that's still unclear.

I appreciate your answer.

I've asked this question before and haven't received a single response, but I'll try again.  I want to buy a property sub2 by using a land trust.  I would have beneficial interest but the deed would be in the Trust's name c/o Trustee.  Is it possible to owner finance a house to a new buyer having just the beneficial interest?  If so, what would be the process?  Would I sell my beneficial interest to a buyer in exchange for a note, collateral assignment of beneficial interest and some kind of security agreement?  Has anyone ever done this?  I would really appreciate hearing from anyone with experience and knowledge on this topic.

I've been searching for an answer to this question for a while and would really appreciate help from anyone with some experience with Land Trusts and/or Owner Financing.

I want to try to acquire properties Sub2, but in the safest way possible, and then try to owner finance. I believe I understand the acquisition side of this type of transaction. I have a motivated seller deed their property into the trust, then assign their beneficial interest to me. However, since my goal is to then Owner Finance these properties to new buyers, I am not sure I understand how to do this from a land trust.

Let me say first, I don't want to dissolve a trust which I just set up to acquire the property.  I want to keep the protection the trust provides until the owner is ready to obtain conventional financing and pay off the original mortgage and the note he signs with me  (which wraps the seller's mortgage.)  The only way I can think to keep the trust in place and owner finance is to finance my beneficial interest and not the deed.

So, this is what I think can be done...and I hope someone can tell me if they think this is a good idea.

1.  I, as owner of 100% beneficial interest, agree to sign over that beneficial interest to the buyer.

2.  In return, the buyer signs a promissory note and a Collateral Assignment of Beneficial Interest as security (sort of equivalent to note and deed of trust.)

Does anyone out there have experience with this?

Wow!  Thank you for the quick reply. 

So, by using a Land Trust, the bank would be notified the seller has appointed a trustee and thus allow insurance and taxes in the trustee's name to be paid from that account?

If I've got that right, then I agree the land trust sounds like the way to go.  Thank you again.

Hello everyone, I am new to the forum here and hope someone can help me understand a problem I've been having trying to grasp the details of Sub2. I have searched for the answers first, but was unable to find a satisfactory answer. I've seen some discussions about insurance and taxes, but can't find where someone nails down exactly what I'm after.

My question has to deal with paying property taxes and insurance when purchasing Sub2. Say I have an owner deed a property to me and I begin making payments. Of course, part of the payment is for P&I and part goes to the seller's escrow account for reserves to pay T&I.

Here is where I get hung up.

The county will now show that I owe the taxes, not the seller.  If I have the county send the taxes to the lender, why would the lender pay for a bill in "My" name from the "Seller's" escrow account?  I understand that the lender wants the taxes paid for the house, but how are they authorized to pay my bill from another person's account.

Likewise, I have the same question about the insurance.  If I become the "Named Insured" that means I am the owner of the new policy.  Sure, I would have the seller as an "Additional Insured" and the lender as "Mortgagee", but wouldn't the bank recognize that I am the owner of the policy and have a problem paying for my insurance from the seller's escrow account? 

Again, in a nutshell. Without explicit approval by the seller, how is the lender even authorized to pay my tax and my insurance from the seller's escrow account? Because if they don't, then I'm forced to pay for it twice - once to a building escrow account and once for the actual T&I. Maybe I get a refund later by changing seller's address and a POA, but I can't believe that is how everyone else is doing it.

Very sorry this is too long, but I just had to get it out in full in hopes someone out there could help me get it.