What Happens To The Deed?
Deed from a SUB-TO DEAL
The following is a hypothetical deal:
The seller has a home worth 150k and has a lien on it from a bank, with a balance of 133k. The interest rate and terms are good. PITI = 1,066.00 per month.
They are 1 month behind and want out. They have also asked for 1k in moving or “ u-haul” money.
Rents in the area are going for about $1,150 to $1,200 for rent for the same square footage home and same area.
I guess I want to ask for the best way to get this deal done. I have spoken to the seller twice and sense the motivation in his voice.
My idea was this:
Get the deed subject to existing financing. I have mentioned this to the seller and they said they would entertain this action.
I would then get the seller to put the home into a trust and transfer the http://www.ben.interest to my llc. Guidance in doing this would be appreciated!
After that I have several options. I should also state that the home is in a good area with no repairs needed.
I would have the 133k owed plus the 1k in moving money, 500.00 to set up the trust? And also, making up the back payment and then an additional payment until I sell. Total would be approx. $136,532. That leaves about $13,468 in equity and know for a fact the FMV is at least 150k. Have a friend that is an appraiser and also had a title company do a property profile on it for free!
Once this is done I can do 2 things:
l/o for 1,199.00 a month with a 12 month lease, and an option to renew for an additional 12 months. Price of 160,000 with 5,000 http://www.down.I would create about a $133.00 a month in positive cash flow and also get an upfront profit of $1,468.00.
5K – 3,532 = 1,468.00
Back end profit of $23,000- 155k thru refinancing – 132k owed = 23,000.
Total profit on deal is:
133x24 = 3,192.00 = monthy cash flow for 2 years
1,468.00 = upfront cash
23,000 on refinance by T/B/
TOTAL = 27,660.00!
Not too bad, if it goes that way.
The other way to do it, that I am considering is to do a seller finance as follows:
Seller financing and doing a wrap around mortgage to the buyer. The price would be 160,000 with 20,000 down and a note for 140,000. 20 years @ 8% with a 3 year bullet. The monthly payments to me would be 1,171.02 p and i.
I would then make over 16k up front.
A little monthly cash flow and some on the back end as well.
My question is this:
If I do the owc deal and the “ wrap” would I keep the deed in the trust or would the actual deed be transferred to the owner/occupant? I live in Nevada and I could just do a “ contract for deed” and I would keep the deed until the buyer refinances and pays off the existing lien, correct? In other words, a wrap around consists of the deed being transferred to the new owner and a “ contract” would allow the seller to keep the deed in their possession until the lien is paid off??? I always have a hard time with that as it is never explained right, or I am looking in the wrong place?? Lol!
Any help on the explanation of the deed, and who actual has it in their possession would be greatly appreciated and thanks in advance.
_________________
To your success,
Richard P. Belliveau[ Edited by MAKECENTSINC on Date 01/30/2005 ]
Lets see if I can understand the question.
1. So you buy the house subject to (Have the seller deed you the prop).
2.You have the deed and can do whatever you want with the prop because you are the owner.
3. You have several options.
A. You sell on a Lease Option (You keep the deed until the tenant/buyer exercises the option to buy).
B. Sell using a Contract For Deed(You keep the deed until the buyer pays you off).
C. Sell Wrap Around Mortgage( The buyer gets the deed secured by a mortgage that you record )
D. Keep the house and rent it out. (You have the deed)
Hope this helps. Peace!
[ Edited by theREIkid on Date 01/30/2005 ]
reikid, Thanks for the reply. So I am thinkinh correctly then in relation to the deed transfer?
If I wrapped the note, the deed would have to be transferred to the buyer, correct?
If I sold the home through a Contrat for Deed, then the deed remains in my name until the buyer refinances.
I guess I would like to know who would possibly want to do the wrap and lose the deed? Even though you have the cash flow from the note you created, it seems that it is a lot less risky selling with the contract and still having the cash flow, and like you stated, easier to get the owner out of the home, in case of a default.
Thanks again and anything you or anyone else could add, would be great. Have a great evening.
[addsig]
8-) Mike, Thanks for the reply. The 5k down on the 160k home, wold be the 3% of the non refundable down for the Lease option. If I was selling with the contract, I wold try to get 20k down, which is about 12.5%.
In lease options I try and not ask for more than 3 to 5% down, and that more than covers the upfront money we might have to pay the seller for U haul money, and/or to get the deed, and make up a payment or two.
Have a great night and the best to you.
[addsig]
i have used land trusts before and havent had problems with DOS. I know John Lock takes title without using trusts and has never had problems with the DOS, among many others on this board. its more of a preference thing. if you feel its necessary then do it. as long as the banks getting paid i dont DOS would be an issue.
as far as the beneficiary goes, the trust doc. is usually recorded with the previous owner as beneficiary. i doubt the bank is going to check that out. from what i know it is fully legal to deed a property into trust for estate planning purposes. as long as the trust is named with the sellers last name. for ex. say the owner is john doe. then name the trust the doe family trust. then the bank will think nothing has changed. we do it this way and then record our beneficial rights after we find a buyer and there loan is underwritten and as long as the attorneys are on board there isnt a problem.
hope this helps. talk to an attorney well versed in trusts and creative deals, for i am no attorney.[ Edited by ZinOrganization on Date 02/01/2005 ]