Archive for the 'Seller Financing' Category
‘Seller Financing on Steroids’ - Published in the Pasadena Independent & the Arcadia, Monrovia and Sierra Madre Weekly
July 2nd, 2009 categories: Land Trusts, Seller Financing, Thursday Weeklies
Does seller financing give you the willies? There are usually a couple of reasons the average seller (or even real estate professional) is uncomfortable when it comes to seller financing.
In fact, many react as if the concept is not only marginal, but borderline illegal.
I’m always a bit confused by this, as seller financing has been around for many decades, long before MBSs, CDOs and TARPs, and in some areas of the United States, it’s an important backbone for the real estate market.
But in fairness, let’s address the biggest fear circling around in a seller’s head:
“What happens if the buyer defaults and I have to foreclose? I just can’t tolerate even the remote possibility that I would have to foreclose on someone.”
A large down payment and good underwriting will massively reduce the statistical likelihood of default, but won’t entirely erase it.
But seller financing, especially in this market, and especially in the jumbo arena (houses worth $700,000 and above), can be such a powerful strategy for selling quickly and easily for top dollar, that it’s a shame we can’t do something about this little foreclosure nuisance.
I mean, wouldn’t it be great if we could get all the benefits of seller financing without some of the risks?
This is where I pull out my syringe (I still have my RN license, so don’t worry that there’s a junkie hitting the press) and fill it chuck full of steroids . . .
not so I’ll get large muscles, but so I can pump the seller financing model: the Title Holding Trust.
The Title-Holding (Land) Trust is accepted throughout the United States, and may arguably be the best possible means of real property asset protection and/or transferring real estate.
That’s why I like to call it Seller Financing on Steroids. It could also be called Lease Option on Steroids because of the added protections and benefits it provides for both parties to the typical lease option agreement.
Also called Land Trusts, Blind Trusts and Business Trusts, the trust model dates back to the 1500’s under King Henry VIII, and the Illinois Land Trust was introduced in the U.S. in the late 1800’s.
California’s version, the Title Holding Trust, was introduced in the early 1900’s, and is similar to, but not exactly like the Living Trusts that many of us use for estate planning purposes.
Increasingly, investors and ‘regular’ property owners like you and me are taking title to every piece of property they own in the name of a title holding trust. Why?
Privacy.
Most people would rather that their assets are hidden from the snooping eyes of clients, lawyers and governments.
And speaking for myself, it’s also a preferred way for transferring real estate when I am interested in deferring capital gains and/or leaving my existing financing in place for the next buyer (without worrying about the due-on-sale clause).
And here’s the clincher. When I offer seller financing through the title holding (land) transfer system,
I never have to worry about potential foreclosure.
If they stop making their payments, I simply evict them according to tenant law. I won’t have to foreclose to regain possession of the property, and when I do, I won’t have a higher tax basis to worry about.
My original tax basis in the property is preserved until the trust is terminated, up to 20 years from inception, though most average 5-10 years in length.
So, if you’re ready to line up for your own shot of steroids, take a quick peek at the introductory information I have on Title Holding Trusts on my website.
[Always consult with your CPA, tax attorney and/or financial adviser before selling any real estate.]
I’d love to give you some FREE gifts and send you my Seller Financing Newsletter:
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Canadians Buying US Property Have Financing Options - Even With REO’s
June 25th, 2009 categories: Land Trusts, Seller Financing
Seller financing is a great way for foreigners to pick up property in the U.S., as getting a traditional loan can be even tougher for them than us nationals. Usually seller financing is only applied to non-corporate owned properties (i.e. anything besides short sales or REOs), but there are some options when it comes to bank owned properties. I recently got this email:
“Hi Dawn,
Just read an article about Canadians purchasing property in the US and saw your name.
We want to buy a 2nd home in Palm Springs that is owned by the bank. Unfortunately in this situation we cannot get the vendor to finance. We have a great credit rating. Can we get a mortgage? Look forward to hearing from you.
Kindest regards,
Janet”
Hello Janet,
How much of a down payment could you put down? And what is the purchase price of the property? Would love to help if I can.
Sincerely,
Dawn
“Hi Dawn,
This property was purchased in 2005 for around 1.7 and the owners did a real number on it. Then they rented the property and tried to sell it for around 2.6. The bank foreclosed and it is soon to go on the market. We know the current market value of the property is 1.4.
We were hoping to put down 10-20% and are hoping to purchase it for less than 1 million. We have owned a condo in Sandpiper, Palm Desert for around 10 years. It has a mortgage. We have a great credit rating. Hope you can help.
Kindest regards
Janet”
Hi Janet,
If you can acquire the property for that much below market value, then you may be able to get a private money loan if you put the 20% down. You could refinance out of the 12% loan at your earliest opportunity once the lending environment supports it.
Alternatively… we may be able to get a private investor to purchase the property, taking title in the name of a land trust, and then beneficial interest would be transferred to you. Obviously, your purchase price would be higher than the price the investor would pay to acquire the property to create some profit in the transaction for the investor(s).
For instance, investor buys it for $900K cash, and then ’sells’ it immediately to you for $1.1mil through a land trust, carrying the financing for you, that would last for 5 years or so.
To pursue your hard money options, contact Steve Aranda @ 323.868.6242. If that option doesn’t look feasible, then let’s explore option #2.
Sincerely,
Dawn
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Are There Sellers Offering Seller Financing in my Area? I Only Need Them to Carry for a Year
June 22nd, 2009 categories: Seller Financing, Selling Your Note
As good as the financing can be these days, there are still good buyers who fall through the cracks. Here is an email from one:
“Dear Dawn –
We are looking to buy a modest property in Evansville, IN (about $100-120K). We have a 10% down payment, a solid income, and have been told that our credit would qualify us for a VA loan in about one year.
We recently sold our home in Indian Wells, CA — no foreclosure, no bankruptcy, although plenty of delinquents the past three years due to a medical crisis. We had a tax lien and judgment lien, and those were satisfied at the time we sold our home.
“Seller financing” is not well-understood out here. Right now, we’re looking at a couple of homes that are 50% more expensive than the type of house we want and need only because those are the only ones where the Seller — out of desperation — is willing to carry for a year.
Any chance that you know of anyone who would be interested in buying the note in a seller-financed transaction here in Indiana that would allow us to get a house we REALLY want that is far cheaper than what we may have to settle on?
Thank you, Ren”
Dear Ren,
What are your FICO scores? If above 600, then there may be a simultaneous note sale program that you would qualify for. There would still be some educating to do, as all parties involved usually need some guidance and clarification, but it’s possible to create and then sell the note created with minimum discount (.85 on the dollar).
Once you have a property in mind, you will need to present an offer for the seller to consider, and you will need to see if you qualify for the simo program by turning in a 1003 and paying for credit reports.
Alternatively, if you find a seller who has great underlying financing, you may want to leave it in place by using the title holding land trust transfer.
I am available to consult with you regarding your individual situation by the hour or by flat fee. The flat fee of $495 covers you until you successfully consummate a transaction, including talking to all parties involved until everyone is on board.
Best wishes,
Dawn
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