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Short Sale Flips- the best way

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Viewing 15 posts - 91 through 105 (of 105 total)
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  • #27862
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @GetSmart wrote:

    also don’t everyone call the lender i mentioned to verify the seasoning issue, let one authority here verify because an over load of calls will always call for a red flag. so scott will you call to verify. don’t want the lender to get spooked by some seminar newbie that can’t really explain what they are talking about.

    Amen!

    #27863
    Avatar of socalgal
    socalgal
    Participant

    Here’s a thread from a broker discussion board wherein the request was made for names of lenders that don’t have seller title seasoning requirements.

    http://forum.brokeroutpost.com/loans/forum/2/252363.htm

    However, the transaction referenced therein was completed in December 2008. As I previously posted and confirmed with a link to Fannie Mae’s website, Fannie’s new title seasoning guidelines take effect in 2009.

    Which came first–Fannie guidelines or lenders/title companies figuring out on their own that recently recorded land trusts are just get-arounds for seller title seasoning? I don’t know but, going forward, there will be far more scrutiny of recently recorded land trusts. All the protests that “land trusts are legal!” will mean nothing to lenders and title companies. Lenders won’t take a chance on running afoul of Fannie/Freddie, so they’ll just say no to land trusts recorded < 12 months.

    Coldwell Banker Residential Mortgage is a conduit lender for Fannie Mae and Freddie Mac; therefore, Fannie/Freddie guidelines apply.

    #27864
    Avatar of getsmart
    getsmart
    Member

    SoCalGal, i haven’t read the guideline completely so is that just for land trust or all short term deals? so the guidelines are now in effect? there are still ways, but i won’t get into them. it’s a shame how far things have gone due to real estate agents, appraisers and mortgage brokers all of which have nothing to do with investors.

    #27865
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    Thanks for the links and information.

    #27866
    Avatar of jerry carey
    jerry carey
    Member

    Getsmart thanks for the lender referral. However, as you can see the disparity on opinions about lender’s seasoning issues perpetuates itself. Some say lender’s have no problem, others say they do … or will.

    I posted a scenario earlier in this string … to which no one responded! Again for the sake of arguement lets say there is a seasoning issue simply by the formation of a land trust … due to it’s recent abuses buy ignorant investors. In my previous scenario I suggested transferring the property out of the Trust entity back to the Settlor beneficiaries as individuals … the original owners. Two Questions: 1.). Can doing so satisfy the lender’s seasoning issues :?: and if yes … 2). How can we protect the escrow disbursement back to the Beneficiaries or Trust/ee who transfers the property(deeds) back to said original owners :?: Please read the scenario I posted earlier in this string for details. Will NARS, SoCalGal, Scott Moyes, Dave Salcido, Gary “da wiz” or any other informed poster … please reply :!:

    Jerry Carey

    #27867
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @Jerry Carey wrote:

    In my previous scenario I suggested transferring the property out of the Trust entity back to the Settlor beneficiaries as individuals … the original owners. Two Questions: 1.). Can doing so satisfy the lender’s seasoning issues :?: and if yes … 2). How can we protect the escrow disbursement back to the Beneficiaries or Trust/ee who transfers the property(deeds) back to said original owners :?:

    Since I have never experienced this scenario I don’t know if I can answer your question, but I’ll play the “what if” game and we’ll see where is takes us.

    “IF”, and that’s a BIG “IF” by the way, simply placing the property in a trust creates a seasoning or chain of title issue (which it doesn’t) and the lender requests that it be reconveyed back to the Settlor, now you have another change in title. So what did that solve? Now it’s worse, isn’t it?

    But, let’s say that the lender agrees to close the loan if this happens. All we are really doing is a Substitution of Trustee, aren’t we? The Trust actaullly stays in place and remains in effect. The Settlor, now as Owner and Trustee is still bound by the Trust and Trust Law to carry out the written instructions of the beneficiaries. Nothing changes except the Owner/Trustee.

    So the question will surely come up… “What IF the Settlor, now Owner/Trustee, does not act accordingly? Well for one thing they will have now violated their fiduciary and legal responsibility and may face criminal prosecution. And “IF” all is done correctly by the title company, and mine will, they must follow the trust and dispurse funds as agreed. The funds are not typically paid directly to the Trustee. “IF” they are, they Trustee is instructed to set up a seperate escrow, sign over the check to the title company and have them disburse funds as per the beneficiary agreement.

    I actually had to do it that way on a deal in Texas with one of our members so I know it will work.

    #27868
    Avatar of jerry carey
    jerry carey
    Member

    Scott, thanks for the reply!

    You said:

    and the lender requests that it be reconveyed back to the Settlor, now you have another change in title. So what did that solve? Now it’s worse, isn’t it?

    The lender would not want it conveyed back to the Settlor Beneficiaries … rather have the trust terminated (as said was done by Joe Cain) and/or the sellers take title again as Indviduals/sellers! The revocation and termination of the trust and/or transfer to the individual is why the lender will fund the loan … overcoming the seasoning issues! These indidual sellers are no longer bound by the now terminated Beneficiaries Agreement of the Trust.

    The second question I posed … is how do we (the former beneficiaries) legally and absolutely guarantee that we get paid by these individual sellers :?: Perhaps the trust does not need to be terminated until the funding has happened? Can a promissory note be signed by the indidual sellers to the trust and that note be paid out of the escrow funding? Just thinking out loud here!

    Other thoughts and opinions please!
    Jerry Carey

    #27869
    Avatar of scott_l._moyes
    scott_l._moyes
    Participant

    @Jerry Carey wrote:

    The lender would not want it conveyed back to the Settlor Beneficiaries … rather have the trust terminated (as said was done by Joe Cain) and/or the sellers take title again as Indviduals/sellers! The revocation and termination of the trust and/or transfer to the individual is why the lender will fund the loan … overcoming the seasoning issues! These indidual sellers are no longer bound by the now terminated Beneficiaries Agreement of the Trust.

    The Settlor is the original title holder. Is that not what the lender wanted, to have the title deeded back to the original title holder. Why would the Trust need to be terminated? The property, of a THLT, is not owned by the Trust. If the properties title is deeded/reconveyed back to the original owner, what would be the lender’s problem. Again, isn’t that what they wanted. They have no right, legal or otherwise, to make someone terminate a trust.

    Besides, and don’t take this wrong, once the title is deeded back to the Settlor, who’s to know if the Trust has been terminated or not?

    @Jerry Carey wrote:

    The second question I posed … is how do we (the former beneficiaries) legally and absolutely guarantee that we get paid by these individual sellers :?: Perhaps the trust does not need to be terminated until the funding has happened? Can a promissory note be signed by the indidual sellers to the trust and that note be paid out of the escrow funding? Just thinking out loud here! Other thoughts and opinions please!Jerry Carey

    This is done with a “Rider Agreement” to the Trust. Been there, done that.

    #27870
    Avatar of socalgal
    socalgal
    Participant

    …it’s a shame how far things have gone due to real estate agents, appraisers and mortgage brokers all of which have nothing to do with investors.

    Well, investors are buying the properties, so they’re not exactly blameless.

    Yes, it’s a shame but, as with most things, a few rotten apples spoil the whole barrel.

    #27871
    Avatar of bmckee
    bmckee
    Participant

    One of the reasons a deed is transferred to a trustee, and a 2nd unrelated beneficiary added to the trust, is to reduce the hazard due to judgments, tax liens, etc. clouding title.

    What happens if the settlor(s) happened to obtain a tax lien, or a judgment since the property was conveyed to the trustee? IF Trustee deeds back to settlor, that could create another problem to deal with. You would be forced to deal with the liens/clouds before you could “sell” the property.

    We have a real problem in Oregon using Land Trusts. Title companies refuse to insure title if a land trust is used to hold title, especially if it was formed within past 12 months.. Joe has been working on this problem for perhaps 6 months and as yet has no answer. In Oregon, if you want to insure title for property held by a trustee using a land trust, you must “register” it as a business trust with the state of Oregon. where all beneficiaries are listed. This makes the title company feel more confident that there is no ‘hanky panky” going on. Land Trust is not illegal, they just won’t insure the title for new buyer/lender.

    I have been trying to find a title/escrow company that would handle land trust conveyances. I haven’t found any to date that are willing to insure transactions using the EHT documents and procedures. I wish it weren’t true… but as a licensee, since I’ve been told by title companies that they will not insure transactions where land trusts are used, I am compelled to tell potential clients that this very real problem exists.. and that title insurance may be very difficult to obtain (or impossible) until the property is deeded back to the original settlor. In the current economic environment, that poses huge risks to a potential RB who hopes to finance a purchase down the road. He/she may not be able to insure title without substantial extra costs and unanticipated risks.

    I’m hoping that Joe Cain will come up with a good answer for this. I have been discussing this with him and a very seasoned escrow officer in CA, who claims to have done lots of EHT trusts over the years. She also has been trying to find a solution for handling Oregon EHT conveyances the past 6 months or so- no success yet.

    I’ve close EHT transactions in the past, and hope to do more. Things have changed. In order to assure participants that title insurance can be obtained without inordinate added costs, risks, and uncertainty, we need this important title insurance matter cleared up.

    #27872
    Avatar of homesavers
    NULL
    Member

    @bmckee wrote:

    In Oregon, if you want to insure title for property held by a trustee using a land trust, you must “register” it as a business trust with the state of Oregon. where all beneficiaries are listed. This makes the title company feel more confident that there is no ‘hanky panky” going on. Land Trust is not illegal, they just won’t insure the title for new buyer/lender.

    This of course comes from the crooked investors out there. So I would suggest seeing if you can play their game but create an LLC as the beneficiary(consult an Attorney). Since this is a Business Trust it should be no problem. Do they think every single property in Oregon is owned by an air breathing, flesh and blood human being. No I don’t think so. If so there would be no builders in Oregon and no rich people buying homes in the that State.
    There is a loophole you just have to find it. Let us know what you find.

    #27873
    Avatar of socalgal
    socalgal
    Participant

    This of course comes from the crooked investors out there.

    It comes from parties who are trying to circumvent title seasoning requirements, which is just what NARS tries (tried) to do.

    #27874
    Avatar of homesavers
    NULL
    Member

    @SoCalGal wrote:

    It comes from parties who are trying to circumvent title seasoning requirements, which is just what NARS tries (tried) to do.

    I respectfully disagree with this statement. Why because circumvention implies fraud. All parties are fully aware of who is holding title at every step. That is why we have Title and Escrow companies and Attorneys in some states. So both parties will be kept accountable.

    NARS does not circumvent any lender’s underwriting requirement. Indeed it cannot otherwise it would not exist very long as a business.

    #27875
    Avatar of jerry carey
    jerry carey
    Member

    Scott Moyes … asked:

    Why would the Trust need to be terminated?

    I said:

    The lender would not want it conveyed back to the Settlor Beneficiaries … rather have the trust terminated (as said was done by Joe Cain)

    because Mr. Joe Cain said the following in the post titled “Lenders that don’t require Title seasoning” posted on Jan. 15, 2009 on thread page one:

    A buyer is located who wishes to purchase the property. In many cases, this buyer is the very same natural person or individual who was residing in the property and leasing it from the owner. An Offer is generated from buyer to owner (as seller), who passes it on to the beneficiaries of the Trust for review and possible approval. The NARS Beneficiary Agreement (one of the private Documents involved in the Settlor’s Trust) lists the entire process step-by-step. (As a NARS Network Member, you possess an example of this Doc and all the others that we use, and I encourage you to consider the possibility being educated and going back to the Docs and reading and studying.)

    If the Purchase Offer is accepted by the beneficiaries of the Trust, then they sign, in concert, a Letter of Direction instructing the Trustee to terminate the subject Trust, and of course, since this is a beneficiary-directed Trust, the Trustee will do exactly as instructed.

    Ready everybody, here comes another vital point:

    Once the Trust is terminated, there are no longer ANY beneficiaries in reality.

    I’m supposing that in the Trust’s Beneficiary Agreement and/or the Rider Agreement that the same terms which mandate that the Trustee disburse the escrow funding per the trust agreements can also be used to control the actions of the Sellers … former Settlor Beneficiaries!

    BMcKee said:

    I am compelled to tell potential clients that this very real problem exists.. and that title insurance may be very difficult to obtain (or impossible) until the property is deeded back to the original settlor …

    This is what I’m suggesting to solve Seller seasoning requirement and will resolve the title insurance issue, too :!:

    With regard to your concern about judgement creditors (lienors) grabbing the property … they had this opportunity all along … when the property was originally in the sellers individual names. They(sellers) have no equity position, are over-encumbered, and are not getting any of the sale proceeds :!: So what are said judgment lienors going to get :?: PLus in California anyway … these judgment creditors are required to file an “Abstract of Judgment” with county recorder, which can easily be found in the title search for the sale! Plus, the Sellers will hald the reconveyed title for about 30 seconds, until the consequtive sale deed is sequentially recorded! I really don’t think that the reconceyance to the sellers offers much if any threat to the property!

    Jerry Carey

    #27876
    Avatar of jerry carey
    jerry carey
    Member

    HomeSavers said:

    I respectfully disagree with this statement. Why because circumvention implies fraud.

    I think SoCalGal chose poor wording … meaning “satifying” title seasoning requirements, which does circumvent the issue!

    Jerry Carey

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