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NARS Trust does NOT circumvent seller title seasoning

Home Forums General EHTrust/EHT Topics and Creative Real Estate Financing NARS Trust does NOT circumvent seller title seasoning

This topic contains 46 replies, has 13 voices, and was last updated by Avatar of Administrator Administrator 4 years, 10 months ago.

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  • #29319
    Avatar of homesavers
    NULL
    Member

    Thanks, Scott. It would sound like I did not do my job building trust with the owner. They do not think I am the best offer if they are being “promiscuous” with other investors. I can see how this could happen though and I am sure you have experienced it.

    #29320
    Avatar of dave salcido
    dave salcido
    Member

    @homesavers wrote:

    @Scott_L._Moyes wrote:
    There is no need to create a trust until and unless a fully qualified and approved end buyer is ready to close.

    What if you record a memorandum of Option with the County Recorder placing a cloud on the Title while you negotiate? This will not protect the Title from further liens but they will have to deal with you first if they try to contract with someone else. Right?

    The very reason I switched from options and assignments to the EHT was for that very reason. I had a signed contract. some idiot bottom feeding investor came in with another offer knowing full well that I already had the property under contract. The seller took the bottom feeder’s offer and said no thanks to mine. When I told the seller that we were already under contract, he laughed, told me to stick it and said, “I’ll see you in court”. Ir wasn’t worth the time, trouble and expense to litigate and the seller knew it. I had the contract recorded, but was never contacted by a title company on a pending sale. So, I don’t know whatever happened afterward. The property probably ended up in foreclosure. But nevertheless, no deal. The only thing I got out of the experience was that I realized that some investors are scumbags and many distressed homeowners make stupid decisions. It’s all about control. EHT is the best way on earth to control. Don’t fall for guru talk when it comes to options and assignments. Eventually and often you will get burned.

    #29321
    Avatar of homesavers
    NULL
    Member

    I can see how that happens. I think the Trust is the best thing since sliced bread for Real Estate acquisition. However, I think the Option and recorded memo were dreamed up to deal with objections from sellers not wanting to deed the property to a third party and lenders having a problem dealing with trusts.

    If we can sell the owner on everything good about the land trust then we need do nothing else. This is my personal issue getting people to understand this is the best and safest way to do things.

    #29322
    Avatar of areyes
    areyes
    Member

    @Dave Salcido wrote:

    As a former cop, I want evidence beyond a reasonable doubt.

    You were a cop? I didn’t know that.

    That’s cool

    #29323
    Avatar of lgoudie
    lgoudie
    Member

    To carry this a little bit further:
    1. After recording deed to EHC, the seller (now beneficiary) would sign the P&S contract (to be submitted to the lender) as seller and EHC sign as buyer, or what?
    2. Could I be the Trustee for this short period of time during which the short sale is negotiated and an end buyer found?
    Larry :roll:

    #29324
    Avatar of derrickali
    derrickali
    Member

    @Dave Salcido wrote:

    @homesavers wrote:
    @Scott_L._Moyes wrote:
    There is no need to create a trust until and unless a fully qualified and approved end buyer is ready to close.

    What if you record a memorandum of Option with the County Recorder placing a cloud on the Title while you negotiate? This will not protect the Title from further liens but they will have to deal with you first if they try to contract with someone else. Right?

    The very reason I switched from options and assignments to the EHT was for that very reason. I had a signed contract. some idiot bottom feeding investor came in with another offer knowing full well that I already had the property under contract. The seller took the bottom feeder’s offer and said no thanks to mine. When I told the seller that we were already under contract, he laughed, told me to stick it and said, “I’ll see you in court”. Ir wasn’t worth the time, trouble and expense to litigate and the seller knew it. I had the contract recorded, but was never contacted by a title company on a pending sale. So, I don’t know whatever happened afterward. The property probably ended up in foreclosure. But nevertheless, no deal. The only thing I got out of the experience was that I realized that some investors are scumbags and many distressed homeowners make stupid decisions. It’s all about control. EHT is the best way on earth to control. Don’t fall for guru talk when it comes to options and assignments. Eventually and often you will get burned.

    Dave,

    Co-Signs aka AMEN To THAT My Brother!

    #29325
    Avatar of dave salcido
    dave salcido
    Member

    @lgoudie wrote:

    To carry this a little bit further:
    1. After recording deed to EHC, the seller (now beneficiary) would sign the P&S contract (to be submitted to the lender) as seller and EHC sign as buyer, or what?
    2. Could I be the Trustee for this short period of time during which the short sale is negotiated and an end buyer found?
    Larry :roll:

    1. A buyer (this could even be a trust beneficiary) is making an offer to the trustee to purchase the property contingent upon lender’s approval of a short sale. That’s why this type of transaction is a bit unorthodox. If the buyer happens to be a beneficiary, he in reality is merely making a short payoff, but the lender will consider it a sale with a real estate purchase contract and all. Now that the property is free and clear and still in trust, the short sale funding beneficiary can either terminate the trust and owner occupy or can keep the trust intact and assign a resident beneficiary and give him a reasonable monthly payment. Either way, a great investment.
    2. Sure, why not?

    #29326
    Avatar of nyreattorney
    nyreattorney
    Member

    This is the way we have successfully structured this transaction.

    A creates land trust retaining 100% BO of trust & deeds property to Trustee. No seasoning issue created as Date of Acquisition remains the date A purchased the property (see my legal analysis of the FHA Seasoning Requirement)

    Contract of Sale between A & B for home and/or beneficial ownership of entity that might hold title to said home. (Basis for Short Sale Transaction)

    Contract of Sale between Trustee & C.

    A assigns BO to B for consideration. Said assignment is a real estate conveyance (I have the statutory authority under NY law) and therefore a legitimate basis to prepare HUD-1.

    Trustee conveys property to C and funds. B, as beneficiary of the trust, is the party entitled to receive net profit.

    #29327
    Avatar of nyreattorney
    nyreattorney
    Member

    @bill_gatten wrote:

    Kathleen, you are not only brilliant, a fine lawyer and a looker…you’re my next wife (assuming my present one will relinquish title to me and give me back all the jewelry).

    Thank you so much for that input. It answers the questions and enlightens us all as to the reality of what’s is going on.

    Our thinking re. our proposed program…is that the land trust itself becomes the bona fide silent purchaser of the property for a pending all cash funding to the underlying lender at the beginning of the usually lengthy short-sale approval process (i.e., no beneficiary interest held by the seller). During this approval and acceptance process, the end-buyer is simultaneously qualifying for the “take out” mortgage to buy the property at 90% of its legitimate FMV from the legal and equitable title owner–i.e., the title-holding trust’s trustee (Equity Holding Corporation, a non-profit, licensed and bonded trustee corporation).

    In this scenario, the owner (the trustee) has held the property as its own for the requisite seasoning term and then sells to the end-buyer for 90% of FMV with a simultaneous closing once they have their financing in escrow. Also, if opted for, we will use the buyer’s own MAI appraisal as the basis for pricing.

    Is my thinking skewed? Are you perhaps suggesting that the procedure wouldn’t satisfy the end-lender’s title seasoning requirement? Our attorneys are in favor of the system and have seen no problems with it at this point…but if there’s another take on it, I want to know about it.

    E.g., Would you defend it as presented?

    Bill

    Bill – thanks so much for all the compliments – their worth is only enhanced by your stature in our industry.

    Please see my last post on how I have been structuring these transactions. I am sure we can come to a point where we have developed a workable product in all venues. What we need to do is create a “Dream Team” – title, mortgage etc so that we can provide the necessary resources to support the investors out there.

    #29328
    Avatar of mtnwizard49
    mtnwizard49
    Member

    Great posts, Kathleen. Bill’s compliments are further enhanced by the fact that he’s a dirty old man, if admittedly a smart one.

    #29329
    Avatar of nyreattorney
    nyreattorney
    Member

    Thanks Gary and as for Bill, I wouldn’t have him be any other way lol!

    #29330
    Avatar of homesavers
    NULL
    Member

    @nyreattorney wrote:

    This is the way we have successfully structured this transaction.

    A creates land trust retaining 100% BO of trust & deeds property to Trustee. No seasoning issue created as Date of Acquisition remains the date A purchased the property (see my legal analysis of the FHA Seasoning Requirement)

    Contract of Sale between A & B for home and/or beneficial ownership of entity that might hold title to said home. (Basis for Short Sale Transaction)

    Contract of Sale between Trustee & C.

    A assigns BO to B for consideration. Said assignment is a real estate conveyance (I have the statutory authority under NY law) and therefore a legitimate basis to prepare HUD-1.

    Trustee conveys property to C and funds. B, as beneficiary of the trust, is the party entitled to receive net profit.

    A B C BINGO!!! Thanks again a straight shooter you are

    #29331
    Avatar of nyreattorney
    nyreattorney
    Member

    I only wish my profession and other members of the real estate industry, i.e. title companies, saw it the same way.

    I, unfortunately, seem to be the victim of vicious rumors, spread by local NY attorneys and title companies (because I apparently shut down their illegal operations of making up fake HUD-1s, doctoring up dates in title binders for a percentage of the investor’s profits) that I got raided by the Feds, or I am being investigated by the Attorney General blah blah blah.

    What utter nonsense! I even heard one rumor that I had a closing approximately 2 weeks, it died at the table and the feds arrested the Seller – I was flabbergasted!!! Obviously it is completely false but it is saddening what members of the industry will stoop to to keep their fraudulent enterprises running.

    I am a straight shooter but it does get disheartening on occasion.

    #29332
    Avatar of homesavers
    NULL
    Member

    @nyreattorney wrote:

    I only wish my profession and other members of the real estate industry, i.e. title companies, saw it the same way.

    I am a straight shooter but it does get disheartening on occasion.

    Don’t worry you are in good company. Hold your position if you stand for the Truth you cannot be shaken.

    #29333
    Avatar of nyreattorney
    nyreattorney
    Member

    @Dave Salcido wrote:

    To further clarify my position. There is, as of yet, no precedent, no case law that I know of that has come to light with respect to FHA seasoning when a title is transferred from the property acquirer to his/her trustee. I believe Kathleen in her most recent post is probably the most informed of anyone (maybe in the entire country) on this subject, but once again, nobody will know for sure until it has been tested and FHA responds with a new guideline or opinion specific to the Equity Holding Trust.

    Thank you Dave for your kind words – I really appreciate it!

    With respect to FHA Seasoning Rules, it sets forth clearly in FHA Mortgagee Letter 2006-14 that:

    resale may not occur 90 or less days from the last sale or Seller’s date of acquisition
    Date of Acquisition is defined therein as the “Date of Settlement on the Seller’s Purchase of that property”

    Therefore, the date of a no-consideration transfer from an Owner to a Trustee which constitutes a mere change of identity is not a Date of Acquisition under said rule.

    As such, it is not necessary to wait for case law or a clarification from FHA – it is laid out very clearly.

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