I have a question? Would it be necessary to place the deed that I acquire buying a preforeclosure into a land trust to avoid the lenders due on sale clause? And if so, how much does it cost to do a land trust? Also, if I didn?t use a land trust then would I just hold the deed and not record it until I have found a buyer for the property? Thanks for your response.
There is never a necessity for a land trust. The idea that you need a land trust to avoid the lenders due on sale clause is more a pitch to sell land trusts, than truth.
You shouldn?t worry too much about recording the deed. With thousands of deeds being recorded daily it is unlikely the lender will find out about your purchase and force the due on sale clause. Even if they do, they still have to foreclose which, depending on the state, will still give you months to sell or refinance.
Some investors send money orders so that the name on the check doesn?t send a red flag - given the number of payments most large lenders process it is highly unlikely anyone is paying that much attention.
There are certainly fans of land trusts among foreclosure investors, though primarily for asset protection in the case of a lawsuit. What degree of protection this ultimately offers seems to us to be an open question. You should of course consult an attorney regarding your specific needs.
I’d like to find out, once a foreclosure process has been initiated by a lender for a property that was quitclaimed into a “Landtrust” (note: loan was in individual name), what happens or how does the trust protect the owner.
More importantly, if the foreclosure process is started under the individual names (even though in landtrust), what recourse does the owner have in terms of getting this to be reversed to the trust as opposed to the individual name. Your help will be appreciated.
No recourse. Transfers after the fact have no bearing on the lender, those transaction will all be wiped out by the foreclosure. ? Foreclosure is actually a pretty cool mechanism in that respect. If lenders had to worry about what happened after they made the loan, they either a)wouldn’t lend, or b)require you get their approval for any new loan, title change, etc. you wanted to make. So by simply saying that nothing that comes after the loan will impact the loan (with a couple of exceptions like property taxes), this problem is completely resolved. Lenders can lend without having to worry about the borrowers future decisions, and borrowers have the freedom to take on additional loans, change title, etc.
Hello, I’d like to find out if a lender does not follow proper collection procedures such as filing foreclosure proceeding 45 days after late payment, Can I request judge to dismiss case based on technicality especially that I did and have proof of letter sent to lender’s attorney stating I wanted to give the property back (deed in lieu) before they filed the case. Your help would be appreciated.
Lenders aren’t required to accept properties deed-in-lieu, and in fact deed-in-lieu presents significant risks to lenders vs. foreclosure. The reason is that foreclosure typically wipes out junior liens, whereas the lender would have to pay those if accepting a deed-in-lieu. ? You didnt tell me your state, but in CA, a lender can file for foreclosure 5 minutes after you are in “default”. And by default I mean any failure to perform as agreed under the deed of trust… so it could be for as little as missing one payment. In practice most lenders don’t start the foreclosure until much later, but I’m not aware of anything that says they can’t start it immediately upon default. ? Also, my experience is that judges are unlikely to unwind a foreclosure based on a minor technicality, and in fact, CA Civil Code 2924 outlines a number of technicalities that can not be deemed sufficient to unwind a sale otherwise made in good faith. ? All that said, I’m not an attorney, and it may be worth your time to have an attorney review the specifics of your loan and the events surrounding the foreclosure based on the laws in your state. ? Sorry I didn’t have better news for you.
MY EARLIER QUESTION IS BASED ON THE STATE OF FLORIDA, WHERE LENDERS ARE TO FILE THREE MONTHS. ANY HELP ON THE QUESTION WOULD BE APPRECIATED.
Sean or Michele, regarding comment posted by support on 4/15/2008 on land trust question thread, how do you record the deed when you are buying subject to an exisitng lien? Can you get title insurance as part of escrow when the lien with a due on sale clause is not paid off as part of escrow, but instead brought current by the buyer? Thanks.
Hi, You can purchase a property legally and with title insurance subject to the existing loans. The title company would include verbage in your escrow instructions and there would be a rider to your owners policy since a lender could accelerate the terms of the loan under the due on sale clause. We do not see many “subject to” transactions because most homes have substantial negative equity but they can be done.
Thanks. So the subject to loan with the due on sale clause is just brought current through escrow proceeds?
Also, in this type of transaction does the buyer have to financially qualify with anyone as part of escrow with regard to buying subject to an existing loan?
The buyer would not have to qualify since you are not formally assuming the loan or getting a new loan. The risk to the buyer is that if the lender decides to accelerate the loan which would make the entire amount due and payable and the buyer did not have the ability to pay or qualify for a new loan then the lender could foreclose on the property. The risk to the seller is that even though they are selling the house and transferring the title the loan is still in their name. If the buyer fails to make the payments that will negatively affect the sellers credit since the loan is still in their name. This is a risky transaction on the part of both the seller and the buyer.
Land Trust are great you should never never ever put the property in your name. If you don’t use a Land Trust at least use a LLC I have been setting up IRA LLC’s for my foreclosure investors awesome tax free investing No withholding fees to Calif. Best of all the LLC fee is $100 or less per year. Cash Buyers Visit my website www.ContraCostaProperty.net Buy in Alameda and Contra Costa If you call me try calling after 2pm 925-766-7713 Kevin Roberts
I too am wondering on this tactic. What companies offer this ? Websites or referrals please!