A way to sell your home

[jeb]

With home sale prices so low in many parts of the country, this may not help many but for some it might be something to think about.

In virtually all home loan papers is a "due on sale" clause - meaning, if you sell the home, the full amount of the loan is due at that time.

There is a completely legal way to get around this, however.

It is called a "Land Trust".

In short, you put the home in a land trust and then you sell THE TRUST, NOT THE HOME. The home just happens to be what is in the trust. (The bank can not prevent you from putting the home in a trust. However, since loan companies hold the title of autos, etc, you may need them to release the title to put it in the name of the trust or own the vehicle outright.

Trust are a FEDERAL document and come under their own Federal laws. Rich people have been using them for years to get around all kinds of taxes, etc. and for protection of other assets. (Ever seen when a rich person/star dies, they say, "It is estimated that . . ." they are worth XXXX? That is because they can not find the assets that these people own.)

As an example, you own a car, someone kills a person with the car - you, kids, etc - and you get sued. You could - and many have - lose everything you own - home, cash, other assets.

If the car was in its own Personal Property Trust, the only thing they could get is the car itself - your other property is protected. This comes about because the owner (beneficiary) of the trust is not public record. The trustee is the front man for the trust and if set up properly it is virtually impossible to break a trust - hold the beneficiary responsible.

Ideally, you put everything you own - bank accounts, cars, home, boat, etc - into its OWN TRUST, not all in one trust which is what most Attorneys that don't understand trust do.

If you do this and a sharp Attorney does a search of you assets, they find that you own nothing - no bank/savings account, no cars/boats/etc, no home/other real estate - - nothing. Attorneys - normally - do not sue people that have no assets.

In the above - your house in a trust - the trust makes the payments so you can sell the trust and the the new owner makes the payments through the trust. The bank is not even aware that the sale has taken place.

This means that you can now get creative in selling your home - lease/rent to own, let them take over payments - all kinds of things that get you out from under the payments. (How about getting a down payment and they take over the payments?)

As I say, this might not help some but maybe something to take a look at.

Be advise, MOST Attorneys have no idea how or why trust work or how to set them up for maximum benefit and MOST pure trust Attorneys are expensive. There are alternatives, however, so shop around.

As I stated, this may not be of help to many here because of the cash flow problems we have but something to think about this for the future. - jb

[HHM]

Well, in the BK process, most transfers to trusts are avoidable transfers, so it is not a tool for protecting assets going into a BK.

Also, as a practical matter (putting all other issues aside which are too lengthy to go into here), who is really going to BUY the trust. The average buyer wants to buy the real estate, not some entity.

[jeb]

Ah, H, they are buying the real estate.

When you place the real estate into the trust, the TITLE of the real estate now shows the trust as the owner.

Just as you buy a box of salt and it contains salt, when you purchase the turst you buy what is in the trust - in this case, the real estate located at 123 Main Street.

Certainly, using a trust and then going into BK would solve little but if the only reason someone is filing BK is because they can't sell their home, a trust can make it much easier to sell as the payments can be assumed with no pre-payment of loan.

In many parts of the country, homes are not selling for virtually any price - and now a large down payment is required to get a new loan. Being able to sell your home/trust with no down payment and no qualifying for a loan gives one a big advantage over others trying to sell.

This is also a way that, after a BK, one can buy a home - have the seller put the home in a trust and take over the payments. All the paperwork is done at the closing - seller putting home in trust, buyer buys the trust. MANY sellers would love for you to do that right now. - jb

[StartingOver08]

Yes, JEB this is a good method to market your home. But the only thing to consider is to make sure that the single asset trust has a name that is innocuous (like your example: 123 Main Street); and that you transfer title into the trust a long time before you sell it. Then you want to claim homestead in the allowable timeframe. The best time to set this up is right after you purchase the property - long before you plan to sell it. What you are really selling is the beneficiary interest in the trust - you want to have an attorney that knows what they are doing to set up the trust. I think this is a good way to market your property in todays market. I am sure there are some difficulties with this type of transaction - because there are difficulties with all types of transactions! It is a matter of setting the trust up right in the beginning.

[HHM]

Still, the average buyer is not going to want to do this (look at it this way, if this were that great, everyone would be doing it), and it still is true, in many mortgage agreements ANY TRANSFER counts to trigger the acceleration, most mortgage agreements I have seen are not so naive to simply have a due on sale clause.

[jeb]

Startingover, you are correct - except for the long term part.

Everything can - and is being done every day - AT the closing.

The trust is created with the present owner of the property as Benefactor. The title to the home is then transferred into the trust - one part. The trust is then sold to the buyer and the turst now shows the new buyer as benefactor. Clean, simple IF you have people that know what they are doing.

And HHM, the reason this has not been done much in the past is because virtually no one knew that it could be done - just the Attorney's for the rich and famous.

In the last few years, many more 'mainstream' people have been finding out about how to use a turst - virtually every investor in the country is now purchasing their properties this way.

As for "ANY TRANSFER counts to trigger the acceleration", your are correct - except NO bank in the country has ever challenged this in court.

There is a reason for this -

First, the bank is not even aware of the transfer of the trust from one person (or Corp, LLC, whatever) to the other.

Second, a turst is under FEDERAL law that came to us from England and has been used there for hundreds of years. The laws under trust are very specific that they are there for the protection of the privacy of the benefactor.

The benefactor of a trust is NOT public record therefore, when one transfers the trust from one to another there is no public record - no new title, nothing except changing the Benefactor of the trust.

So the bank never is aware that a sale has taken place - and, in the cases in which they have become aware, there has never been a case of a bank taking it to court to enforce the acceleration.

From what I have been told, they are afraid to set a precedent if they lose and with the trust law being so tight they have not taken that chance.

As stated, this is NOT for those going into BK unless the lack of a sale of their home is the reason for the BK. It just gives someone an edge to sell their home.

As for who would buy a home this way, I did - and I would never even consider buying one any other way again.

And since it requires NO LOAN APPROVAL, it is the only way to buy a home AFTER BK - jb

[HHM]

LOL, why is this sounding more and more like this is coming from one of those websites that claim income tax is unconstitutional

jb, this is obviously not coming from you, please cite your source.

And since it requires NO LOAN APPROVAL, it is the only way to buy a home AFTER BK - jb

That is pretty much a FALSE overstatement.

I understand the concept, these "trusts" are generally used to maintain privacy, but they tend to be set up at the time of purchase, but you are correct, anyone can quitclaim their interest in the property to a Trust Entity. Keep in mind, the buyer is only buying such interest in the real estate as is quitclaimed. However, there is actually some risk for the seller, because the loan doesn't actually change hands... (as you said, the real estate goes into the trust, the lender is never notified, and it is the trust that is sold, the individual seller is still liable on the mortgage) the buyer simply agrees to assume the mortgage payments as part of the purchase agreement for the Trust...the problem is, if the buyer defaults to the seller, the seller is hosed vis-a-vis the mortgage lender. The seller gets the foreclosure noted on their credit report and is liable for any deficiency, the buyer is only out a home which they haven't really paid very much for (not a big loss), and the seller only has a breach of contract claim against the buyer for which they will have to sue.

Believe me, If I could find some sucker to sell me a Land Trust where I only have to assume the mortgage payments, I would essentially get a free house for a year or so

[jeb]

LOL, why is this sounding more and more like this is coming from one of those websites that claim income tax is unconstitutional

jb, this is obviously not coming from you, please cite your source.

Now, play nice, H.

This is, in fact, coming from me - at least what I have learned about trust over the last several years, from many sources.

Ref the rest of your post, we seem to be talking about apples and oranges.

The apples are trust - some 30 or so different types used in different situations - how to use them and the advantages of doing so. The Land Trust is what the subject is here.

Now, the oranges are how to protect yourself IF you sell your home in what use to be a somewhat "normal" way of doing so - having someone take over the payments.

I use the term "normal" because for many, many years you could do so - without having any problems with the lender.

Then, one of those fine, upstanding lenders saw that, since a typical amortization schedule on a multi-year loan had the interest loaded to the first few years of the loan, they were losing billions of dollars.

It is not untypical that the first payment you make on a new loan will be almost 99% interest - the older the loan, the less the amount of interest paid until the last payment - which is almost no interest.

With loans being assumed, the bank was getting less interest than if the people buying had to get a new loan - i.e., the "due on sale" and, later, the "any transfer of interest" inserted into new contracts.

And your fine, upstanding "buy my vote" boys and girls in DC said not a word. (Really? I know, hard to believe they would let big business stick it to the people.)

This has been the law of the land, so to speak - until the coming about of more people having access to land trust, and the virtually iron clad FEDERAL laws under which trust are ruled.

Legally, could a lender enforce their "any transfer of interest" clause of a home in a trust that is sold? Well, they could try - IF they, in fact, knew of the transfer. (Remember, there is NO escrow, no title change, no public record that there has been a change in ownership. Trust have been a part of the laws of the land well before we became a country - widely used in Europe for hundreds of years.)

At this point in time, lenders have not tried to enforce the clause - the thinking of most in the know is that they are not sure that they could win the suite, and a loss would open the flood gates and tie their hands.

As to the oranges -

People and investors that own the home typical sell it in one of four ways -

1- seller pays cash - VERY rare.
2- sold on a lease/option - buyer leases the home with an options to buy, usually with a part of the monthly payment going toward the later purchase.
3- rent to own - in use more and more these days - where the renter has a part of the monthly payment go towards a purchase at a later date.

Both of 2 and 3 may have the final purchase price fixed at the time of the lease/rent to own contract.

In the case where there is a loan on the home, there would be one more option - 4- seller takes out a new loan and pays off the existing loan of the seller.

In all 4 there is NO transfer of title UNTIL the purchase is exercised and the purchase is completed.

Now, how does it work with a sale of a land trust?

The exact same way.

And what protections do the seller have?

The exact same ones they would have in any of the above.

As for the "dangers" of selling either in or out of a trust, nothing is different, the seller is going to do the exact same thing - qualify the buyer, maybe get X amount up front and stage the payments in a manner that protects them.

And they have exactly the same recourse's if the buyer defaults - foreclosure, eviction, etc., depending upon where and how the deal is structured.

Is this a real pain? Can be - but if your house is what is pushing you into BK, this is another option you have which many do not know about.

As for your -

That is pretty much a FALSE overstatement.

where you go on about the seller still being on the loan, you are absolutely correct - in a trust or not.

But is it dangerous, as you seem to want to imply? Absolutely not.

And as for your -

Believe me, If I could find some sucker to sell me a Land Trust where I only have to assume the mortgage payments, I would essentially get a free house for a year or so

How many do you want to purchase in the next 12 months - I know one gentleman that purchased - and resold some - over 120 in this manner in 2008.

Peace. - jb