By Bill J. Gatten
When dealing with pre-foreclosures it’s always best (when possible) to get the property under contract and just wave bye-bye to the departing defaulting party. Many would consider it unwise to become embroiled with the mess that too often arises “later on down the line.” After the homeowner’s financial situation improves, these folks somehow forget your name and that you were once their only hope, their ‘saving grace,’ and their guardian angel during that minor setback of so very long ago.
We regularly receive reports from good intentioned folks across the country who thought they were doing something nice for someone (while helping themselves in the process, of course), but then got zapped in the pants a year or so later when the cause for the original crises had eased up. It seems that some of those formerly groveling ever-grateful recipients of goodwill tend to turn real mean…because an attorney says they can…and should.
Therefore, in those cases where an owner insists that the only way they’ll deal with you is to remain in the property after you bring their loan current (i.e., in return for giving you a stake in future appreciation potential and maybe some portion of the existing equity), we recommend the NARS PACTrust™.
First off, it’s a good idea to never deal with a property that is IN foreclosure at the time of documentation: get it OUT of foreclosure first, and then deal with it. In addition, in order to avoid risks of claims of impropriety later on, make certain that you always deal with the property and the delinquent party only at the property’s true Fair Market Value. That is to say: Try to come in at a reasonable assessment of the real value, minus your anticipated expenses. Such expenses would, of course, be closing costs, refurbishment costs, arrearages, penalties paid, marketing costs, etc. If there is equity in the property at inception, it’s good to leave the owner of record with no less than half of it intact after your cost computations. The homeowner’s equity then becomes their contribution to the land trust: i.e., the “Settlor Beneficiary Contribution,” which amount is fully refundable at termination, prior to any other distribution of sale (or re-fi) proceeds.
After assessing the viability of the transaction and the likelihood that the owner will be able to cover the payments, if given a second chance, one might consider the following:
1. Upon deciding you’d like to proceed with the transaction (after comps, title search, zoning records search, inspection, etc.), obtain a letter of authorization from the homeowner that will allow you to speak with the lender/s about the loan/s and its/their problems. Assure yourself in that conversation that reinstatement of the loan will take place it is brought current (be careful here, in some cases they will take your money, add it to principal reduction and continue on with the foreclosure if they want to). Also, be sure to try to negotiate with the lender for a forbearance of he arrearages: e.g., possibly having them added to the end of the loan; allowing a temporary moratorium on payments; or perhaps breaking the total down into small monthly increments for a while. Note that in this conversation, you are a “friend of the borrower who is considering helping him/her reinstate the loan.
2. Once the arrearages are forborne or covered by cashier', then open a silent Escrow (note that in all NARS PACTrusts™ handled through our company, we work exclusively with American Title Escrow throughout the U.S.).
2. The property is then placed into a title-holding land trust (outside of Escrow), vesting 100% of the legal and equitable title ownership with a third-party trustee (we utilize our trustee, PAC Holdings, a Non-Profit California Corp.…but that part’s up to you).
3. An Assignment of Beneficiary Interest…to you the investor…is then structured. A silent rider agreement will indicate the percentage of your beneficiary interest (40%, 50, 60%, etc.) in accordance with whatever percentage of profits are to be shared upon disposition at termination.
4. Next, the Beneficiary Agreement is created…between yourself (as the “Co-beneficiary”) and the borrower of record (the “Settlor Beneficiary”). This silent agreement delineates each party’s benefits and responsibilities relative to the trust property. It also provides confirmation of all directions to the trustee concerning title matters and the disposition of the property at the termination of the trust (at full Fair Market Value). Obviously, at termination should either of the beneficiaries choose to become the purchaser at termination they may do so…at full Fair Market Value only, less any moneys due them from the trust (e.g., their share of the profits). That is to say that any initial closing costs or equity held at inception is returned to the beneficiaries prior to any other distribution of proceeds.).
5. And following the close of Escrow, an Occupancy Agreement between the formerly defaulted homeowner and the new true owner of the property--the Trustee--is created. In this agreement, the former owner pays a lease payment sufficient to cover all monthly obligations. In order to convey tax benefits, this agreement is set up in a “triple-net” form: which obligates the tenant to all principal, interest, property tax, insurance; and to accept responsibility for all maintenance and repairs…the “Burdens of Ownership (See IRC 163(h)4(D).” Should any sum be paid to collection service, which is over and above the actual amounts due creditors, it will of course, accrue to the Investor Beneficiary (you), as positive cash flow.
Especially note that in the above scenario, even though ownership benefits (including full income tax deduction benefits) are held intact: the mortgagor (the borrower) no longer “owns” the property. The nature of the underlying land trust is such that its trustee is the owner and holder of all legal and equitable title to the trust property. Furthermore, there is no Purchase-Option or pre-determined bargain buy-out provision in the NARS PACTrust. Neither is there a loan or interest consideration between parties. The property remains a residence by at least one of the “acquiring parties…the beneficiaries of the land trust (i.e., in conformity with CA. CC 1695-1695.17). The property is not in “foreclosure” at the time of transfer to the trust. There has been no effective compromise of regulations concerning “equity-purchaser” or “foreclosure consultant” laws (re. the Ca. Civ. Code §§1695 and 2945).
And, too, in the event of a default by the “tenant beneficiary,” simple eviction takes place in lieu of a judicial foreclosure process. This is because, since the transaction’s structure is hinged upon a bona fide (Illinois-type) land trust, the tenant can never claim an “equitable interest” in the property to avoid Eviction and to force time and money consuming Judicial Foreclosure processes. Also of major importance, is the fact that in the NARS PACTrust™ scenario, once the tenant beneficiary (the former owner) has defaulted in its obligations, the contract provides that his or her beneficiary interest in the trust will not be extinguished; but instead the default within itself will constructively constitute an offer by the defaulting party to sell his or her interest in the trust at full Fair Market Value, to the non-defaulting beneficiary/ies. Such fair market value purchase amount, if contested, would then have to be proven within, say, 30 days: fully at the contesting (defaulting) party’s expense…and only by means of a full (and quite costly) MAI appraisal; and following a mandatory payment of, say, a $2,000, $3,000, etc. Default Fee.
For example, in terms of the former owner’s second failure to perform, let’s say you offer a buy-out of the defaulting tenant’s interest for one dollar plus, maybe, any equity he or she had held at inception. At this point, if the defaulting party deems the offer too low, he or she has a right to prove it so, and to demand and collect what is rightfully due them. However, also note that it is agreed in the beneficiary agreement that such proof of value must only be by means of an M.A.I. Appraisal (quite expensive), and that the buy-out would only follow payment of the established Default Fee.
Then at that point, if the defaulting party is willing to spend the money and effort to prove he is owned more, and would succeed in his or her effort: then the full amount proven would have to be paid: however, the contract provides that the method of payment of the sum owed, shall be means of an UNSECURED promissory note. This note is then scheduled for retirement no sooner that the property sells at the trust’s originally scheduled termination date: AFTER a return of all of the investor’s (your) original contribution, beginning equity and appropriate share of net proceeds.
A FINAL CAVEAT…
Remain well aware of, and well versed in, your own local foreclosure consultant laws: especially as they pertain to investors and Realtors® who would purport to “save” someone from foreclosure by effectively taking advantage of them. As you can see, the NARS PACTrust™ should avoid the pitfalls of “foreclosure bailouts”; but one would nonetheless be very well advised to rely only the advice of his or her own knowledgeable and competent legal advisors in such matters.
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, April 24, 2008
Thursday, April 17, 2008
THE EQUITY HOLDING TRUST TRANSFER™ (PACTRUST™ AND NEHTRUST™)A WHOLE ‘NOTHER ANGLE ON THINGS
By Bill J. Gatten
North American Realty Service, Inc.
Granada Hills, CA. 91344
1 800 207 4273
The NARS Equity Holding Trust Transfer™ works like this:
A. In order to create the safest disposition of a property for sale, wherein seller-carry financing is the mode of choice (e.g., due to greater profit potential, a faster sale and ease of transfer), an owner of record places its property into a simple single-beneficiary title-holding land trust (the owner thereby becoming the trust’s beneficiary and director in all matters relative to the property, the trustee and the trust…for the following advantageous and beneficial reasons:
1. For privacy, estate planning, probate avoidance and assets protection
2. To shield the property from legal threat such as: marital dissolution litigation, creditor claims, Probate, bankruptcy…even IRS tax liens.
3. To be able, by a subsequent Assignment of Beneficiary Interest, to convey all ownership and income tax benefits to any third party who would become a co-beneficiary in possession (*done without a title transfer)…in order to command, say, 150% higher rents, and/or to eliminate all costs of income property management (vacancies, maintenance, repairs, etc.).
4. To be able, upon such an assignment and payment take-over, to avoid compromising or triggering a lender’s due-on-sale clause relative to keeping the underlying financing in place.
5. To make loan payment-assumption simple, in that the relinquishing party (“seller”) is so thoroughly protected, and needn’t worry about collections and disbursement of payments (handled by a third-party collection service appointed by the nominated trustee), and never need have his own, or the acquiring party’s (“buyer’s”) name on title… until the trust’s termination, at which time the property sold, or refinanced in the acquiring party’s own name.
6. To make selling (or disposition in general) easier, in that the acquiring party can be thoroughly protected while assuming the responsibility for the existing financing... without a down payment (necessarily) and without a new loan or standard credit requirements
7. To make "sandwiching easier (i.e., where the investor is a principal in the transaction between relinquishing and acquiring parties), in-so-far as the investor beneficiary needn't be concerned about the potential for untoward or illegal actions by, or personal problems on behalf of, the person remaining on the loan (the borrower of record): or of the beneficiary who occupies the property and handles all payments and other costs of ownership. This is so because no beneficiary party can act unilaterally during the trust term with respect to any decision concerning the property or its use.
8. To make dispossession of a defaulting tenant-beneficiary faster and easier, in so much as a defaulting resident beneficiary cannot claim having "equity" in the property in order to avoid simple eviction (i.e., claiming “equitable interest” in order thwart or forestall eviction or unlawful detainer action…a common practice by “professional tenants”).
9. To shield the acquiring party against illegal or illicit foreclosure or Unlawful Detainer by the relinquishing party (aka: settlor or first non-resident beneficiary) without just and appropriate cause
10. To allow for the collection of much higher “security deposit (the trust’s contingency fund)” without being restricted by landlord-tenant legislation...i.e., a land trust’s contingency fund can hold a sum from as much as a single payment or twenty or more payments (acquisition of interest in the trust, being wholly separate from the related triple-net leasehold of the trust property…allowing the parties to post as much in the fund as they choose)
11. To shield the non-resident beneficiaries (settlor or investor) from unfair and highly biased and restrictive landlord-tenant regulations
B. NEXT, following “A” above, a beneficiary interest in the executed trust can be silently assigned to a co-beneficiary (e.g., to a resident beneficiary or to you, the investor)
C. THEN when you are the assignee of beneficiary interest, you locate a third beneficiary (who would wish to “buy a home”) to lease the property from the trust on a "triple-net" lease basis (i.e., contracting to pay all costs of mortgage, maintenance, insurance and taxes in exchange for income tax benefits and the fee-simple benefits of homeownership). Such third-party lives in the property, takes care of it, makes all payments and handles all other costs of homeownership: all in exchange for all the advantages and benefits (100%) of homeownership (including full income-tax deductions for mortgage interest and property tax).
Note that at the investor’s (investor beneficiary’s) discretion, by manipulating percentages of ownership and what might be kept or relinquished at term, the EHT takes the form of, and protects, virtually ANY seller-assisted financing objective with full income tax benefits to the tenant/buyer (e.g., straight option, lease option, wrap-around, contract-for-deed, equity-share, subject-to, tax lease, etc.). And all of this is accomplished without the necessity of a title transfer to the acquiring party; without an open due-on-sale violation; and without the risk of jeopardy to the property’s title by any party’s lawsuits, creditor judgments, IRS tax liens, divorce litigation or bankruptcy actions.
The Equity Holding Trust™ Beneficiary Agreement clearly stipulates that upon termination of the trust (and the related lease agreement), the beneficiary who is residing in the property will either sell the property, or refinance tit in his/her own name, and thereupon pay the investor (you) any monies he/she may have expended in the beginning or have been carrying throughout the term of the agreement (out of the proceeds of such disposition).
In order to avoid characterization of the transaction as a security agreement or equitable mortgage the acquisition price for the property upon termination is never agreed to in advance: it is shown to be “the Fair Market Value of the property at the time of termination and disposition…though MINUS any monies owed to the acquiring party by the trust (e.g., from profits, allowable credits, earlier contributions, refunds due, etc.).
By use of the Equity Holding Trust Transfer™ arrangement, the investor can finally relax and receive profit through some or all of the following profit centers:
1) Up-front cash from the relinquishing party (“seller”), e.g., when upside-down or over-the-barrel re. Equity or monthly payments
2) Up-front cash from the acquiring party (“buyer”) to get in the property
3) “Sale” or use of the available income tax write-off (see IRC 163h(4)D),
4) A share in equity build-up from mortgage principal reduction,
5) A share in appreciation potential,
6) A return of any equity held since inception, or any expenditures during the transaction,
7) Receipt of a positive cash flow throughout the term,
8) Use of the passive tax write-off (depreciation) throughout the term of the agreement,
9) A subsequent sale of his/her interest in an established Equity Holding Trust to another investor (the ad says” “Look! Cash-flowing income property with no management, maintenance or payments…”).
At North American Realty Service, Inc. in striving for perfection and maximum simplicity we provide all documentation, legal review, trustee appointment, escrow appointment (seldom needed) and client consultation. We'll even help make the deal by teleconferencing with you and your clients and prospects. We guide you through every phase of the transaction process; we prepare all documentation; we appoint the trustee and the collection and disbursement service; we provide full client consultation, escrow settlement and legal endorsement. We also remain available and as involved as you need us to be in all post-settlement follow-up.
Bill Gatten
www.landtrust.net
bill@landtrust.net
1 800 207 4273
1. Fast
2. Cheap
3. Good
Pick any two from the list above
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
North American Realty Service, Inc.
Granada Hills, CA. 91344
1 800 207 4273
The NARS Equity Holding Trust Transfer™ works like this:
A. In order to create the safest disposition of a property for sale, wherein seller-carry financing is the mode of choice (e.g., due to greater profit potential, a faster sale and ease of transfer), an owner of record places its property into a simple single-beneficiary title-holding land trust (the owner thereby becoming the trust’s beneficiary and director in all matters relative to the property, the trustee and the trust…for the following advantageous and beneficial reasons:
1. For privacy, estate planning, probate avoidance and assets protection
2. To shield the property from legal threat such as: marital dissolution litigation, creditor claims, Probate, bankruptcy…even IRS tax liens.
3. To be able, by a subsequent Assignment of Beneficiary Interest, to convey all ownership and income tax benefits to any third party who would become a co-beneficiary in possession (*done without a title transfer)…in order to command, say, 150% higher rents, and/or to eliminate all costs of income property management (vacancies, maintenance, repairs, etc.).
4. To be able, upon such an assignment and payment take-over, to avoid compromising or triggering a lender’s due-on-sale clause relative to keeping the underlying financing in place.
5. To make loan payment-assumption simple, in that the relinquishing party (“seller”) is so thoroughly protected, and needn’t worry about collections and disbursement of payments (handled by a third-party collection service appointed by the nominated trustee), and never need have his own, or the acquiring party’s (“buyer’s”) name on title… until the trust’s termination, at which time the property sold, or refinanced in the acquiring party’s own name.
6. To make selling (or disposition in general) easier, in that the acquiring party can be thoroughly protected while assuming the responsibility for the existing financing... without a down payment (necessarily) and without a new loan or standard credit requirements
7. To make "sandwiching easier (i.e., where the investor is a principal in the transaction between relinquishing and acquiring parties), in-so-far as the investor beneficiary needn't be concerned about the potential for untoward or illegal actions by, or personal problems on behalf of, the person remaining on the loan (the borrower of record): or of the beneficiary who occupies the property and handles all payments and other costs of ownership. This is so because no beneficiary party can act unilaterally during the trust term with respect to any decision concerning the property or its use.
8. To make dispossession of a defaulting tenant-beneficiary faster and easier, in so much as a defaulting resident beneficiary cannot claim having "equity" in the property in order to avoid simple eviction (i.e., claiming “equitable interest” in order thwart or forestall eviction or unlawful detainer action…a common practice by “professional tenants”).
9. To shield the acquiring party against illegal or illicit foreclosure or Unlawful Detainer by the relinquishing party (aka: settlor or first non-resident beneficiary) without just and appropriate cause
10. To allow for the collection of much higher “security deposit (the trust’s contingency fund)” without being restricted by landlord-tenant legislation...i.e., a land trust’s contingency fund can hold a sum from as much as a single payment or twenty or more payments (acquisition of interest in the trust, being wholly separate from the related triple-net leasehold of the trust property…allowing the parties to post as much in the fund as they choose)
11. To shield the non-resident beneficiaries (settlor or investor) from unfair and highly biased and restrictive landlord-tenant regulations
B. NEXT, following “A” above, a beneficiary interest in the executed trust can be silently assigned to a co-beneficiary (e.g., to a resident beneficiary or to you, the investor)
C. THEN when you are the assignee of beneficiary interest, you locate a third beneficiary (who would wish to “buy a home”) to lease the property from the trust on a "triple-net" lease basis (i.e., contracting to pay all costs of mortgage, maintenance, insurance and taxes in exchange for income tax benefits and the fee-simple benefits of homeownership). Such third-party lives in the property, takes care of it, makes all payments and handles all other costs of homeownership: all in exchange for all the advantages and benefits (100%) of homeownership (including full income-tax deductions for mortgage interest and property tax).
Note that at the investor’s (investor beneficiary’s) discretion, by manipulating percentages of ownership and what might be kept or relinquished at term, the EHT takes the form of, and protects, virtually ANY seller-assisted financing objective with full income tax benefits to the tenant/buyer (e.g., straight option, lease option, wrap-around, contract-for-deed, equity-share, subject-to, tax lease, etc.). And all of this is accomplished without the necessity of a title transfer to the acquiring party; without an open due-on-sale violation; and without the risk of jeopardy to the property’s title by any party’s lawsuits, creditor judgments, IRS tax liens, divorce litigation or bankruptcy actions.
The Equity Holding Trust™ Beneficiary Agreement clearly stipulates that upon termination of the trust (and the related lease agreement), the beneficiary who is residing in the property will either sell the property, or refinance tit in his/her own name, and thereupon pay the investor (you) any monies he/she may have expended in the beginning or have been carrying throughout the term of the agreement (out of the proceeds of such disposition).
In order to avoid characterization of the transaction as a security agreement or equitable mortgage the acquisition price for the property upon termination is never agreed to in advance: it is shown to be “the Fair Market Value of the property at the time of termination and disposition…though MINUS any monies owed to the acquiring party by the trust (e.g., from profits, allowable credits, earlier contributions, refunds due, etc.).
By use of the Equity Holding Trust Transfer™ arrangement, the investor can finally relax and receive profit through some or all of the following profit centers:
1) Up-front cash from the relinquishing party (“seller”), e.g., when upside-down or over-the-barrel re. Equity or monthly payments
2) Up-front cash from the acquiring party (“buyer”) to get in the property
3) “Sale” or use of the available income tax write-off (see IRC 163h(4)D),
4) A share in equity build-up from mortgage principal reduction,
5) A share in appreciation potential,
6) A return of any equity held since inception, or any expenditures during the transaction,
7) Receipt of a positive cash flow throughout the term,
8) Use of the passive tax write-off (depreciation) throughout the term of the agreement,
9) A subsequent sale of his/her interest in an established Equity Holding Trust to another investor (the ad says” “Look! Cash-flowing income property with no management, maintenance or payments…”).
At North American Realty Service, Inc. in striving for perfection and maximum simplicity we provide all documentation, legal review, trustee appointment, escrow appointment (seldom needed) and client consultation. We'll even help make the deal by teleconferencing with you and your clients and prospects. We guide you through every phase of the transaction process; we prepare all documentation; we appoint the trustee and the collection and disbursement service; we provide full client consultation, escrow settlement and legal endorsement. We also remain available and as involved as you need us to be in all post-settlement follow-up.
Bill Gatten
www.landtrust.net
bill@landtrust.net
1 800 207 4273
1. Fast
2. Cheap
3. Good
Pick any two from the list above
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, April 10, 2008
Expired Listings
When a Real Estate Broker takes a sales contract (a listing) on a property and is unable to sell it in the time allotted, the listing expires on a stated date, and the expiration of the listing appears in the local Multiple Listing Service (MLS) bulletin and is at that point up for grabs for anyone intrepid enough to contact the owner of the property. Typically these expired listings are published daily or at least once or twice per week, and for the eyes of the MLS Member-agent only.
• The information normally available in record is:
• The property address,
• Square feet,
• Date taken off the market,
• Most recent asking price,
• A description of the accoutrements,
• Year built
• Lot size.
• (In some areas) the name and address of the former listing agent
One of the favorite means of trolling for new listings for many of the more aggressive Realtors is “Working the “Expired’s.” In order to get the next chance a the listing, the Realtor need merely contact and convince the seller that his/her talents and wherewithal in the business are greater than were the Realtor’s who just dropped the ball on marketing the property that last time around. Most Realtors (not all) will agree to do more advertising, more open houses, more pitches at the local Realtor Board meetings, etc. But more often that not they take the same listing, put it right back in the same MLS and wait for someone else to bring them a buyer because a buyer’s agent just happened to run across the listing when the buyer came into the office asking for properties in that general area and price range.
Many property owners who have learned this lesson too late, and who have had to sit and watch a burdensome and cash-draining property go unsold for six months or more are exasperated and disillusioned with their Realtor, and with the real estate sales industry in general. And this makes them a little testy, but considerably more open to creative options that they may not have considered before (e.g., lease optioning, equity sharing, rent-to-own, wraps, seller carries, contracts for deed, etc.). It goes without saying that these people thus become wonderful prospects for a creative real estate entrepreneur who would offer to step up and take the property off their hands, while saving them a real estate commission in the process.
The idea here is to get access list of Expired’s in your community, or in the community in which you wish to concentrate, and generate regular mailings to the disillusioned owners, suggesting that you understand their plight and that you would like to speak with them about their property…now that it’s showing on the MLS as an “Unsold” Property (this term will create more ‘Pain’ in the mind of the seller than will the expression ‘expired listing’).
If your not a Realtor and have no access to the MLS, one way to obtain this closely guarded information is to find a new Realtor who may be having trouble coming up with the money for the Board dues and their MLS membership, and offer to pay one or the other, or both, for the agent in exchange for their access to the centralized data. In most localities it will entail being given a phone number and PIN code with which to access the board’s website on the Internet.
A Different Approach
Network member, Adam Albright in Arizona, has come up with another twist on working Expired listings without having to do all the footwork, and the ability to elicit the services of a Realtor for all the hard stuff. Adam has taken it upon himself to begin contacting Realtors in the more distant areas in lieu of the homeowner, after their listings have expired. His fax to the Realtor essentially let’s them know that that if they can resurrect their relationship with the seller and help him make the deal, he will buy the property under his own take-it or leave=it terms and conditions, and see that the agent gets paid for their services: i.e., a commissions they’ve already kissed good-bye.
Obviously this approach garners great interest from Realtors who see their hard-earned listings and commissions going down the drain, because of not having been able to perform under the terms of the agreement with their client. This also affords the Realtor an opportunity, and reason, to re-contact their lost client with a real live prospective buyer in hand and perhaps even get a renewal on the listing.
The following is a sample cover letter and a sample offer that can be mailed or faxed to the Realtor. The cover letter is designed to neutralize objections before they arise, and the offer explains the terms and the conditions and financing process under which he is willing to proceed. If the letter is not answered, nothing is lost, and he may contact the owner directly: if it is, then that’s another property owned.
Adam’s has sent out 150 such faxes to date and his return call rate so far is 50%. We’ll see how many deals ultimately come from the program and report to you in a future newsletter.
THE COVER LETTER…
Ms. Brooke Angler
Century 21 Four Rivers
9876 Fly Street
Steelhead Bluff, Montana
Dear Ms. Angler,
The Rod County MLS records indicate an expiration of your Real Estate Sales Contract with Mr. and Mrs. James Alpers on the property at 123 Lake St. in Troutsville has expired. However, I would none-the-less like to make an offer on that property and will, for the sake of expediency and your professional assistance, be pleased to make the offer through your office, rather than by my contacting Mr. and Mrs. Alpers directly (if you wish).
Before reviewing the accompanying proposal, however, in anticipation of concerns you may have, or which may arise from your broker, your company’s attorney or the sellers themselves, please make special note of the following important points.
• There are two ways to transfer real estate ownership – by a transfer of legal and equitable title to a buyer, or 2) by a transfer of beneficiary interest in a trust to a co-beneficiary, wherein the trustee is vested with the legal and equitable title
• Although not widely known of or extensively used by the vast majority of real estate professionals, land trusts (Illinois type title-holding trusts) are in-fact extremely safe, viable, protective and wholly legal holding and transfer vehicles. These trust forms are authorized or accepted in every state throughout the U.S., and have been used for real property ownership transfer since the beginning of the twentieth century. There are no states in which this particulars trust structure is not held wholly viable, valid and legal.
• Unlike other inter vivos trusts, the beneficiaries of a land trust are its directors and make all decisions evening view of the fact that the trust property’s ownership is vested with the trustee. The land trust trustee holds full legal and equitable title ownership of the property along with the full Power of Sale as directed by the trust’s beneficiaries. Also, note that the nature of such a title-holding vehicle is to convert Realty ownership to that of Personalty, even through the IRS will still treat all beneficiaries as owners of the Realty for income tax purposes (IRR 92-105/The Doctrine of Equitable Conversion (See Black’s Law, 6thED, pp 332/538).
• Through the use of a bona fide title-holding land trust, ownership interest in real estate can be effectively conveyed to a co-beneficiary without the necessity of a new mortgage loan, without an unauthorized title transfer, and without a violation of a mortgage lender’s “due on sale clause” or alienation admonitions. (FDIRA 12USC1702j-3)
• By utilizing a simple land trust as a transfer device, one can effectively buttress his/her real estate ownership against virtually any threat of lawsuits, judgment creditor claims, IRS tax liens, bankruptcy and legal claims in marital dissolution, Probate proceedings, etc. (From an asset protection standpoint, one’s holding any real estate in one’s own name is considered by many to be an invitation to lawsuit and potential financial devastation).
• The land trust transfer allows one to convey full income tax benefits to a tenant co-beneficiary (See IRC 63(h)4(D), along with virtually all of the Bundle of Rights in Fee-Simple Real Property Ownership.
Please bear all of the above closely in mind as you peruse the accompanying purchase offer.
THE OFFER…
Date: 8/17/2007
From: Investor Bob
To: Ms. Angler, Realtor® - Century 21, Four Rivers
As I indicated in my cover letter (attached), I am prepared to acquire the subject unsold property under the following terms:
• Property to be accepted in As-Is condition without request for repairs, alteration or improvements by seller now or in the future. Buyer shall hold seller free and harmless from any claim of financial loss relative to discovery of substandard or hazardous conditions presently known and disclosed, or later discovered..
• All loans, taxes and insurance relative to the subject property to be current at the time of transfer
• Property to free of all title clouds and liens, other than those of record, at time of transfer.
• Seller to hold the current mortgage financing in place for a minimum of three to four years…although the ideal term would be ten years or more (the seller’s choice)
[Note here that the suggested transfer process, more fully described in the accompany cover letter, will not violate a lender’s due on sale clause or constitute any transfer to me of the property’s legal or equitable title.]
• Seller to be paid all of its existing equity (if any) in the property at such time as the property is re-sold or refinance at the termination of the proposed Agreement.
• During the course of the proposed transaction, the property shall be held in trust, in the name of seller, for the benefit of seller, until such time as the Agreement has terminated and the property is disposed of or refinanced by buyer.
• Buyer to lease the property from the seller’s trust on a “triple-net lease” basis: i.e., paying for 100% of all costs of ownership, including mortgage payments, property taxes and insurance; as well as handling 100% of all management, maintenance, repair and day-to-day upkeep for the term of the agreement.
• Buyer to take possession the property at the close of Escrow (30-60) days
• During the term of the subject title-holding trust, buyer shall be named as a co-beneficiary, in order to enable all the benefits of real property ownership to accrue to buyer/co-beneficiary without the necessity of title transfer and without undue risk of comprising the due on sale clause relative to the underlying mortgage financing.
• Upon disposition of the property the termination, all existing loans will be retired by buyer/co-beneficiary, and at that time seller will receive 100% of all of its equity existing at the inception of the transaction.
• Seller shall be allowed to refinance its mortgage loan or acquire secondary financing at the monthly expense of buyer, prior to, or at any point during, the course of the subject agreement: so long as the agreed-upon aggregate monthly payments agreed to be made by buyer/co-beneficiary are not increased in the process; and so long as such new financing or re-financing would not exceed the mutually agreed upon value of the property at the inception of the proposed transfer.
• Buyer to cover all costs of closing except for Real Estate commissions, back taxes or unpaid insurance or delinquent mortgage payments (suggest commission deferment or carry for 1,2 or 3 years if a burden for seller)
• This offer shall become valid and in full effect 30 days from the date shown below, during which interim period, the following issues will be confirmed by seller for the benefit of buyer: 1) loan condition and pay-off; 2) comparative market value, 3) condition of insurance and property tax payments, 3) freedom from zoning and building code ordinance violations, 4) freedom from utility company liens, income tax liens and mechanics liens
• Buyer to execute any Purchase Offer and Contract deemed by agent to be suitable for the subject transfer, so long as all terms and conditions proposed here remain fully in tact.
Signed: __________________________ Date ______________________
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
• The information normally available in record is:
• The property address,
• Square feet,
• Date taken off the market,
• Most recent asking price,
• A description of the accoutrements,
• Year built
• Lot size.
• (In some areas) the name and address of the former listing agent
One of the favorite means of trolling for new listings for many of the more aggressive Realtors is “Working the “Expired’s.” In order to get the next chance a the listing, the Realtor need merely contact and convince the seller that his/her talents and wherewithal in the business are greater than were the Realtor’s who just dropped the ball on marketing the property that last time around. Most Realtors (not all) will agree to do more advertising, more open houses, more pitches at the local Realtor Board meetings, etc. But more often that not they take the same listing, put it right back in the same MLS and wait for someone else to bring them a buyer because a buyer’s agent just happened to run across the listing when the buyer came into the office asking for properties in that general area and price range.
Many property owners who have learned this lesson too late, and who have had to sit and watch a burdensome and cash-draining property go unsold for six months or more are exasperated and disillusioned with their Realtor, and with the real estate sales industry in general. And this makes them a little testy, but considerably more open to creative options that they may not have considered before (e.g., lease optioning, equity sharing, rent-to-own, wraps, seller carries, contracts for deed, etc.). It goes without saying that these people thus become wonderful prospects for a creative real estate entrepreneur who would offer to step up and take the property off their hands, while saving them a real estate commission in the process.
The idea here is to get access list of Expired’s in your community, or in the community in which you wish to concentrate, and generate regular mailings to the disillusioned owners, suggesting that you understand their plight and that you would like to speak with them about their property…now that it’s showing on the MLS as an “Unsold” Property (this term will create more ‘Pain’ in the mind of the seller than will the expression ‘expired listing’).
If your not a Realtor and have no access to the MLS, one way to obtain this closely guarded information is to find a new Realtor who may be having trouble coming up with the money for the Board dues and their MLS membership, and offer to pay one or the other, or both, for the agent in exchange for their access to the centralized data. In most localities it will entail being given a phone number and PIN code with which to access the board’s website on the Internet.
A Different Approach
Network member, Adam Albright in Arizona, has come up with another twist on working Expired listings without having to do all the footwork, and the ability to elicit the services of a Realtor for all the hard stuff. Adam has taken it upon himself to begin contacting Realtors in the more distant areas in lieu of the homeowner, after their listings have expired. His fax to the Realtor essentially let’s them know that that if they can resurrect their relationship with the seller and help him make the deal, he will buy the property under his own take-it or leave=it terms and conditions, and see that the agent gets paid for their services: i.e., a commissions they’ve already kissed good-bye.
Obviously this approach garners great interest from Realtors who see their hard-earned listings and commissions going down the drain, because of not having been able to perform under the terms of the agreement with their client. This also affords the Realtor an opportunity, and reason, to re-contact their lost client with a real live prospective buyer in hand and perhaps even get a renewal on the listing.
The following is a sample cover letter and a sample offer that can be mailed or faxed to the Realtor. The cover letter is designed to neutralize objections before they arise, and the offer explains the terms and the conditions and financing process under which he is willing to proceed. If the letter is not answered, nothing is lost, and he may contact the owner directly: if it is, then that’s another property owned.
Adam’s has sent out 150 such faxes to date and his return call rate so far is 50%. We’ll see how many deals ultimately come from the program and report to you in a future newsletter.
THE COVER LETTER…
Ms. Brooke Angler
Century 21 Four Rivers
9876 Fly Street
Steelhead Bluff, Montana
Dear Ms. Angler,
The Rod County MLS records indicate an expiration of your Real Estate Sales Contract with Mr. and Mrs. James Alpers on the property at 123 Lake St. in Troutsville has expired. However, I would none-the-less like to make an offer on that property and will, for the sake of expediency and your professional assistance, be pleased to make the offer through your office, rather than by my contacting Mr. and Mrs. Alpers directly (if you wish).
Before reviewing the accompanying proposal, however, in anticipation of concerns you may have, or which may arise from your broker, your company’s attorney or the sellers themselves, please make special note of the following important points.
• There are two ways to transfer real estate ownership – by a transfer of legal and equitable title to a buyer, or 2) by a transfer of beneficiary interest in a trust to a co-beneficiary, wherein the trustee is vested with the legal and equitable title
• Although not widely known of or extensively used by the vast majority of real estate professionals, land trusts (Illinois type title-holding trusts) are in-fact extremely safe, viable, protective and wholly legal holding and transfer vehicles. These trust forms are authorized or accepted in every state throughout the U.S., and have been used for real property ownership transfer since the beginning of the twentieth century. There are no states in which this particulars trust structure is not held wholly viable, valid and legal.
• Unlike other inter vivos trusts, the beneficiaries of a land trust are its directors and make all decisions evening view of the fact that the trust property’s ownership is vested with the trustee. The land trust trustee holds full legal and equitable title ownership of the property along with the full Power of Sale as directed by the trust’s beneficiaries. Also, note that the nature of such a title-holding vehicle is to convert Realty ownership to that of Personalty, even through the IRS will still treat all beneficiaries as owners of the Realty for income tax purposes (IRR 92-105/The Doctrine of Equitable Conversion (See Black’s Law, 6thED, pp 332/538).
• Through the use of a bona fide title-holding land trust, ownership interest in real estate can be effectively conveyed to a co-beneficiary without the necessity of a new mortgage loan, without an unauthorized title transfer, and without a violation of a mortgage lender’s “due on sale clause” or alienation admonitions. (FDIRA 12USC1702j-3)
• By utilizing a simple land trust as a transfer device, one can effectively buttress his/her real estate ownership against virtually any threat of lawsuits, judgment creditor claims, IRS tax liens, bankruptcy and legal claims in marital dissolution, Probate proceedings, etc. (From an asset protection standpoint, one’s holding any real estate in one’s own name is considered by many to be an invitation to lawsuit and potential financial devastation).
• The land trust transfer allows one to convey full income tax benefits to a tenant co-beneficiary (See IRC 63(h)4(D), along with virtually all of the Bundle of Rights in Fee-Simple Real Property Ownership.
Please bear all of the above closely in mind as you peruse the accompanying purchase offer.
THE OFFER…
Date: 8/17/2007
From: Investor Bob
To: Ms. Angler, Realtor® - Century 21, Four Rivers
As I indicated in my cover letter (attached), I am prepared to acquire the subject unsold property under the following terms:
• Property to be accepted in As-Is condition without request for repairs, alteration or improvements by seller now or in the future. Buyer shall hold seller free and harmless from any claim of financial loss relative to discovery of substandard or hazardous conditions presently known and disclosed, or later discovered..
• All loans, taxes and insurance relative to the subject property to be current at the time of transfer
• Property to free of all title clouds and liens, other than those of record, at time of transfer.
• Seller to hold the current mortgage financing in place for a minimum of three to four years…although the ideal term would be ten years or more (the seller’s choice)
[Note here that the suggested transfer process, more fully described in the accompany cover letter, will not violate a lender’s due on sale clause or constitute any transfer to me of the property’s legal or equitable title.]
• Seller to be paid all of its existing equity (if any) in the property at such time as the property is re-sold or refinance at the termination of the proposed Agreement.
• During the course of the proposed transaction, the property shall be held in trust, in the name of seller, for the benefit of seller, until such time as the Agreement has terminated and the property is disposed of or refinanced by buyer.
• Buyer to lease the property from the seller’s trust on a “triple-net lease” basis: i.e., paying for 100% of all costs of ownership, including mortgage payments, property taxes and insurance; as well as handling 100% of all management, maintenance, repair and day-to-day upkeep for the term of the agreement.
• Buyer to take possession the property at the close of Escrow (30-60) days
• During the term of the subject title-holding trust, buyer shall be named as a co-beneficiary, in order to enable all the benefits of real property ownership to accrue to buyer/co-beneficiary without the necessity of title transfer and without undue risk of comprising the due on sale clause relative to the underlying mortgage financing.
• Upon disposition of the property the termination, all existing loans will be retired by buyer/co-beneficiary, and at that time seller will receive 100% of all of its equity existing at the inception of the transaction.
• Seller shall be allowed to refinance its mortgage loan or acquire secondary financing at the monthly expense of buyer, prior to, or at any point during, the course of the subject agreement: so long as the agreed-upon aggregate monthly payments agreed to be made by buyer/co-beneficiary are not increased in the process; and so long as such new financing or re-financing would not exceed the mutually agreed upon value of the property at the inception of the proposed transfer.
• Buyer to cover all costs of closing except for Real Estate commissions, back taxes or unpaid insurance or delinquent mortgage payments (suggest commission deferment or carry for 1,2 or 3 years if a burden for seller)
• This offer shall become valid and in full effect 30 days from the date shown below, during which interim period, the following issues will be confirmed by seller for the benefit of buyer: 1) loan condition and pay-off; 2) comparative market value, 3) condition of insurance and property tax payments, 3) freedom from zoning and building code ordinance violations, 4) freedom from utility company liens, income tax liens and mechanics liens
• Buyer to execute any Purchase Offer and Contract deemed by agent to be suitable for the subject transfer, so long as all terms and conditions proposed here remain fully in tact.
Signed: __________________________ Date ______________________
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Thursday, April 3, 2008
8/17/2007
Bill J. Gatten
North American Realty Services
6520 Platt Ave. #548
West Hills California 91307
Editor in Charge, A National Consumer Law Center Report
National Consumer Law Center
77 Summer Street 10th Floor
Boston, Mass 02110
In Re. Your June Article referenced below
Dear Sir/Mme,
Regarding the article written and published by you in June, 2005 in your Report by the Nation Consumer Law Center, we are respectfully requesting a formal published retraction of the erroneous portions in that report referencing myself by name and our programs (the section purportedly written by Dan Lipton, of the Harvard Law School Predatory Lending/Foreclosure Prevention Clinic, entitled “Stay Unassociated with the End Result. Caring Costs Money” and said to have been researched by your Steve Tripoli and Elizabeth Renuart.
We have not determined that your comments are actionable at all, and this is not a threat to sue. We are merely requesting a corrective or republished clarification of that specific portion of your text. If you would be so kind, please reread your article, reproduced in its entirely here below, along with my highlighted response to it.
Note that the seminar your Mr. Lipton claims he so clandestinely “infiltrated” and to which he refers in your publication, was a free public workshop that was recorded in its entirety, clearly verifying my refutation of virtually every-single assertion made by him in your article. In listening to the recording and reading your report, it appears that a malicious intent was in fact someone’s primary goal, rather than a quest for Truth on behalf of your clients.
In addition, there are 175 eye-witness workshop attendees who will readily attest to the inaccuracy of the information proffered by your article (as given to you by Mr. Lipton and purportedly researched by your staff).
YOUR ARTICLE STATES: “Bill Gatten spent two and one-half days in his seminar, going over the intricacies of the land trust. However, only one day of that time was devoted to substantial trust edification, with the remaining time devoted to selling his program (books, tapes, network fees) and doing “magic” to condition the audience that things are not always as they appear.
FACT: Our workshops are FREE, and I specifically do not discuss any services or products for sale until perhaps the last 30-40 minutes of the final day of the 2.5 days (2:30 to 3:00 pm on Sunday); and all I promote at that time is a one-on-one life-time personal mentoring program. The first evening of the workshop is devoted to an introduction to our services and the philosophy of, and tools for, self determination. Half of the first full day is spent in basic real estate terminology. The remainder of that day and continuing through until 2:30 PM on the third day, we discuss and carefully study trusts in general and the Illinois Land Trust in particular. From approximately 3:00 to 6:00 or 7:00 PM I make telephone calls in front of the audience to persons advertising homes for sale who, for higher profits, a faster sale and maximum safety are willing to leave some or all their equity in tact for a while..
YOUR ARTICLE STATES: “The two primary advantages of the trust emphasized were its ability to circumvent the Lender Due on Sale Clause (note: this clause requires mortgages to be paid off upon transfer of the property unless the mortgage holder gives written permission to the contrary)…
FACT: This statement is inaccurate and reflects a naiveté and lack of familiarity with the federal law being referred to. Title 12 of the U.S. Code (p.1701-j-3) clearly precludes any lender of record from foreclosure upon many types of legitimate transfers (nine of them, as a matter of fact), and in particular “…a transfer to an inter-vivos trust, wherein the borrow is, an remains, a beneficiary; and wherein the trust is revocable; and wherein the document itself does not relate to a transfer of occupancy rights (note here that any residential property from 1 to 4 units can obviously be leased or rented to another without the necessity of obtaining a lender’s permission, whether in such a trust or not).” The lender need not be consulted for permission to place one’s property into a legitimate inter vivos trust, so long as such placement is done within legal regulations and established and governmentally accepted guidelines, as reflected in The Code.
“…and to facilitate the fastest way to evict a lessee from “their” property if they default in their lease payments (note the lessee is generally the owner of the property who has surrendered ownership of the home in exchang for a foreclosure rescue plan that supposedly will allow recovery of the property later).
FACT: Another grossly misleading assertion. First off, our program is NOT first and foremost a “foreclosure rescue program.” We do NOT specifically target people or homes in foreclosure. Our primary target audience is those who owe too much to sell traditionally, or those who have explainable and rectifiable cash and/or credit challenges. Although…our system may in-fact be used quite effectively in assisting a homeowner under the threat of dispossession by their lender, by allowing avoidance of the foreclosure and retention of their homes…all without an upfront fee, or risk of losing their equity. In such a scenario (a tiny aspect of our business), our trust system provides the debtor the money they need to avoid foreclosure; reduce their monthly payments; and to retain 100% of the full Fee-Simple rights of homeownership…without a forfeiture, threat or possibility of forfeiture, or even a chance of a loss of equity in the event of a default (re. your term: “equity stripping”).
In such a “foreclosure bail-out” scenario, should the homeowner later default in its obligation (…again) and be unable to recover: it is clearly agreed by parties that the non-defaulting benefactor must pay the defaulting party 100% of any equity the defaulting party would hold in the property at the time of default (i.e., equity held from inception and/or accumulated over the term of the agreement).
Regarding “rapidity of eviction” being our goal…that assertion is (if I may say so) quite silly…eviction of an errant takes the same amount of time whether the property is in a trust or not. Our “goal” is merely the prevention of the deceitful and spurious acts of a resident party in default, who would resort to unscrupulous tactics to unlawfully detain the property and defraud his/her benefactor after the fact (a most common practice).
YOUR ARTICLE STATES: “Lipton notes that the trust is supposed to give owners facing foreclosure a chance to buy back their property if the trust agreement is followed to fruition. But he writes that “this scenario is extremely unlikely” because terms of the buy-back are so onerous, and there are so many ways to drain equity from the property before the agreement’s end, that the initial homeowner is unlike to recover.
FACT: Again I’ll suggest that editorial licenses by your own staff may have been taken here, without Mr. Lipton having said any such a thing. But be that as it may…even when our program IS used (rarely) for safety and mutual protection of parties in a “foreclosure bail-out”) there is specifically no “onerous” buy-back provision! The homeowner and the benefactor have contractually agreed that once the property can be sold or refinanced by the homeowner at the scheduled termination date of the trust, following a return of the debtor’s equity, the benefactor’s initial contribution will be returned to him/her along with, perhaps, some percentage of the property’s accumulated appreciation over the term (usually 10%, but up to a maximum of 50%)...should there have been any such appreciation…but NEVER is any significant portion of the debtor’s equity taken!
In the above scenario, in order to entice a moneyed benefactor in the first place, a debtor in foreclosure may in fact have offered that person a small percentage of his/her equity in the property at inception (to be paid at termination, years later) as an investment buffer, for the quite real possibility of there being no appreciation at all over term (note, though, that such divesture of equity at start, will not, in our program, exceed 10% of the property’s verifiable market value at the time). Furthermore, with the trust’s corpus (the property) having been vested in an unrelated, third-party trustee, co-beneficiary land trust, there is absolutely NO WAY for either party to “drain equity” from the property, or take unconscionable advantage of the other at any time…ever…period! That’s exactly why we do things the way we do.
YOUR ARTICLE STATES: “In his report Lipton poses the question: “What is the likely result of the trust agreement?” and answers: “The most likely result (client) could have anticipated when signing the trust agreement is exactly what the other co-beneficiaries hoped for: a default on (the client’s) obligations resulting in an implied intention to sell their beneficial interest, followed by a quick eviction from the home. As Gatten preached over and over again in his seminar program, “Stay unassociated with the end-result, and caring costs money.” He specifically gave an example where it was necessary to evict an elderly woman from her home after her husband had passed away and she could not meet her obligations.
FACT: This paragraph is unquestionably a purposeful distortion of Truth. First, there is no such un-named “client.” The scenario being alluded to has never happened with our program…not one single time…EVER (since our beginning in 1984)!
Next, no investor anywhere wants to endure the eviction process of a non-paying tenant to whom he has to pay 100% of all of the property’s existing equity upon their departure. That’s ridiculous!
Next, as stated with only partial accuracy, “Gatten” does indeed say, “…don’t be attached to the outcome.” However, what your writer (or over zealous editor) purposely omitted (for effect, I presume) is the first part of that mantra: “Be honest AND remain unassociated with the end-result.” In our course, we teach, above all else, that honesty, attentiveness and not forcing any situation or perceived opportunity to one’s own self-serving advantage is the secret of attaining true Wealth in life. And note carefully that the term “Wealth” in this context needn’t connote just ‘pecuniary’ gain). I have never said “caring costs money”…ever. It’s “Caring Costs Too Much.”
And, as well, the “widow eviction” example was grossly and obviously misreported. The “elderly” widow referenced in a passing comment (a Mrs. Joyce Reed, San Bernardino, California, age 42) lived in the property for several months, rent-free (at my insistence), after her husband died. She was told to utilize the trust’s Contingency Fund to continue her uninterrupted tenancy, property taxes, insurance and payments to the lender. Once her affairs were finally in order, she moved away (of her own volition), and was refunded all of the remainder of the Contingency Fund when it became apparent that she couldn’t afford the property any longer. This woman had no equity in the property at the time, and remarked repeatedly how grateful she was for the integrity of our trust system that gave her “breathing-room” when she needed it most. The story, when shared at the referenced workshop was to point out that had the woman been an evil or mean-spirited person (which she was not), as are many tenants in default, our system would have prevented her from avoiding payment and unlawfully detaining the property.
YOUR ARTICLE STATES: “After reviewing likely outcomes for the trust as he understood it, Lipton penned the following conclusion:” The different results create a lose-lose situation for someone like (client).
FACT: Again, there is not, and never has been, any such client! And further, the system that is being so inaccurately reported on is widely touted as clearly creating a Win-Win situation for everyone involved. The”lose-lose” comment is without the slightest merit, provocation or foundation.
YOUR ARTICLE STATES: “There is no way that (client) would ever be able to repurchase her home from the trust.
FACT: Patently untrue! Such a client (should one exist) would have the absolute contractual right and open power at termination to: 1) refinance, 2) sell, 3) extend the agreement, or 4) Walk-away with all of "her" equity fully intact.
YOUR ARTICLE STATES: “If (client) did see the trust to fruition, all she could hope for would be to accrue some amount of the appreciation value.
FACT: Again, untrue (and strongly believed to be purposely so). There has never been a single party…EVER…in our 3,000 plus transactions who has ever met any such fate. At termination of this hypothetical scenario, the mythological “client” would retain 100% of “her” equity; 100% of her equity build-up form the loan’s principal reduction; 100% of her active income tax deductions; and whatever percentage of the accrued appreciation she agreed to in the beginning (…never less than 50%).
YOUR ARTICLE STATES: “But at this point, where is (client) to go? Gatten knows that the resident/beneficiary wants to stay in their home as long as they can. Thus he puts in a nice provision into the occupancy agreement that allows the resident/beneficiary to stay in the home on a month-to-month basis for as long as the trust term (20 years) after the original period has expired.
And that’s a bad thing? The tenant beneficiary retains “her” home with all the benefits of ownership, and has all the time in the world to sell or refinance…or she gets paid in full and leaves, if she so desires. And…in our program it is she (your dreamed-up “client”) as the directing beneficiary who is the only person who can instigate her own eviction or dispossession other than for cause (violation the contract), as discussed above. Would any fair and honest person prefer that we NOT give her those rights?
YOUR ARTICLE STATES: “Basically, if the resident beneficiary has not defaulted yet, give him time, he eventually will.
Really? This is your assessment of your fellow human being? “Give the mooch time and he’ll just default again?” This is the kind of intellect I’m having so much trouble dealing with here. I’m proud to say that I/we tend to have a considerably higher respect for, and confidence in, the people with whom we deal. Our methods clearly assure any homeowner in default that they will NOT have to relinquish their hard-earned equity, even were they to default in their payment obligations a second time.
YOUR ARTICLE STATES: “This does create a scenario which fits nicely with Bill Gatten’ mantra, one that he repeated over and over again: “Caring costs money, and stay unassociated with the end-result.”
FACT: The “mantra (your term)” is misquoted, as well as grossly misunderstood. It would be accurately re-stated as: “Be honest and stay unattached to the outcome…caring costs ‘too much.” The “costing too much” in this context has nothing necessarily to do with money...it refers to integrity, fairness, accurate reporting of events and treating our fellow humans beings with respect and dignity. We teach that when one “cares too much (i.e., anticipating a profit…or maybe just an ‘Atta Boy’ for a job assumed to have been well done),” he will all too often be tempted to purposely misstate pertinent facts to the detriment of another person or idea solely in order to ingratiate himself with his peers and/or superiors of like mind…and spirit. I truly pity the person who has missed this (so extremely valuable and crucial) concept, as Mr. Lipton or your editors have, I fear…”Caring too much about a given hoped-for self-serving outcome will invariably cause one to compromise his/her own integrity…it’s never worth it.
YOUR ARTICLE STATES: “The complexities of the trust make it difficult for anyone to understand. As a law student who has taken property, real estate litigation and fiduciary relations I had trouble keeping up with what it all meant…it took me at least two weeks to put it all together.”
FACT: The total complexity of our program follows (but do beware it apparently takes some of our slower students as much as two weeks “to get it”). As an aside: do note that (despite needing to be capitalized), having taken Property, Real Estate Litigation, and Fiduciary Relations—does not a fair and “un-agendized” person make; nor does it place this student in a superior position of knowledge over those of us (and our own in-house and retained legal counsel) who have taken the same courses and fully understand and apply their concepts every day of our lives.
What we teach is that, in order to best avoid the myriad pitfalls, risks and rampant deceit of so-called creative financing…JUST DON’T DO IT! There’s a better and far safer way.
We maintain that one would be wise, if confronted with the need for seller financing, to place the property safely into a bona fide and fully legal 3rd party trustee, beneficiary-directed land trust, as doing so is directly analogous to holding the property in Escrow for the term of the agreement. From that point on, one need only deal with the trust’s beneficiary interest rather than the property’s ownership (title). Ergo, any beneficiary of such a trust with at least a 10% interest in it, whether on title, on the loan, living in the property or not, is fully entitled to 100% of all the Fee-Simple benefits of real property ownership (including income tax deductions). And all of this is effected wholly without comprising a lender’s security interest, violating their due-on-sale clause, subjecting the property to either (any) party’s creditor liens, lawsuits, bankruptcy actions, actions in marital dissolution, IRS tax liens, partition action, creditor charging orders, probate or ancillary intestate administration…or loss of equity.
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Some Frequently Encountered Arguments to Put an End To, Before They Crop Up From Other Inadequately Informed Detractors:
Title 12 of the Code of Federal Regulations (12CFR 591-vi), which appears to contradict the US Code (12 USC 1701-j-3) is specifically not a law! This entry in the title is, instead, a notation of prima facie evidence of the regulations found in the US Code.
Title 12 of the CFR (as originally promulgated by the Federal Home Loan Banking Board, FHLBB, which is now the OTC - Office of Thrift Supervision) is one of several CFR titles that specifically have not been enacted into law (See Sec. 204 of Title 1 of the Code).
The IRS authority for full income tax benefits by a resident beneficiary in a qualified property, who need not be on the property’s title or on the loan: IRC §163(h)4(D) also see IRC §677 and IRR 92-105
The “Illinois” land trust is legislated, authorized or accepted in principal and effect throughout the US, excluding only Tennessee and Louisiana. Its legitimacy in a particular state relies solely on that state’s acceptance of inter vivos real estate trusts in any form wherein the trust is not characterized (by the state) as a lien on the real estate (i.e., re. ownership in Use Vs. Trust), as well as reliance upon: 1) the Doctrine of Equitable Conversion, 2) the Doctrine of Merger) 3) the exclusion of “land trusts” per se from any extant Statute of Uses.
Our fervent desire and our company objective is to provide safe and legitimate solutions (via our land trust systems) for those who would deign to be investors, and/or real property owners of any kind, who would forgo enormous ill-gained profits in exchange for security and safety (e.g., avoidance of all the dangers, risks, pitfalls, downsides, and need for subterfuge in real estate acquisition and disposition).
Note that in our program the subject property is not being sold, or transferred beyond the owner’s (settlor’s) nominated trustee: even though all the features and benefits of homeownership can be passed to and enjoyed by a remainder agent/co-beneficiary who would live in, and maintain, the property under a properly structured leasehold agreement with the trustee.
Q: Think about it. Instead of the standard gloom and doom: What about a future headline in your publication that would read something more like:
Is There Is In Fact Finally a Safe and Legitimate Way to Avoid the Unscrupulous and Unconscionable Practices of Those Who Prey Upon the Down-and-Out and Disenfranchised?”
Sincerely,
Bill J. Gatten
North American Realty Services Consultants
POB 6520 Platt Ave. #548
West Hills, California
1 (800) 207 4273
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
Bill J. Gatten
North American Realty Services
6520 Platt Ave. #548
West Hills California 91307
Editor in Charge, A National Consumer Law Center Report
National Consumer Law Center
77 Summer Street 10th Floor
Boston, Mass 02110
In Re. Your June Article referenced below
Dear Sir/Mme,
Regarding the article written and published by you in June, 2005 in your Report by the Nation Consumer Law Center, we are respectfully requesting a formal published retraction of the erroneous portions in that report referencing myself by name and our programs (the section purportedly written by Dan Lipton, of the Harvard Law School Predatory Lending/Foreclosure Prevention Clinic, entitled “Stay Unassociated with the End Result. Caring Costs Money” and said to have been researched by your Steve Tripoli and Elizabeth Renuart.
We have not determined that your comments are actionable at all, and this is not a threat to sue. We are merely requesting a corrective or republished clarification of that specific portion of your text. If you would be so kind, please reread your article, reproduced in its entirely here below, along with my highlighted response to it.
Note that the seminar your Mr. Lipton claims he so clandestinely “infiltrated” and to which he refers in your publication, was a free public workshop that was recorded in its entirety, clearly verifying my refutation of virtually every-single assertion made by him in your article. In listening to the recording and reading your report, it appears that a malicious intent was in fact someone’s primary goal, rather than a quest for Truth on behalf of your clients.
In addition, there are 175 eye-witness workshop attendees who will readily attest to the inaccuracy of the information proffered by your article (as given to you by Mr. Lipton and purportedly researched by your staff).
YOUR ARTICLE STATES: “Bill Gatten spent two and one-half days in his seminar, going over the intricacies of the land trust. However, only one day of that time was devoted to substantial trust edification, with the remaining time devoted to selling his program (books, tapes, network fees) and doing “magic” to condition the audience that things are not always as they appear.
FACT: Our workshops are FREE, and I specifically do not discuss any services or products for sale until perhaps the last 30-40 minutes of the final day of the 2.5 days (2:30 to 3:00 pm on Sunday); and all I promote at that time is a one-on-one life-time personal mentoring program. The first evening of the workshop is devoted to an introduction to our services and the philosophy of, and tools for, self determination. Half of the first full day is spent in basic real estate terminology. The remainder of that day and continuing through until 2:30 PM on the third day, we discuss and carefully study trusts in general and the Illinois Land Trust in particular. From approximately 3:00 to 6:00 or 7:00 PM I make telephone calls in front of the audience to persons advertising homes for sale who, for higher profits, a faster sale and maximum safety are willing to leave some or all their equity in tact for a while..
YOUR ARTICLE STATES: “The two primary advantages of the trust emphasized were its ability to circumvent the Lender Due on Sale Clause (note: this clause requires mortgages to be paid off upon transfer of the property unless the mortgage holder gives written permission to the contrary)…
FACT: This statement is inaccurate and reflects a naiveté and lack of familiarity with the federal law being referred to. Title 12 of the U.S. Code (p.1701-j-3) clearly precludes any lender of record from foreclosure upon many types of legitimate transfers (nine of them, as a matter of fact), and in particular “…a transfer to an inter-vivos trust, wherein the borrow is, an remains, a beneficiary; and wherein the trust is revocable; and wherein the document itself does not relate to a transfer of occupancy rights (note here that any residential property from 1 to 4 units can obviously be leased or rented to another without the necessity of obtaining a lender’s permission, whether in such a trust or not).” The lender need not be consulted for permission to place one’s property into a legitimate inter vivos trust, so long as such placement is done within legal regulations and established and governmentally accepted guidelines, as reflected in The Code.
“…and to facilitate the fastest way to evict a lessee from “their” property if they default in their lease payments (note the lessee is generally the owner of the property who has surrendered ownership of the home in exchang for a foreclosure rescue plan that supposedly will allow recovery of the property later).
FACT: Another grossly misleading assertion. First off, our program is NOT first and foremost a “foreclosure rescue program.” We do NOT specifically target people or homes in foreclosure. Our primary target audience is those who owe too much to sell traditionally, or those who have explainable and rectifiable cash and/or credit challenges. Although…our system may in-fact be used quite effectively in assisting a homeowner under the threat of dispossession by their lender, by allowing avoidance of the foreclosure and retention of their homes…all without an upfront fee, or risk of losing their equity. In such a scenario (a tiny aspect of our business), our trust system provides the debtor the money they need to avoid foreclosure; reduce their monthly payments; and to retain 100% of the full Fee-Simple rights of homeownership…without a forfeiture, threat or possibility of forfeiture, or even a chance of a loss of equity in the event of a default (re. your term: “equity stripping”).
In such a “foreclosure bail-out” scenario, should the homeowner later default in its obligation (…again) and be unable to recover: it is clearly agreed by parties that the non-defaulting benefactor must pay the defaulting party 100% of any equity the defaulting party would hold in the property at the time of default (i.e., equity held from inception and/or accumulated over the term of the agreement).
Regarding “rapidity of eviction” being our goal…that assertion is (if I may say so) quite silly…eviction of an errant takes the same amount of time whether the property is in a trust or not. Our “goal” is merely the prevention of the deceitful and spurious acts of a resident party in default, who would resort to unscrupulous tactics to unlawfully detain the property and defraud his/her benefactor after the fact (a most common practice).
YOUR ARTICLE STATES: “Lipton notes that the trust is supposed to give owners facing foreclosure a chance to buy back their property if the trust agreement is followed to fruition. But he writes that “this scenario is extremely unlikely” because terms of the buy-back are so onerous, and there are so many ways to drain equity from the property before the agreement’s end, that the initial homeowner is unlike to recover.
FACT: Again I’ll suggest that editorial licenses by your own staff may have been taken here, without Mr. Lipton having said any such a thing. But be that as it may…even when our program IS used (rarely) for safety and mutual protection of parties in a “foreclosure bail-out”) there is specifically no “onerous” buy-back provision! The homeowner and the benefactor have contractually agreed that once the property can be sold or refinanced by the homeowner at the scheduled termination date of the trust, following a return of the debtor’s equity, the benefactor’s initial contribution will be returned to him/her along with, perhaps, some percentage of the property’s accumulated appreciation over the term (usually 10%, but up to a maximum of 50%)...should there have been any such appreciation…but NEVER is any significant portion of the debtor’s equity taken!
In the above scenario, in order to entice a moneyed benefactor in the first place, a debtor in foreclosure may in fact have offered that person a small percentage of his/her equity in the property at inception (to be paid at termination, years later) as an investment buffer, for the quite real possibility of there being no appreciation at all over term (note, though, that such divesture of equity at start, will not, in our program, exceed 10% of the property’s verifiable market value at the time). Furthermore, with the trust’s corpus (the property) having been vested in an unrelated, third-party trustee, co-beneficiary land trust, there is absolutely NO WAY for either party to “drain equity” from the property, or take unconscionable advantage of the other at any time…ever…period! That’s exactly why we do things the way we do.
YOUR ARTICLE STATES: “In his report Lipton poses the question: “What is the likely result of the trust agreement?” and answers: “The most likely result (client) could have anticipated when signing the trust agreement is exactly what the other co-beneficiaries hoped for: a default on (the client’s) obligations resulting in an implied intention to sell their beneficial interest, followed by a quick eviction from the home. As Gatten preached over and over again in his seminar program, “Stay unassociated with the end-result, and caring costs money.” He specifically gave an example where it was necessary to evict an elderly woman from her home after her husband had passed away and she could not meet her obligations.
FACT: This paragraph is unquestionably a purposeful distortion of Truth. First, there is no such un-named “client.” The scenario being alluded to has never happened with our program…not one single time…EVER (since our beginning in 1984)!
Next, no investor anywhere wants to endure the eviction process of a non-paying tenant to whom he has to pay 100% of all of the property’s existing equity upon their departure. That’s ridiculous!
Next, as stated with only partial accuracy, “Gatten” does indeed say, “…don’t be attached to the outcome.” However, what your writer (or over zealous editor) purposely omitted (for effect, I presume) is the first part of that mantra: “Be honest AND remain unassociated with the end-result.” In our course, we teach, above all else, that honesty, attentiveness and not forcing any situation or perceived opportunity to one’s own self-serving advantage is the secret of attaining true Wealth in life. And note carefully that the term “Wealth” in this context needn’t connote just ‘pecuniary’ gain). I have never said “caring costs money”…ever. It’s “Caring Costs Too Much.”
And, as well, the “widow eviction” example was grossly and obviously misreported. The “elderly” widow referenced in a passing comment (a Mrs. Joyce Reed, San Bernardino, California, age 42) lived in the property for several months, rent-free (at my insistence), after her husband died. She was told to utilize the trust’s Contingency Fund to continue her uninterrupted tenancy, property taxes, insurance and payments to the lender. Once her affairs were finally in order, she moved away (of her own volition), and was refunded all of the remainder of the Contingency Fund when it became apparent that she couldn’t afford the property any longer. This woman had no equity in the property at the time, and remarked repeatedly how grateful she was for the integrity of our trust system that gave her “breathing-room” when she needed it most. The story, when shared at the referenced workshop was to point out that had the woman been an evil or mean-spirited person (which she was not), as are many tenants in default, our system would have prevented her from avoiding payment and unlawfully detaining the property.
YOUR ARTICLE STATES: “After reviewing likely outcomes for the trust as he understood it, Lipton penned the following conclusion:” The different results create a lose-lose situation for someone like (client).
FACT: Again, there is not, and never has been, any such client! And further, the system that is being so inaccurately reported on is widely touted as clearly creating a Win-Win situation for everyone involved. The”lose-lose” comment is without the slightest merit, provocation or foundation.
YOUR ARTICLE STATES: “There is no way that (client) would ever be able to repurchase her home from the trust.
FACT: Patently untrue! Such a client (should one exist) would have the absolute contractual right and open power at termination to: 1) refinance, 2) sell, 3) extend the agreement, or 4) Walk-away with all of "her" equity fully intact.
YOUR ARTICLE STATES: “If (client) did see the trust to fruition, all she could hope for would be to accrue some amount of the appreciation value.
FACT: Again, untrue (and strongly believed to be purposely so). There has never been a single party…EVER…in our 3,000 plus transactions who has ever met any such fate. At termination of this hypothetical scenario, the mythological “client” would retain 100% of “her” equity; 100% of her equity build-up form the loan’s principal reduction; 100% of her active income tax deductions; and whatever percentage of the accrued appreciation she agreed to in the beginning (…never less than 50%).
YOUR ARTICLE STATES: “But at this point, where is (client) to go? Gatten knows that the resident/beneficiary wants to stay in their home as long as they can. Thus he puts in a nice provision into the occupancy agreement that allows the resident/beneficiary to stay in the home on a month-to-month basis for as long as the trust term (20 years) after the original period has expired.
And that’s a bad thing? The tenant beneficiary retains “her” home with all the benefits of ownership, and has all the time in the world to sell or refinance…or she gets paid in full and leaves, if she so desires. And…in our program it is she (your dreamed-up “client”) as the directing beneficiary who is the only person who can instigate her own eviction or dispossession other than for cause (violation the contract), as discussed above. Would any fair and honest person prefer that we NOT give her those rights?
YOUR ARTICLE STATES: “Basically, if the resident beneficiary has not defaulted yet, give him time, he eventually will.
Really? This is your assessment of your fellow human being? “Give the mooch time and he’ll just default again?” This is the kind of intellect I’m having so much trouble dealing with here. I’m proud to say that I/we tend to have a considerably higher respect for, and confidence in, the people with whom we deal. Our methods clearly assure any homeowner in default that they will NOT have to relinquish their hard-earned equity, even were they to default in their payment obligations a second time.
YOUR ARTICLE STATES: “This does create a scenario which fits nicely with Bill Gatten’ mantra, one that he repeated over and over again: “Caring costs money, and stay unassociated with the end-result.”
FACT: The “mantra (your term)” is misquoted, as well as grossly misunderstood. It would be accurately re-stated as: “Be honest and stay unattached to the outcome…caring costs ‘too much.” The “costing too much” in this context has nothing necessarily to do with money...it refers to integrity, fairness, accurate reporting of events and treating our fellow humans beings with respect and dignity. We teach that when one “cares too much (i.e., anticipating a profit…or maybe just an ‘Atta Boy’ for a job assumed to have been well done),” he will all too often be tempted to purposely misstate pertinent facts to the detriment of another person or idea solely in order to ingratiate himself with his peers and/or superiors of like mind…and spirit. I truly pity the person who has missed this (so extremely valuable and crucial) concept, as Mr. Lipton or your editors have, I fear…”Caring too much about a given hoped-for self-serving outcome will invariably cause one to compromise his/her own integrity…it’s never worth it.
YOUR ARTICLE STATES: “The complexities of the trust make it difficult for anyone to understand. As a law student who has taken property, real estate litigation and fiduciary relations I had trouble keeping up with what it all meant…it took me at least two weeks to put it all together.”
FACT: The total complexity of our program follows (but do beware it apparently takes some of our slower students as much as two weeks “to get it”). As an aside: do note that (despite needing to be capitalized), having taken Property, Real Estate Litigation, and Fiduciary Relations—does not a fair and “un-agendized” person make; nor does it place this student in a superior position of knowledge over those of us (and our own in-house and retained legal counsel) who have taken the same courses and fully understand and apply their concepts every day of our lives.
What we teach is that, in order to best avoid the myriad pitfalls, risks and rampant deceit of so-called creative financing…JUST DON’T DO IT! There’s a better and far safer way.
We maintain that one would be wise, if confronted with the need for seller financing, to place the property safely into a bona fide and fully legal 3rd party trustee, beneficiary-directed land trust, as doing so is directly analogous to holding the property in Escrow for the term of the agreement. From that point on, one need only deal with the trust’s beneficiary interest rather than the property’s ownership (title). Ergo, any beneficiary of such a trust with at least a 10% interest in it, whether on title, on the loan, living in the property or not, is fully entitled to 100% of all the Fee-Simple benefits of real property ownership (including income tax deductions). And all of this is effected wholly without comprising a lender’s security interest, violating their due-on-sale clause, subjecting the property to either (any) party’s creditor liens, lawsuits, bankruptcy actions, actions in marital dissolution, IRS tax liens, partition action, creditor charging orders, probate or ancillary intestate administration…or loss of equity.
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Some Frequently Encountered Arguments to Put an End To, Before They Crop Up From Other Inadequately Informed Detractors:
Title 12 of the Code of Federal Regulations (12CFR 591-vi), which appears to contradict the US Code (12 USC 1701-j-3) is specifically not a law! This entry in the title is, instead, a notation of prima facie evidence of the regulations found in the US Code.
Title 12 of the CFR (as originally promulgated by the Federal Home Loan Banking Board, FHLBB, which is now the OTC - Office of Thrift Supervision) is one of several CFR titles that specifically have not been enacted into law (See Sec. 204 of Title 1 of the Code).
The IRS authority for full income tax benefits by a resident beneficiary in a qualified property, who need not be on the property’s title or on the loan: IRC §163(h)4(D) also see IRC §677 and IRR 92-105
The “Illinois” land trust is legislated, authorized or accepted in principal and effect throughout the US, excluding only Tennessee and Louisiana. Its legitimacy in a particular state relies solely on that state’s acceptance of inter vivos real estate trusts in any form wherein the trust is not characterized (by the state) as a lien on the real estate (i.e., re. ownership in Use Vs. Trust), as well as reliance upon: 1) the Doctrine of Equitable Conversion, 2) the Doctrine of Merger) 3) the exclusion of “land trusts” per se from any extant Statute of Uses.
Our fervent desire and our company objective is to provide safe and legitimate solutions (via our land trust systems) for those who would deign to be investors, and/or real property owners of any kind, who would forgo enormous ill-gained profits in exchange for security and safety (e.g., avoidance of all the dangers, risks, pitfalls, downsides, and need for subterfuge in real estate acquisition and disposition).
Note that in our program the subject property is not being sold, or transferred beyond the owner’s (settlor’s) nominated trustee: even though all the features and benefits of homeownership can be passed to and enjoyed by a remainder agent/co-beneficiary who would live in, and maintain, the property under a properly structured leasehold agreement with the trustee.
Q: Think about it. Instead of the standard gloom and doom: What about a future headline in your publication that would read something more like:
Is There Is In Fact Finally a Safe and Legitimate Way to Avoid the Unscrupulous and Unconscionable Practices of Those Who Prey Upon the Down-and-Out and Disenfranchised?”
Sincerely,
Bill J. Gatten
North American Realty Services Consultants
POB 6520 Platt Ave. #548
West Hills, California
1 (800) 207 4273
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
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