Home › Forums › General › EHTrust/EHT Topics and Creative Real Estate Financing › Benefits for seller
February 6, 2006 at 8:21 am #14312
jim_pasquini, An owner needs some cash right away. This is rental and she wants to sell and move on, cause she got other things to worry about. She is not re or re financing savvy at all. She doesn?t go for NEHT. The market is hot or warm enough. You know if you can pick this one up for some discount, it is easy to flip to retail buyer quickly. But the key is she has to see the cash now and it has to be simple. You just use plain old option or P&S to tie it up with some discount, give her the cash and flip for quick bucks and be done with it.February 6, 2006 at 1:23 pm #14313
What a great post! You found a house among the billions available that is not suitable for the NEHTrust! In case you hadn’t noticed, This is the NARS Trust board and your posts are hilarious. Do you stay up nights dreaming up these scenarios or do they just flash into your mind? As they say in the Guiness commercials: Brilliant! Now, what was your point, Mr. Nameless?February 6, 2006 at 3:06 pm #14314
I’m not this particular “guest”, but come on — can’t we just respond to what he’s saying, rather than continually harping on whether or not he wants to take the time to register, or add a name to his “Guest” tag?
It’s not really one house out of billions, it’s a class of investments.
Is there a reason to use a PACTrust for a quick flip, or isn’t there?
If there is, it shouldn’t matter whether the owner will “go for it” or not — it’s just the way we’re taking title, she’s still getting her cash at closing, it’s over and done for her, why should she care?
If there isn’t, why do it?
I’m still without a doubt a bit rusty on all the nuances of Bill’s EH Trust. I can see how it makes sense if you’re holding for any length of time, I don’t see what value it adds if you’re doing a double close. What am I missing?February 6, 2006 at 4:44 pm #14315
Come on guys, I wish that Guest would come out of the closet too but he does raise some good points. Yes this is the NARS Board but lets take the opportunity to learn here. You can’t tell me that this question of the Seller wanting money now has not come up while making offers.
So what is the solution and can it be done using a NARS Trust of not. To be or not to be, that is the question.
Bill has taught us to think outside the box, so let’s try it. Don’t get caught in the the straight EHTrust Box. There are other ways to use a NARS Trust.
Here’s a suggestion. I know it may not be as simple as our Guest might like but this is a simple as I want to get it. If it doesn’t fit in my senario then I walk.
Just use the Simple Trust and have her name you a Bene with the Right to Purchase at FMV. Go get your NOO Interest Only Financing at 95% LTV, put up the 5% Down and purchase the property from the Simple Trust.
Why would you do it this way? Because it allows you to get financing based on the FMV not the discounted purchase price. So why is that important? Because by putting 5% Down and financing the other 95% you will get your Equitable Interest back at closing as a Beneficiary of the Trust which means you get your 5% back plus whats left in the Trust after you pay off the Seller/Settlors Equity.
Now you have your cake and eat it too.
I’ve done a half a dozen deals just like this in the last couple of months. One of them just put another $15,000 in our pockets at closing.February 6, 2006 at 5:44 pm #14316
This is real scenario and happens all time. I?m not talking about big discount here. I wouldn?t get a loan or close myself. You want to get in light with as little over head as possible and get out quick by assigning to retail buyer for just bit below FMV. If you mind is fixed, then you would miss many opportunities. Know the local market really well, understand the sellers and be flexible.February 6, 2006 at 6:53 pm #14317
If that is your criteria and the numbers don’t work for you it doesn’t matter what method of Creative Real Estate you use. In this particular example I would just choose to walk away because it doesn’t meet my personal exit strategy.
No one every said you HAD TO purchase it either through a Simple Trust or other. This is just a suggestion if the numbers fit.
It’s good to hear from someone from the outside every now and then and if you want to remain a “guest” then so be it. We’re really a good bunch of Joes (and Janes), just a little protective and defensive about our system.
At any rate, good luck and feel free to join us anytime.February 7, 2006 at 11:02 am #14318
We use the simple trust to get the loan to buy based on an improved value. For example: in my search for deals to buy I look for good clean houses that don’t need fix up but that I can improve. Usually an unfinished basement that we can finish (turn a 3 br 2 ba house into a 5dr 3 ba home. You’d be surprised how much that improves the appraisal value) and improve the appraisal value, or maybe a kitchen that needs new cabinets & counter tops, or a house that needs curb appeal by adding landscaping (Basements in SLC are the easiest right now). By using the simple trust I can get a new appraisal based on improvements instead of the agreed upon sales price (transfering title into a simple trust doesn’t create a sale). If I get a 95% loan, for example, I will have enough to pay the purchase price agreed on with the seller, closing costs, improvement cost, and still have enough left over for Hip National Bank. Everybody gets paid in cash at closing.
There is only one seller (trust), one buyer (credit investor/partner), one sale, and one appraisal. There is no double contracting, no simultaneous closing, no assigning your contract, no acquiring or selling of an option, no private or hard money, no loan fraud (everything is fully disclosed because of our use of the trust), and your down payment and improvement costs, if any, comes back to you at closing! It?s safe, ethical and legal in all 50 States. 8)
At this point you can flip the house for more spread (if you are in a good market) if you need immediate money. Or, as we do mostly, you can put out the yard signs and get an RB into an EHTrust (you are now the investor beneficiary and there is no settlor beneficiary because you bought him out with the simple trust. Your equity is in the MAV.) and build great cash flow in 36 months. Try it, it works! 8)February 7, 2006 at 4:34 pm #14319
I think some details are missing but I get the gist.
Increasing value with improvements is an old tried and true technique.
I got a little lost on appraisals, settlor, you as IB etc.
Maybe if I plug it into my HP 11C Jibberish mode it will crank.
Repair&Remod Expert since 1963February 7, 2006 at 7:27 pm #14320
dbhenderson, no argument that different senario requires different solution. I am also lost as to why use of simple trust would allow you to get an appraisal based on improved value, and why use of the trust is nessecery in this case. From appraiser point of view, it is still the same house, no matter how you take the title. Please elavorate. Thanks.February 7, 2006 at 7:59 pm #14321
I believe it’s because there’s no sale (& thus no appraisal) until after the improvements are done. It goes into the trust, with the seller and the IB splitting the beneficial interest. The IB does the fix-up, and only then is it appraised and sold. It sounds like it would require the fix-up (or build-up) money to come from some place other than the loan that funds the closing, but since DB says there’s no hard money involved, so either he’s putting the countertops on his credit card, or his “credit partner” is giving him some cash in advance.
Of course, I could be wrong…February 8, 2006 at 3:53 am #14322
Yep, cork is right. Something is missing.February 8, 2006 at 8:42 am #14323
Send me your e-mail address and I’ll send you my exit stratagy that you can use your HP-11C on. (I cut my teeth on one of those)
You are absolutely right. Both Home Depot and Lowes has a 6 month, no interest or payment card for purchases over $300. For the down payment and closing costs you need to fund it from your own money, get a money partner (which I have) or resort to hard money (which I hate. That’s the right name for it “hard”). However, depending on how long it takes to make the improvements all the money plus a little for hip national comes back in usually less than 60 days. Split the hip national money and cut him in on the flip or EHTrust profits and it’s not hard to find a money partner.
Mr doughnuts and Guest,
What’s missing? If I purchase a $200,000 (comp price) 3 br 2 ba clean home in good area with unfinished basement for $200,000 (agreed on sales price), put it in escrow (simple trust) while I improve it and get my financing arranged, spend $15k – $20k to put in 2 bd 1 ba & family room, does the appraisal value go up (a 3br 2 ba to a 5 br 3 ba fm? You tell me). Because it’s in escrow (simple trust) there was no sale setting the price (and chain of title) at $200,000. The appraiser for the lender then comes out and does his appraisal on a 5br, 3 ba, 2 fr house with no recent sales price. What’s the appraisal going to come in at? At 95% loan based on that appraisal there is enough to pay $200,000 cash at closing, closing costs, Home Depot, money partner and still have some left over. You now have a, let’s say, $250,000 MAV EHTrust or a $240,000 flip. You choose. Either way there’s more profit to be made!
Now what’s missing? We just completed one like this and right now it’s on my web site looking for an RB (didn’t want to flip this one). The only thing missing right now is the RB, which usually takes about 60-90 days. 8)
By the way, I still call FSBOs and ask if they’ll take payments. What do you think about asking if they’ll stay on the mortgage for 90 days for a full price offer (and even a little cut of the profit to help them move)??February 8, 2006 at 3:08 pm #14324
I cut my ‘eye teeth’ on a 60 tooth carbide 7″ blade. [wormdrive,for traction].
I ‘growed up’ as a 3rd Gen KarPunTure. Eat sawdust in my oatmeal.
Heard about the retired sawmill worker who couldn’t do ‘hi 5′?
Well, I have all mine; all eleven, goin on 69…..Not a pun.
You finger it out.
One would think I have nothing else to do? I’m thinkin””’go to Sedona to coffee with the good doctor.
Indubitably, for certain.February 8, 2006 at 4:47 pm #14325
dhenderson, you cooperate with the owner and fixed up (improved this case) before the close of escrow and get the appraisal after you made the improvement to cover you. That’s straight forward.
What use of a trust gave you was some protection while you were working on the property before the close of escrow. Getting higher appraisal could have been done without the trust.
It sounds like you had P&S at $200k, and had another P&S at higher price, did you not? Incorporating guts of it in joint-venture agreement is simpler and cleaner to everybody involved, IMHO.February 8, 2006 at 5:38 pm #14326
Just a couple of thoughts about the original post.
First, always contact the seller, you never know who will say yes.
Sellers aren’t generally investors
That is true. Most are not going to want to be bother by what we offer, unless they have a situation that make our offer look good to them. The only way to find that out is to talk to the seller and see what makes them tick.
Despite the fact many people here put rosy picture of this program, the reality is if the market is doing well, seller does not have insentive to do NEHT
Perhaps, but, as Dave Henderson does, if you can present a case where staying and let the property earn you more, even in a upswing market, this might be enticing. Also, in any market, people can get into situation that make us the “huckleberry”.
But, on the other side, if the seller is uncomfortable with your offer, they will always be uncomfortable. This would not be worth the effort to persue.
Brandon, learn the benefits to the seller and contact everyone. It will be worth the effort. As they say, every no is one step closer to a yes.
Guest, you do your thing, we’ll do ours and let’s get on with life.
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