All Forum Posts by: T. Alan Ceshker

Yes -- I have seen an attorney in SA acquiesce to this old school method. However, the great majority of attorneys will not do this deed only method. We all do it the correct way.

This purchase and allow for a re-purchase by seller is also a very big No No in Texas. We would never allow this either.

The lawsuit in Az is a bit trumped up for the voter appeal. But, they do possibly have some representation issues.

We will watch the case and continue to do things correctly here in the great state of Texas.

Alan

1 Vote

Quote from @Ken M.:

Quote from @Scott Rabon:

We have a Buyer interested in purchasing a property from Us :

on a SUBJECT TO or Bond for Title Rent to Own etc

Scott Rabon

Personally, I would never sell on Subject To, you still owe on the loan but you no longer own the property. So, if the buyer stops paying, there is nothing you can do about it. Your credit gets trashed and the house gets sold at auction.

I might sell on a WRAP if I was desperate enough.

Note: A wrap and an assumption (old term for me is sub to) are the same exact transaction. A note and deed of trust are drafted to protect the seller and give them rights of redemption in the event of non-payment.

If an attorney is saying do it with just a deed to secure assumption -- run away

Alan

0 Votes

Please send me a private message with your email and I can introduce you

0 Votes

Austin, Texas

Quote from @Account Closed:

Hello, I have a property in booming east Austin.

1. I lived in it for 7 years, rented it for 3 years, now living back in it (to avoid capital gains tax if I sell). It is my primary residence but still in an LLC (owned by me solely)…. just don't want to pay to have it moved out. Please correct me if I'm wrong about assuming I'll have no captains tax on up to 250k profit/single bring that I'll be living in it as primary 2 out of 5 years.

2. I’m thinking Austin just isn’t for me anymore. The lot is large with 3 new ~million dollar homes on each side and back. Condo regimes are popular here and I’m thinking maybe converting mine to a condo regime and sell either the back lot or the front lot with house and keep the other. How would this affect my capital gains taxes I’m trying to avoid? I’d be selling only part of the property (or both if it made financial sense). Any idea how much legal fees and headache having a condo regime set up would be?

My goal is to get the most $$.
TIA

I can only speak to the legal side vs tax.

The condo regime is easy to get in place and a very popular investment strategy. Not too expensive - a few thousand. But it greatly increases the total FMV of the property.

Message me and I can refer you to a very good attorney here -- I call her the condo queen

Thanks

Alan

0 Votes

Austin, Texas

Let's nudge back towards the question -- a good one in my opinion.

"Can a subject to transaction be done where both parties are reasonably protected?"

My title office closes 30 to 40 of these per month in Texas. Being a state that does not allow contract for deed or lease/option deals, wraps are the best choice for us.

I personally stay involved in all my wraps post closing. If there is a problem, I fix it. And, we experience problems very seldom. We close and both parties get what they were promised and the file is stable. A benefit occurs for both sides - the promised benefit.

We have also never had someone lose the house to a foreclosure from the lender. That record spans 20 plus years and over 10,000 wrap closings.

I will say - there are many attorneys/investors who think they can use some forms and close these without all the preventative measures and correct documents/disclosures. These do get into trouble and our office does help fix these quite often.

So - my answer to the question - before fanatics altered the topic - is yes - wraps can be done safely and benefit both parties. If you are working with the right people that is. You need experienced investors, experienced title offices, experienced law offices and parties that have had full disclosure and education.

Wraps are not for everyone - but they certainly are for many. And, they provide benefit for both parties.

Hopefully this is taken for what it is worth and not contorted into a political post or otherwise.

Stay safe out there (and be nice)

Alan

2 Votes

We have assisted clients that hold property individually or in an entity and they transfer to another entity and have never had a lender call the note due. Strictly speaking, they can. However, they provide a time period to fix this - ie usually 30 days. You would then simply transfer it back to the named borrower.

If you wanted to decrease the DOS issue, you can transfer to a revocable trust with the entity as beneficiary. This would appear to 100% comply with the Garn St. Germain Act. Technically, the fact that the borrower is not the beneficiary, it does not 100% comply. However, the beneficiary interest is not a disclosed matter re the trust.

You need to check any tax concerns with your tax professional.

Stay safe out there

Alan

1 Vote

Austin, Texas

We can close and insure FHA wraps for you

1 Vote

That is a fantastic question.

For more than 20 years and over 15,000 closings we had 3 wraps called due. We fixed all three easily.

Then for the past approximate 3 years and numerous hundred closings, we have seen about 10 to 12 due on sale issues. There are a few reasons for this: getting insurance in place improperly; inappropriate contact with the bank; one loan servicer that is looking for wraps; etc. So, yes - there has been an increase in the percentage of wraps called due. Still a very small percentage -- but an increase.

On each of the approximate dozen that have occurred, only 1 loan was paid off and that was voluntary since the balance was very low. We have fixed all the rest.

I agree the due on sale clause is a risk in wraps.It is just a very small risk that can be fixed if needed. And, all real estate transactions have risk. Some more than others. It is our job to manage the risk at the inception of the project.

Thanks for the info and comments.

Alan

3 Votes

Quote from @Don Konipol:

Can a “subject to” transaction be done safely?

There’s been a LOT of “hostility” on BP toward subject to transactions. Some posters have gone so far as to call these transactions scams, questioning the legality, morality, and ethics of the buyer. While imo this is unfair, extreme and just plain incorrect; the detractors do rightly point out that (1) the seller remains liable for a mortgage note secured by a property they no longer own and (2) as long as the note remains outstanding the seller’s credit capacity will be impacted negatively, often resulting in the inability to obtain a mortgage for a home purchase. They further point out that many sellers are unaware of the consequences of selling subject to.

I think it’s important to note that subject to became popular in 1980 - 1982 when it was virtually impossible to transact real estate using conventional financing. Mortgage rates reached 18%, so transaction were all either owner finance, wrap, cash or subject to.

The possible negatives of subject to have been thoroughly discussed. The positives are from the buyers prospective

1- the ability to buy a property with little down payment

2- the ability to obtain financing at below market rate

3 -not needing to qualify for convention/institutional financing

4- not having another debt on your PFS

5 - not needing to pay points and other fees to obtain a new mortgage

The positives for the seller are

1- can possibly sell a property in which they have negative equity without bringing cash to the closing table

2 -expand the pool of potential buyers

3 -possibly obtain a higher price/ quicker sale

4 - can utilize a wrap to potentially earn the “differential” on interest rate

5 -May be able to save the Realtors commission

All this being established, here’s the BIG question: Can a subject to transaction be done where both parties are reasonably protected? Let us know what you think!

We have closed well over 10,000 wraps in our law and title office and have not had 1 go back to the bank because of a due on sale issue. I have also closed dozens myself as the buyer and seller. It is my primary method of investing.

If structured and closed correctly, they work. You do have to be ready to deal with the due on sale clause issue - but this is doable.

As a seller, you need to be ready to deal with a buyer default -- which I have had to do.

Lastly, you cannot just close these anywhere with any contracting. The key is to have the foundation of the transaction solid before embarking on this.

Stay safe out there

Alan

5 Votes

Quote from @Jake Gasperi:

I'm looking for recommendations on investor-friendly title companies in the Travis County area. If you have any suggestions or have worked with a great title company in the area, I’d love to hear your recommendations!

Allow me to explain/educate on investor "friendly" title offices.

First - it should really be called an investor knowledgeable title team.

A title office is a group of 25 to 70 to more locations.

You do not need to be at a small office - but you do need to reference the team you are using if at a big office. Not all EOs are equal. Not all offices can close an AB/BC sub to acquisition with a seller fi disposition using a blind HUD with pass through funding and a pass through policy.

Saying I close at Independence and they are great at wraps is erroneous. You may close at that company and they may handle wraps - but it is the EO team that knows this -- not the company.

Most offices will have 1 or maybe 2 teams that do the creative investor stuff. We have 4 teams and more than 50% of our closings are investor and creative closings. We live, eat and breath this stuff.

I am not saying you have to use us -- but you do have to use a proven escrow team versus a reference to a company with 200 employees and 70 closing locations.

Interview your escrow team - ask if they close uninsured wraps into a land trust that protects homestead rights and avoids liability for the beneficiaries. Ask if they allow pass through fundings. Ask if they clear AJs from homesteads. Ask if they fight MOCs.

Also - a corporate owned title office cannot do what an attorney owned title office (a fee office) can do. The company limits what their attorneys can and cannot do. While an attorney owned title office is free to assist on the insurance closing side as well as the legal side.

Ask if the office is fully vested in the investor world or just knows some of this stuff.

Be careful out there

Alan

1 Vote

Austin, Texas

All Forum Posts by: T. Alan Ceshker

T. Alan Ceshker has started 3 posts and replied 79 times.

Post: Looking for Attorney to represent Buyer/Client on a Sub Tran.

Post: Looking for Attorney to represent Buyer/Client on a Sub Tran.

Post: Living in rental and converting to condo regime

Post: Living in rental and converting to condo regime

Post: Can a “Subject to” Transaction be done SAFELY?

Post: Series LLC vs. Trust-Owned LLC – How to Handle Deed Transfers

Post: Can a “Subject to” Transaction be done SAFELY?

Post: Can a “Subject to” Transaction be done SAFELY?

Post: Can a “Subject to” Transaction be done SAFELY?

Post: Title: Looking for Investor-Friendly Title Companies in Travis County, TX