Short Sale Deal Almost Blew Up Cuz Of Land Trust

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Are you guys having any problems closing deals in a land trust when you buy? What is the alternative?



Just got my Short accepted and closed with a private lender today. This would of blew up in our face had we tried to do a simultaneous close.



Here was the problem:

Countrywide Did not like it that the property was in a trust even though the seller (orig home owner) had original Beneficial interest (we even faxed the beneficial interest form to them.)

They wanted the seller to sign and she had to be the one on title. We had to run all over town today to get the Trustee to sign a new Deed out of the (sellers last name) Residential Land Trust back to the original home owner and then she could sell directly to the Buyer. The buyer thank God is my partner and we lined up private funds to do the deal but if this had been a simultaneous closing We would of been cut out of the deal. It took 8 months to get approval, What are we to do next time, to keep the home in a trust? Please be specific in your answers.



FYI my attorney who does simultaneous closings said she does not like Trusts as they are a way of trying to deceive the Lender and could get us in trouble in the future. She recommends being paid out of the Hud as a Consulting Fee but then it would be disclosed to the Lender and I know that wont fly.

Comments(2)

  • spyboy25th August, 2006

    Short sales ARE Criteria driven, but, the criteria ( the servicing guidelines ) provide for exceptions. A very niche investing technique is creating exceptions.

    The most effective method I know of ( which is not for everyone as it requires a high level of expertise and a very specific knowledge base; took me two years of research and focused study ), but works for those who work it, is to find defects and/or deficiencies in the mortgage documentation, the servicing process, or in the chain of title. Then, you find the fact-specific Legal Liability. That is the tool used in negoiation. That is what "encourages" them to come to the table in earnest and get rid of the problem ( a potential law-suit, or possibly having to "repurchase" the loan or "substitute" the loan ).

    For any wishing to investigate this further, understand this, the production of the "Original Promissory Note" can be called for in a default / foreclosure situation ( by the homeowner ), and, if done properly, the foreclosure can be thrown into a tailspin for failure to produce it.

    What typically happens is that an "Affidavit of Lost Note" is brought forth in its place. I am familiar with many, many instances where such affidavits ( legal declarations stating some fact, under oath, or penalty of perjury ) were defective, for various reasons.

    Also understand that under the law there are many obligations posed upon various parties, as to the origination documentation ( disclosures, etc. ), and as to the loan servicing ( proper interest rate calculations/charges under the terms of the note, for example ). There are many others. Quite often these laws and regulations are not strictly complied with. That is a fact I can assure you of.

    Finding those defects and bringing them to the attention of the party responsible for making the determination of the short sale, is one way to make short sales happen, even when the homeowner does not meet the typical criteria.

    Thank you.
    SpyBoy

  • mtnwizard25th August, 2006

    What happened in the above case could have been avoided if the Seller had granted the Buyer a beneficial interest in the Trust, then directed the Trustee to sell.

    This is how I do it. Keep it simple. Place the property in a Simple Land Trust. Beneficiary appoints the Trustee and deeds him title. Seller grants Buyer a beneficiary interest in the trust. They then direct the Trustee to sell the property and distribute the proceeds as agreed. We have never had a question or problem from an escrow officer. The Trustee owns the property and the Trustee sells the property as in any other transaction.

    Simple, Cheap, Fast, No Seasoning, Full Disclosure, No Double Closings, No Purchase of an Option, Private, Quiet, No Risk, No Cost to Investor, etc, etc, etc.

    Good luck.

    [ Edited by mtnwizard on Date 08/25/2006 ]

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