OfflineRight now is the perfect time to be investing in real estate! Home prices are at an all time low, and the market is flooded with short sales and foreclosures just waiting for savvy investors to snatch them up. Unfortunately, if you have poor credit or no money to invest with than real estate investing can be scary. A good investing strategy for someone who has poor credit and no money is wholesaling. Wholesaling is where you find a property 30% to 50% below market, lock it up with a contract that states you can reassign the deal, find an end buyer and sell that contract for $5k, $10k, etc. Bingo! You just made $5k and you didn’t use a dime of your money, except maybe a small earnest deposit of at least $1. If you do 10 or more of these deals, soon you will be able to leverage your money to purchase your own property and start creating passive income. You’re on your way to being a millionaire! Right about now, you’re probably thinking to yourself “This is awesome!” Not so fast my friend. Regrettably, due to the banks owning all the homes this scenario is difficult to practice.
Banks employ people who have no clue how the real estate market works. After all, they’re in the business of loaning money, not property. As a result, you will find that the banks have “restrictions,” “guidelines,” and “regulations.” You can put an offer in on a house 25% below the fair market value (FMV) and they won’t accept it. So, the house sits on the market for another month or two. You decide to put in another offer 5 weeks later. You’re kind of ticked that they didn’t take your first offer, so you offer them even less. You offer 50% below FMV. Bingo! The bank has accepted your offer. About now you’re scratching your head because 5 weeks ago you were willing to pay 25% more for the property, but they wouldn’t accept it. Now they just lost 25% more money for themselves. Perplexing isn’t it? Don’t think to hard on this because they are clueless… plain and simple. Due to their cluelessness they don’t understand investors. So, when you go sign your paperwork with the intention of assigning your deal to another investor, don’t be surprised if the agent tells you, “No way! The bank will not accept an offer with “and/or assignee” on the title. No ifs, ands or buts!” You think, “Who cares who takes title as long as the bank receives their money?” Again, they’re clueless, but WE are SMART, SAVVY investors! We know how to break the bank’s “restrictions,” “guidelines,” and “regulations.” And the best part… it is ALL legal! So, how do you assign bank owned property? With a land trust, of course!
First, what is a land trust? A land trust is an agreement between two parties, the trustee and the beneficiary. The trustee agrees to hold ownership of a property for the benefit of the beneficiary. On title is the trustees’ name not the beneficiary. The beneficiary holds all the equity of the property. Investors (smart ones) who own multiple properties use a land trust to keep their personal information private. For example, your trustee takes title to a property you own, but you’re the beneficiary. That means if someone wanted to sue you and they looked for property you owned, they wouldn’t find any because it is under your trustee’s name. Most likely, the attorney would tell the suing individual there is nothing to sue for because on record it appears that you don’t own anything. So, how does the land trust work in wholesaling reo property?
When you make your offer, you are going to tell the agent that you are purchasing the property through a trust. Therefore, you want to take title as… Joe Sample, Trustee, exact vesting TBD at closing. Now the reason you need to add “exact vesting TBD at closing” is because you want to have time to sell (or assign) the beneficiary rights to another investor. If the agent asks you why you can’t determine vesting now, you tell them that you have several investing partners and depending on what you all decide to do with the property will determine which LLC or investor is going to take hold of the vesting. Once your offer is accepted, you immediately take pictures of the property, write an ad on CL saying something like “Wow! 50c on the dollar! Great cash flow property! Hurry before you miss out on the best deal in town!” You are also going to want to email all your buyers from your buyer list. When you find a buyer, you’re going to want to explain to them why you took title as a trustee. You want your fee upfront and a proof of funds letter immediately. You can’t wait around for a loan approval. Your buyer needs to have cash.
Now, you have two options. The first, and best option, is to call escrow and tell them that you and your partners have decided how you’re going to take vesting. Give escrow a copy of your end buyers proof of funds letter and his/her information. The escrow company will remove your name from the title. Now you can walk away (make sure you have your fee first) from the deal and the end buyer finishes the deal. What if the escrow company says, “No way, your name is on title as trustee, and if you want to finish this transaction it needs to stay on title”? This is where option number two comes into play. You still collect your fee from the end buyer, but you tell them that the bank will not allow you to put his/her name on title. So, you’re going to finish the transaction (with the buyer’s money) as trustee, but put his/her name as the beneficiary. After you close, you immediately deed the property to the buyer, thus dissolving the trust automatically. Option one is a much cleaner method.
About now, you’re probably thinking “Wow, great method, but what about putting money down”? Well, you’re going to have to at least put a few hundred (preferably not more than $500) earnest money down if the offer is accepted. The key to getting your offer accepted is telling the bank you’re paying CASH for the house through private funds. You can get a proof of funds letter from a hard money lender or coastal-funding.com allows you to do it online. Just remember to have the amount you’re offering exactly the same on your proof of funds letter. You don’t want to offer $60k for a house, but on your proof of funds letter it says you are approved for $70k. The bank will definitely come back asking for more money if they can get it.
I am going to tell you right now that only a few, and I mean a few, lawyers know about land trusts. In California, I found one! That’s right one attorney! So, if you go to your attorney and they start giving you a bunch of nonsense (one told me I needed a probate attorney and that I should think of using LLC’s) then you need to be forceful and tell them to research an Illinois Land Trust. I've attached a copy of a land trust. You might want to have your attorney look at it.
Happy Investing!
KimmyJ
“Commit to the LORD whatever you do, and your plans will succeed.” Prov.16:3
Hello everyone, just wondering if a land trust is legal in all 50 states,what is meant by loss of benefits in LA. and TN. subject to?I am interested in finding out because this seems not only as a good way around banks not accepting assignments but a way to keep your investing private, as well as not paying 2 pts. plus $595 processing when using a POF letter through Coastal Funding.(I see the value of the Coastal route when options are limited as long as the ROI is there.)A land trust seems like a great option.
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I advise you to talk to an attorney, who handles numerous real estate transactions, in your State to find out whether a Land Trust holds value or are not. I've found out in consulting with an attorney today that a Land Trust has no value in Georgia compare to states like Illinois, Florida and other such places that recognize a LT. I also learned in my conversation with him that Fannie Mae and Freddie Mac DO NOT have seasoning restrictions but FHA does. You won't be able to assign a contract if your buyer is using a bank. The bank will not fund the loan if there's a Assign fee on the HUD-1. I learn this also today. Because in Georgia, alot of the fraud was committed using that strategy. You can assign a contract if your buyer is paying All Cash or using a HML/private money. Lenders will not go for it.
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Hi Kimmie,
Thanks for all the great information. Have you done a successful deal yet? I am in San Jose, CA and looking to wholesale REOs using Land Trusts. Please put me in touch with an attorney who is familiar with Land Trusts.
Thank you,
Anna
First off let me just say what a great community this is, I just wished I started sooner.
Hey, my name's Chris, I just finished reading both of Dean's books quite recently, and I can't wait to get started, I'm ecstatic! When I found this post, I was even more excited and ready to get out there and start making offers on props!!! Thank you Kim for this wonderful information. It's crystal clear to me except for one thing. The POF letters provided by websites such as coastal funding or real estate day funding aren't going to cost me anything during closing right? They will charge me only if I use their money to buy the property, but because I'll be assigning the contract to my buyer and they're going to be using their money, and these websites won't have any records of my deals right?
Life is like a painting, we make mistakes but we go over it and stay focused on the bigger and overall picture.
Okay, I undertand reo wholesaling with land trust.
i have a question.
I found the end buyer, I am, the investor as trustee in the contract.
Now end buyer is asking me how i will take title if he gives me the money to close?
Basically, do i need to close as 123 main street, trust, myname Trustee. Or the C buyer as trustee? Or me close first and then Quit claim it to him whatever he wants to be??
Important, He is not sure or not trusting me to Wire his money if the paperwork is correct. Guys, you have to undertand these C or end buyer. We investors make it seem simple But the other parties are Confused, and not trusting, especially to release their money..
Help, Reply
Just read the whole tread and I think its great for going around and/ or assigns that the bank wont accept. Thank you kimmyJ and everyone that has contribute with questions we are all learning as we go.
Stop thinking just DO IT!
I see this thread start back in March 2009.
Does this concept still work or have the banks gotten wise to it, too, and changed their policies again?
Karen
"You're never too old to be what you were meant to be!"
www.deangraziosi.com/real-estate-forums/investing-journals/59128/day-for...
"Shining Like a Star & Dancing on Sunshine"
"Shoot for the moon! Even if you fall short, you'll still land among the stars!"
More and more banks are becoming wise and it's the bad investors that are ruining it for the one's that are doing it ethically and right. Unfortunately, banks will not accept as trustee any more. If they accept your offer they will send an addendum without the as trustee and just your name.
Also, I am seeing more banks and agents giving first dibs to individuals and not LLCs or corporations (unless they are have done business and can show they performed, but still banks have the last say). So what is our new strategy in the desert? Using my desert partner's name (I am a real estate agent so we leave my name off the offer)and then when we are in escrow we tell the escrow officer that we want to change how we are taking title because we want it in a land trust (title holding trust for CA). This doesn't seem to be a problem because we are still the ones closing on the house.
In addition, the agents seem to like working with an individual than an LLC because too many of them have been burned by bad investors.
Good luck...
"we tell the escrow officer that we want to change how we are taking title because we want it in a land trust (title holding trust for CA)."
Kimmy....is the land trust document you provided at the beginning of the post the same as a title holding trust in CA? Is it the same animal with a different name or is a title holding trust in CA different from a traditional land trust altogether?
Thanks
Same thing except change the title to Title Holding Trust.
Thanks kimmy for all this great information, this a great way in buying and assigning properties without having to use the and or assign and another way to assign a property when the and or assign cannot be used. I will keep this one on my list when working with reo properties and now know of a way to pass them on to my buyers as they come in. I have also booked marked this so I can find it again if I have any questions along the way and can re read it or ask questions if needed. Once again thanks for such great info.
ba
Here is a better description of how to do this than the one I posted...this is much more detailed. Even though this is from a few years ago it still pertains to today's market...
Well Kimmy apparently, I am not a savvy enough investor.
I was looking at a house that had been vacated for over a year and that appeared to be in good condition. A small 4 bdrm. house that was appraised at about $260,000 in a 400 plus neighborhood. But in my quest, I was unable to contact the benificiary to "even" discuss the possibility of selling.
I became so near sighted about wanting to make this purchase happen, I eventually gave up because it became to discouraging. I guess I dont no anything about ( Land Trust's.) But the house is still vacant. How would you recommend I go about, finding the Benificiary to discuss the possibility of buying this house ?
Are you talking about a property that is owned by a trust? You need to contact the TRUSTEE directly as they technically handle everything for the beneficiaries. If you can find the TRUSTEE (contact info should be recorded in public record), (sometimes a trust is done without ever being recorded at all though). That is your only way to the beneficiaries. Land trusts give privacy to the owners. Another way is to check the county records to see if there is a trust deed against the property and see whose name is on the deed of trust or trust deed (depending upon your state)(shows evidence of a mortgage). SOMETIMES, but not always, this is the actual beneficiary (unless someone bought it subject to existing financing).
Only real thing to do is contact the trustee if you are interested in buying the property.
Kim, I hope you don't mind me answering, I know you're not on here as often anymore. But, does this technique still work with the banks or have they caught on? I heard (I think it was from you) about 9 months ago the banks were getting weary of trusts as well).
Only real thing to do is contact the trustee if you are interested in buying the property.
Kim, I hope you don't mind me answering, I know you're not on here as often anymore. But, does this technique still work with the banks or have they caught on? I heard (I think it was from you) about 9 months ago the banks were getting weary of trusts as well).
Tammy
I believe you are meaning to say "Deed Of Trust" not "Trust Deed", very different things. The "Trust Deed" is the deed on the property whereas the "Deed Of Trust" is a mortgage. As far as I know those titles are universal in all 50 states.
"Do something you LOVE and you will never work another day in your life."
"Nothing can ever stop you without your permission."
"So long as you haven't quit, then you haven't lost."
I have to update this post again. LOL I'm doubting myself and confusing myself and I know I know this stuff, but its not the easiest to understand. LOL
Steve, Deed of Trust isn't the actual mortgage, but shows there is a mortgage against the property; it lays out the players in the mortgage and the amounts, and the note shows the terms of the mortgage. Deeds of Trust are also known as trust deeds, NOT to be confused with a trust or a land trust or regular deeds.
(I know, this is as clear as mud, but I'm trying to make it less complicated with this post)
And the deed is the recorded document showing ownership; here in CA we use grant deeds; other states use warranty deeds. There are also quit claim deeds and other types of deeds for special circumstances; they show ownership.
Sorry for the confusion.
I understand the purpose of the trust is to give the end buyer some security until the property is deeded over. I was trying to find info on the quit claim deed as I am thinking that I could just meet my buyer at closing and after we use his/her money to close and I add him/her to title as buyer then we could just go to an attorney together and do the quit claim deed and be done. That way my buyer doesn't have to trust me to make that happen.
I don't know just what is involved with the QCD but if it is something I could fill out and sign at closing with my buyer and send it to county records (giving the buyer a copy of course).
Sorry for my ignorance of something so basic as this but I don't know how to even file a QCD and if it's very simple to do "on the spot" we don't even need the trust created at all. Also while we are both on title my buyer has half ownership of the property until it is deeded over so they do have some security.
Is an attorney needed to handle the QCD?
Has anyone done this before or had buyers not wanting to do the deal do to lack of security/assurance that they will get the property deeded over?
OK, too many questions, I know, I will end this now.
Thanks for posting this Kimmy.
"Do something you LOVE and you will never work another day in your life."
"Nothing can ever stop you without your permission."
"So long as you haven't quit, then you haven't lost."
my properties with a QCD w/o using a lawyer. You can often times find a copy of the ones your state uses online and fill in the information;BUT it is important to put all the information in it thoroughly and correctly.
Technically, all you need to do is resign as the trustee. They can then record a new trustee themselves and keep the property in the trust, but just record the new trustee with the county.
The purpose of the trust for wholesaling is to put it under contract w/o the and/or assigns clause; primarily needed when dealing with banks and REOs.
Often times, you won't even need to create a trust as you will give the name of the buyer to escrow for recording and the sale will be recorded in their name.
IF they don't allow you to record in a different way, the recording with still be Jack Black, trustee of the ABC 123 Trust OR ABC 123 Trust, Jack Black acting as trustee; in which case you'll need to draw up a temporary trust. In this trust, you designate a beneficiary, which will be your end buyer; and the trustee(you); which, if escrow didn't allow you to change the original purchaser on the contract to the TBD name, will use as the new owner of the property. (the end buyer)(this is just a VERY BASIC overview of a trust).
YOU will be the trustee (the one who REPRESENTS and SIGNS FOR the beneficiary(ies)) at closing; HOWEVER, it is very easy to resign as the trustee once the document is recorded. It is then up to the BENEFICIARY (your end buyer) to designate a new trustee within 2 weeks and record such with the county. It is the beneficiary's responsibility to assign a new trustee to their trust. The resignation IS recorded with the county; I can send that document to you if you want a copy of it. If the trust does not have a trustee, it is not a viable entity, and dissolves.
The QCD is used if you, as the trustee, want to just deed over the property to the beneficiary (the end buyer) in their name and remove the trust altogether and this will also remove the trust.
Thanks DG Family!!
It's been a long time since I've been on the site... but I still kept you all in mind and KNEW big things were happening for you guys. And although it's been a while, I still retained MOST of the information I learned here. (including Land Trusts) It's a good thing I read again, because I didn't know the banks were on to this method of assigning. I'll be reading again to cement this new info, but I just wanted to tell you guys "It's great to be back!!"
I'm probably going to use transactional funding for a lot of REO's just to avoid this whole mess by simply doing a double close. I would rather save that money in fees but at least my offers should get accepted.
In fact I thought perhaps I could use that as a bit of leverage, once building a rapport with a banker after a few deals together. I could explain that any money I could save in costs by avoiding a double close, including lender fees, I could add to my purchase price to them. So if I could just assign my contract to my buyer I could afford to offer more on the property while maintaining the same sell price (B to C) and same profit for me. Probably wouldn't be very persuasive, but I thought it might be worth a try.
Steve
"Do something you LOVE and you will never work another day in your life."
"Nothing can ever stop you without your permission."
"So long as you haven't quit, then you haven't lost."
Let us know how it goes...
Land trust's will work now in this economy for some investors...
This is exactly how to do it. If anyone is wondering how to do it in California. You always seem to post good info. You could also tell the bank that earnest money will be deposited after a 7-10 day inspection. This will give you an opportunity to get your end buyers EM before you have to submit your own funds to the bank. Good info.
To get something you've NEVER HAD
DO something you've NEVER DONE.
Can anybody help me to get the documents for the land Trust transaction and the Quit claim I been looking for them on the DG site but I can't find 'em
Land Trust documents will be obtained in your state. Putting these contracts on this site would be unwise. The reason that you will need to get the Trust documents from your state is because each state deals with Trusts differently.
The normal Trust documents that you will looking for are:
- Trust Deed or Deed in Trust - This give control to you trustee to own the property.
- Trust agreement - this manages how much control the trustee has.
- Beneficiary agreement - If there are more than one beneficiary it manages their affairs.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
This is awesome. I'm just getting started and I am going with wholesaling right now to build capital to start holding and this has just opened up a new avenue for me. I wanted to deal with the banks to get property cheaper and thought I would have to wait a while, but now I'm going to start calling to put in offers.
Positively,
everything works out.
Ricky T. Hatley
Will this "trust" option work with Fannie, Freddie and/or Hud properties?
The answer is yes. Trusts can hide and create anonymity even with the government companies. They may, however, ask for ownership of the trusts. They way want to know who owns the trust and who is closing. Even if they did ask for who owns the trust when an offer is made they would also need to follow up at closing asking for ownership again.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Hi Kimmy and everyone else,
trying to get a hold on this Trust execution for wholesaling. Carol's method that has been talked about recently on IE has drawn me into a spiral of forum confusion. Everyone seems to have a different way of going about wholesaling with a trust; who is the trustee? who is the beneficiary? In this thread Kimmy says that you are the trustee (option 2), and your end buyer is the beneficiary and you close as such with the end buyers funds, as does carol. But carol says that you must sign a assignment of beneficial interest form before transferring your beneficial interest in the property. That doesn't make sense to me though. The trustee wouldn't have beneficial interest in the property right? only the beneficiaries have beneficial interest. the trustee just acts on the behalf of the beneficiary. so if you are trustee, then what are you assigning? Wouldn't it make more sense for you to be the beneficiary, have someone on your team as trustee (either a close friend or partner), and then once you find your end buyer, you can assign your beneficial interest to them? and step down as trustee? wouldn't it raise red flags to the bank if they ask who all the owners are and you don't have your end buyer yet (i've had this happen already, the bank wanted to know everything about the trust i was making the offer under, trust name, all owners, person w signing authority, tax id number-not sure about that either if it all applies to trusts)? This potentially the best and most cost effective way to wholesale an REO but i just want to make sure I'm doing everything ethically and legally. I'll be calling the advisory line again soon to chat up the coaches on this, but please if anyone can shed a little more light that would be greatly appreciated
ps. attempting to wholesale in Southern NJ
-Pete