I'd Just Like To Share This With Everyone Fearing The DOS Clause.
I recently went to a title company and spoke to the head closer/owner with 26 years experience with this company and picked her brains over the subject-to method. Because I read and re-read John's manual and a few others, I could speak with her on a very impressive level, so she said. She claimed 2 investors walked in recently with very little knowledge of this method and never heard from them again, but was rather impressed with what I had learned. She said contact her anytime. Indeed I will!
Most of the topics were state specific but THIS was the one thing she said to me that helped reassure myself. The due on sales clause can be invoked IF a flag is thrown. Many lenders IF they find out title has transfered, will most likely want to shuffle papers hoping the problem will go away, thus delaying any potential foreclosure process. She also said your best method of defense was to indeed get a loan servicing company to send in the payments, and keep them current. Keep EVERYTHING current. She said usually people get caught when taxes aren't current, or anything falls behind for that matter. Afterall, LSC are what lenders use.
I asked her if she new any lenders that don't use seasoning requirements and she laughed. She said, IF a loan is due, you still have a very good chance of obtaining a new loan to place on the property. She stated that over 60% of loans that she sees come through her office are approved ranging with only a few months up until the full year of owner seasoning requirement. The lenders don't just nessesarily care that you own the property under 12 months. What they care about is "has anything bad, suspicius, or fraudulant happen within the last 12 months, both under your ownership or from the previous owners. So check the title and make sure it's clean. So from what I was told, don't count yourself out even IF the loan is called. And if there is a transfer tax in your county, you will pay it (you or seller) when getting the deed from the seller and pay (usually seller) when your tenent/buyers complete their purchase and grant another deed. Do not mess with this because the government can and most likely will constitute that as fraud.
I would recommend taking a trip to a local title company. You can learn a lot and they also gave me blank forms specific to my state. Very good source of information in addition to John's manual, the sub2 site, and here at TCI.
Mike
Mike,
Very glad to see your post. This was a concern that I had also. These postings help us newbies to get out there and get going. Anything else that you can share with us would be greatly appreciated.
Thanks
Housebyr
There won't be any transfer tax owed if you put title into a land trust and assign the beneficial interest to you.
Tom
I had asked about the land trust also. I was told that since you are still creating a deed to the property, you could still be subject to the transfer tax. If you record the land trust when you record the deed, that information still becomes public record. I'm not 100% sure on this but IF you record a deed and record a land trust with you as the trustee or benificiary, you will still show you have taken title through the deed you created with the seller, not nessesarily the land trust. I'm not totally sure about the land trust just yet, but I was explained that the loan servicing company would provide a better method of protecting yourself vs a land trust to avoid the DOS clause. I'm learning myself and trying to put the pieces together just like everyone else. If anyone has any info to contribute, please feel free.
Tom,
Are you familiar with subject-to investing in Michigan? Also, are you knowledgable in land trust? If you are and you wouldn't mind, I'd like to send you some emails (questions) in regards to the specifics of Michigan.
My email is **Please See My Profile**
Mike
Mike, You don't record the land trust docs. The only thing that is recorded is the warranty deed to trustee. Deeding a property into a land trust is tax exempt. Now technically once they sign their beneficial interests over to you then a sale has happened and transfer tax should be paid. But who will know the transfer has occured. No one because the assignment and trust docs are all kept in your file cabinet. They are not recorded. I would recommend Bronchick land trust course if you decide to go this way.
Tom
Yes, I was looking over his land trust forms as well. Thanks for your input