by Bill Gatten
A caution to always seek out the advice of a competent attorney before "trying this at home" is always good advice, but I find it difficult to proffer truly good (non-legal) advice on the subject of seeking the right attorney with regard to the PACTrust(tm) or land trusts in general. In fact, I find myself "...jest a tad 'twixt a rock and a hard place" here (as it were), mostly because... they jest ain't hardly none a'tall around these parts (as they say on Jerry Springer).
Although I certainly do not advocate proceeding in any real estate related transaction without the advice of a "good' and "knowledgeable" real estate attorney, the quandary in which I find myself is there are very few attorneys who know a lot about the use of trusts in general. Then there is the fact that there are even fewer who know kidney beans from koala bears about what a "land trust" is...much less how it differs from other living trusts, and what it's capable of doing. Many attorneys have never even heard of such a thing; and there are even fewer yet who are competent to offer sound advice-pro or con-relative to the use or safety of an "Illinois-type, revocable, inter vivos, title-holding beneficiary-directed, third party trustee, land trust transfer (the PACTrust(tm))."
Ordinarily, when an uninitiated attorney is engaged for the purposes of reviewing a land trust transfer-much less a PACTrust(tm) with all of its attendant appendices, directions, Escrow documentation, creditor letters, etc.-he or she is faced with a true pointy-horned dilemma. The only two options available are:
1) Get into Nexus-Lexus or out to the law library and spend hours in getting educated on the advent and history of land trusts, or
2) Render advice (pro or con) on something they know virtually nothing about (and it will always be 'con," I can assure you).
I'd presume no less than 10 or 20 hours would be needed to thoroughly research the pertinent local and federal codes and cites, and the myriad features and uses of the land trust (i.e., a bill of from $1,700 to $ $5,000); Think about it...if you were a busy attorney with your itinerary over-burdened with time constraints, what would you prefer to do? Would you opt to:
1) Spend your "billable" hours doing hard research for free for a transaction you'll probably never see the likes of again;
2) Risk your client's walking away and your receiving nothing for your consulting time, or
3) might you attempt to convert the entire transaction to something else" something you better understand, and are more competent to advocate...and on which you could make some money?
Similarly, if you were the client seeking and hoping to pay only for a simple review and approval of a set of documents, would you be willing to finance your attorney's continuing legal education at the rate of $175 to $275 (or ?) per-hour?
Probably not.
My guess is that you'd relent, as many do, and be coerced into accepting the suggestion that the entire transaction should be transformed into something more "manageable (for the attorney)." Perhaps a nice "Contract for Deed" or maybe a little seemingly innocuous "Lease Option." After all, let's face it, there just isn't much billable potential in telling a client, "I'm not competent to review these documents...you should see someone else."
Taking the advice to "convert to something else" clearly means reverting back to the very downsides, short falls and serious risks that the NARS PACTrust(tm) conveyance concept was designed to avoid and protect you from in the first place: shortfalls such as the lenders' due-on-sale clause or alienation admonitions; the risk of a resident's claim of "Equity" to forestall eviction and force judicial foreclosure; the constant threat of the seller's or your buyer's creditor and/or tax lien judgments attaching to the property (or the Option on it); the insidious susceptibility to attachment of the property due to partition actions and/or charging orders against individual participants by judgment creditors; risk of involvement in the other party's Probate or forced ancillary administration; recordation and public notification of the transaction; absence of a third party holding device and trustee to ameliorate potential for disputes; etc...er...to name a few.
If you or I were to consult with our licensed, board certified general medical practitioner about treatment for a brain tumor, a good one would refer us to a neurologist. However, the mindset of the legal practitioner is all too often analogous to a physician's suggesting that we simply contract a more manageable condition. "I don't know much about the brain, so how 'bout I treat your for hemorrhoids instead? Here. Take this. Pay me. Call me in the morning, and if this pill doesn't work...great, just let me know and we'll switch to another disease."
So (you ask), "Well, should I seek the advice of an attorney or not?" Yup you should! Indubitably as a matter-of-fact (so say I)! However, do be sure to choose a truly competent one who has experience with land trust transfers in creative real estate transactions. And if they start talking about Lease Options, Lease Purchases, Land Contracts (Contracts for Deed), Wrap-Around Mortgages, Equity Shares, Subject-To's or Silent Seconds...run! (Unless, of course the attorney is your brother-in-law...in which even it will be you who is facing the dilemma).
Are there any attorneys you could recommend? Thanks for asking but, No. Although there are a few with whom I've become familiar who do understand the concept (albeit a limited few, to be sure):
Gary Gitlen, Agoura Hills, California;
Bill Bronchik, Denver Colorado;
Mark Warda, Ft. Lauderdale. Florida;
Bryan Dunklin, Dallas, Texas;
Jay Swob, Cincinnati Ohio;
Henry W. Keno, Chicago Illinois (but he's dead),
Paul De Witt, Los Angeles, California;
Martin Slater, Los Angeles, California
Michael Kilmartin, Simi Valley, California
Some attorney quotes in answer to "Why aren't there more attorney who know about land trusts?
"Because very few know how to use them and even fewer recognize all the benefits."
Mark Warda, Attorney, Florida
"If you can't find the expertise [when seeking a competent attorney re. land trusts], you have no choices but to keep on looking, or take upon yourself the task of trying to educate your advisors and counselors."
Jay Douglas Swob, Attorney, Cincinatti
"Another problem with using attorneys is that most have a negative attitude. They will probably advise against using a land trust because they [themselves] don't understand it."
Bill Bronchik, Attorney, Denver
"In that the 'land trust' is less frequently used outside of Illinois where it was first created [1891], it is unlikely that many will be immediately familiar with its benefits or structure."
Henry W. Kenoe, Attorney, Chicago (Dc'd) (Keno on Land Trusts, IICLE, 1989)
"No! Don't do it! Oh m'god! These can only be done in Illinois. They violate the Doctrine of Stepped Transactions. Lease tenants can't take tax write-offs. You crazy? No court in the country would see such a thing as a conversion of real estate to personal property! Run Gertrude, run! Run like the wind!”
But wait. Before you rush off, Gertrude, let me create an all-inclusive wrap-around mortgage for you instead. It'll do the all the same things and I'll only charge you $2,000." The Due-on-Sale Clause? Oh, don't worry about that...lenders never pay any attention to those things. I'll build in a nice exculpatory paragraph anyway (so you can't sue me) and it'll be in bold print. Could the buyer get the property embroiled in a lawsuit or tax lien while you're still on the mortgage loan and unable to make the payments or sell the property? Well, I suppose so, but that hardly ever happens either...don't worry about it. Could you evict the buyer if he doesn't make his payment? Well, no. But, hey, there's always judicial foreclosure, Unlawful Detainer, Ejectment and quiet-tile action: which I will be more than happy to handle for you (at $225 per hour plus court costs...no guarantees of course).
Huh?
"Would the property be tied up in the other party's Probate proceedings, if they die?" Well, um, yes, but most people don't ever die: but even if they were to, that would just be a matter of another paycheck for me, now wouldn't it? I don't see any problems here"
Anonymous Riverside, Ca.
"There is no person on earth who is more apparently knowledgeable about the law than an attorney who doesn't know what the hell he's talking about.”
Bill Gatten Seminar Leader Northridge, Ca.
NOTE: Bill Gatten, the author of this article, is not engaged in the practice of law, or in rendering other dependable professional advice. If legal or other expert assistance is required, the services of a competent professional should be obtained. Do not expect Bill Gatten know anything. ANOTHER NOTE: Want to get your client's and their attorneys to do the right thing? Give them a copy of the article.
Avoiding Landlord Cash Flow Woes
By Bill Gatten -
Having owned dozens of income properties, in none of them have I laid out a dime for management, maintenance, repair, upkeep property, tax insurance or vacancies. Why not? Because each property is held in a title-holding land trust in which I have a long-term "co-beneficiary ("resident partner")" who handles the mortgage, as well as all maintenance, repair, upkeep, property tax and insurance for me. These co-beneficiaries gladly cover such costs, in exchange for full income tax deduction, future appreciation potential, equity build-up by loan principal reduction, and the myriad other benefits of homeownership. The agreement between us provides that at the end of the trust's term (3, 4, 5 or maybe 20 years) we will sell the property, at which time they and I will share in the net profits at that time. Their option at termination is to either-1) refinance, pay me off, and keep the property, or 2) they can sell the property, pay me off, and keep the profit.
It's important to note here that anything I may be giving up in future appreciation (or a portion thereof), I will have been well repaid by my increased income and the total absence of vacancies, maintenance costs and management expense. If you own rental property, why not eliminate your costs by increasing your rents and selling the tenant something other than just "Use and Occupancy"? Why not sell the tax-benefits; appreciation potential; loan principal reduction; water rights; mineral rights; Pride of Ownership; etc. Doing so will greatly increase your rental profit while simultaneously reducing your tenant's rental expense.
You get more, while your tenant pays less? How is that possible?
Each of the commodities mentioned has real value; and each is sought-after by tenants who would prefer being homeowners. So...why not relinquish these items for increased income and profit? You'll not only make more money in the process, but your tenant will pay less per-month on an 'after-tax' basis.. For example, consider the negative effect of renting: no tax write-off; no permanence; and no access to the property's future profit potential. Now compare this tenant to one "renting" for a bit more per-month, but with full tax benefits, profit-potential and all the incidents of homeownership. Given a 1/3rd tax bracket, $1,500 in income buys only $1,000 in rent; but the same after-tax amount of income supports a $1,500 house payment, upon which there is virtually no tax. Which one is better?
Most investors today tend to refrain from buying houses, townhouse and condos for long- term holds, because there's typically so little money to made by renting them out and they are so management intensive...but, as you can see, it doesn't have to be that way at all. Ten houses with no expense tends to beat a 10-unit apartment building for income, value and freedom from sweat and worry.
It's interesting to me that when a farmer butchers a pig, the inedible parts are not thrown away. Snouts, brains and tongues are big with dog food companies; hooves sell to glue and gelatin manufacturers; stomach linings go to pharmaceutical companies for making life-saving Heparin; hair for paintbrushes; ears for dog chews, bushings and coin purses; skin for shoes, jackets and footballs; tails for... (they must be good for something...S&M floggers maybe?). The practical pig grower tosses nothing out: so why shouldn't us landlords learn from that? How much above rent would a tenant pay for tax benefits, appreciation potential, and a piece of the American Dream? What does a tenant get for his rent payment? A foul weather shelter and the right to help pay off his landlord's loan!
Q: Why would I give up these things (tax write off half of the appreciation, equity build-up, use occupancy possession, etc.? Isn't that why I bought the property?
A: No! You bought to make a profit: and the way to maximize that profit is charge more rent in exchange for certain features and commodities you don't need or can't use anyway, and entice the tenant to cover all your costs.
Q: How is it that the IRS will allow you to "give" the tax benefits to a rental tenant?
A: Under IRC Section 163(h)4(D), any beneficiary in a land trust is treated as an owner of the real estate, so long as he or she: 1) Makes the payments, 2) Has the risk and burdens of ownership 3) Has a contractual obligation to pay, and 4) Has either an equitable interest in the property, or a beneficiary interest in an estate or land trust that holds the equitable interest.
Q: Yes but what if the tenant defaults, won't it be hard to get him out of the property if he's an owner?
A: He's NOT an owner. The trustee is. Even though he has all the benefits of ownership, the tenant remains subject to simple eviction. Any default constitutes constructive notice of his intent to sell you his interest at Fair Market Value--which you may determine to be nominal. If he disagrees with your offer, he can pay for an MAI appraisal (expensive), pay a $2,000 Default Fee and all missed payments and penalties and then prove that you owe more. However, if he were to ever prove such monies owed, the contract provides that they'll be paid by an unsecured promissory note, to be paid-out upon sale of the property.
--Bill Gatten
Big fat “lies” to tell so you can have your way in the Creative Real Estate Business
By - Bill J. Gatten
Have you ever ridden a roller coaster? Did you ever stop to think why someone would that for the thrill of it, but they wouldn't want to ride in a rattling little jalopy going the same speed on a winding mountain road of the same track-width, with sheer 200 foot drops on both sides,
while someone the never met did the driving? Well, the answer is obviously that one is real and dangerous, while the other is real but not dangerous. On the roller coaster you can have the thrill of fear with a predictable safe outcome, rather than experiencing fear with death being a potential (if not probable) outcome. The squeals and screeches emanating from the roller coaster ride are usually articulated through gleeful smiles and feigned contortions of the face, followed with
“Wheeeee!” or “Whoopee!” or “Yaaaaagh!” Whereas on the narrow mountain-road in the out of control jalopy, the screams are sincerely generated and followed with a loud tapering-off exclamation, like” “Oh sh………..…!”
Now take prevarication (lying) as another example…that's another fun and dangerous pursuit more popular with some than others, which invariably wreaks disastrous results (e.g., shame, a whack on the head, a poke in the eye, jail time, loss of respect, loss of friends, destroyed
future, etc.). But have you ever secretly wondered what it might be like to have a “license to lie”…tell big ol' fat bold-faced mendacities all day long…say, for just a day, to get what you want out of people…but not risk any damage to your good name or your Karma. Wouldn't it be great to have that privilege, but knowing in advance that all the lies you told that day would actually turn out be the God's Honest Truth by the end of the day? Would that be cool, or what?
Well, let's try a little experiment. Here are some of the wildest lies imaginable that one could tell in order to acquire, control, sell or lease properties. Let's see how many of them could be made to fly (i.e., actually become the truth at the end of the day) via the use of the
North American Realty Services Equity Holding Trust system (the “NEHTrust(tm) also known as the “PACTrust(tm)”). And remember…none of these statements have to be true. There's a day long moratorium on honesty…these assertions are simply what you might say--true or not--in order to get your way. Accept them as flat-out lies, and ask yourself…”What other baloney could I spew to get my way”; or ”If this lie were in-fact told, would it get me what I want?” Also know that your objective is to acquire that property, or the control of it, at all cost…but with no cost to you. Now, remember, you're also flat broke and your credit stinks.
For the landlord whose property you would like to control
Mr. Landlord...I saw your 'For Rent' ad (sign), and if I can have the opportunity to buy the place from you in a few years…
• I'll pay you more than your asking for rent
• I'll pay all your maintenance costs during the rental agreement
• I'll pay all your property tax expense while I rent from you
• I'll cover all your management costs during our agreement
• I'll eliminate all your negative cash flow
• I'll take 100% responsibility for the property and everything associated with it
• I'll put in a 3rd party tenant for you, and guarantee his rent and performance 100%
• I'll set our arrangement up so that the property and the title are shielded from bankruptcy, tax liens, creditor claims, probate, or marital dissolution legal actions on your part
• I'll eliminate all of your negative cash flow
• I'll put and end to your vacancies
• I'll completely annihilate all land lording woes and headaches for you, forever
• And, sure I'll have all the cash needed for the deal
For the 'For Sale By Owner’
Mr. FSBO. I saw your For Sale by Owner” ad (sign), and if you can stay on the loan a while longer, say for a couple years, and leave your equity in until then, I'll buy the place from you now for full value. And not only that, but…
• I'll pay you more for the property than your asking
• I'll even pay more for the property than it's worth
• I'll take over all payment responsibilities without even going on title
• I'll pay you the full value for your home, townhouse or condo and give you all cash
• I'll pay you full price-- 1) all cash, or 2) buy for a higher price on your terms
• I'll preserve and protect all of your equity through this bad market
• I'll pay all your maintenance costs
• I'll pay all your property tax expense
• I'll cover all your management costs
• I'll buy the property from you today, but let you keep half of my appreciation over the next 5 years
• I'll buy your house for full value and have you keep the principal reduction
• I'll buy your house and put you into another one with only minimal up-front cost and no credit check
• I'll buy your house and put you into another one with no down payment
• I'll buy your house and give you a letter than will allow you a 100 percent Debt to Income Ratio credit on you next loan
• I'll arrange it so that you can stay on the loan and give me the benefits of ownership without a Due-on-Sale Clause violation
• I'll never need to be on your title
• I'll protect your from any liens, suit or creditor judgment that
• could befall me
• I'll close in a week (if the Escrow and documentation process doesn't slow me down)
• I'll cover all back payments; save, clear up and re-establish your credit with your lender (re. arrearages, back taxes and penalties)
• And, sure I'll have all the cash needed for the deal
Bold-faced lies you can tell a tenant/buyer to manipulate him/her
Dear Mr. & Mrs. Tenant/Buyer…thanks for calling. Through me and my
special know-how and broad range of brilliant expertise…
• You can lease the property with a full tax write-off
• You can rent the property without a credit application
• You can buy the property without a new bank loan
• You can buy the property without a credit application
• You can buy the property without a down payment
• You can put your closing costs on a credit card
• You can rent the property, but still participate in it's appreciation and equity build-up
• You can rent the property, and still participate in the mortgage loan principal reduction
• You can own the property without great or even "good" credit
• You can own the property, versus renting, and pay less than you would to rent it
• You can enjoys all the benefits of homeownership without further scrimping and saving
• You can live virtually rent-free, given reasonable appreciation over time
• You can buy now with all benefits of homeownership now, but finance later when/if you feel like it
• You can have 100% of the benefits of Fee Simple Real Estate Ownership, including tax write-off, and never have to go on title (thus protecting your home from the threat of litigation of all types)
• And, sure I'll have all the cash needed for the deal
OK…now the jig's up (a phrase, the origin of which I wonder about a lot)! All your big fat lies have to suddenly become truths now. Well, if you were planning on utilizing the Equity Holding Trust System (PACTrust or NEHTrust)…then they are in-fact all true…plain and simple! Go
back and look: every one of these is done regularly, or is immediately exploitable with the NARS trust programs every day.
I'd dare anyone to try to convert ALL the above statements to truths when using any 'other' creative financing vehicle.
You might want to give this one a lot of thought folks.
Bill
The Due on Sale clause: a peek at what some people believe
By Bill J. Gatten
A letter to a client (not ours) from the Bank of America
Dear _____________________,
We received your request to transfer the above referenced property into a trust. In order for you to qualify for an exemption on the Due-on-Sale Clause in your mortgage loan, the transfer must meet the conditions set forth in the Garn-St. Germain Depository Act of 1982 (ACT)
Based on the information provided, it appears the property was transferred to an ineligible trust as allowed for under the ACT. In order to transfer the title of your mortgaged property into a revocable living or inter vivos trust, “this Bank” requires that the following conditions
be met:
1. The current borrowers of record are the same parties signing the Living Trust Agreement as Trustees and must remain in the beneficiaries and occupants
2. The Living Trust Agreement must include the power to borrow and to encumber (pledge) the property as collateral;
3. You just provide us with a copy of the recorded deed transferring title of the property into the name(s) of the Trustee(s) or the Living Trust; and
4. A copy of the Living Trust Agreement, verifying that the above conditions are part of the agreement; and
5. A letter from the attorney stating that the transfer of property's title to the trust is an effective transfer; and
6. Complete and return the W-9 form to certify the tax identification number of the beneficiary
We see this as a possible cause for enforcement of the due on transfer clause.
Signed Xxxxx
For THE bank of America
My commentary on this letter:
Poo! This is ridiculous, but it is the reason we never advise the client to contact the lender. Whoever it was who composed this tripe doesn't even know the name of the law they're referring to (it's the Federal Depository Institutions Regulations Act of 1982…not the Garn St. German
Institutions Act) The “Garn St. Germain Act” is what the bill is called for brevity because senators Garn and St. Germain presented it and pushed it through Congress).
1. There is nothing in Garn-St. Germain that says the grantor in any living trust must reside in the property. Title 12 of the Code of Federal regulations (12 CFR 591-vi), which is an interpretation of Garn St. Germain by the National Board of Thrift Supervision (formerly the
Federal Home Loan Banking Board) infers that: but it is patently bogus. The written and adopted law always overrules subjective interpretation, and Title 12 of the U.S. Code (USC1701-j-3) is the LAW, and specifically explicitly states a mortgaged property 'can' be leased out by any SFR borrower, absent any express provision in the loan to the contrary (Special Length of Occupancy Provision), so long as the lease does not exceed three years or involve an Option to Purchase!
And as far as the DOSC is concerned…it matters not what bank would say, require or state on
the loan documents…this law cannot be superceded by any other agreement, whether oral or written. When 12CFR591-vi was composed it was because the Federal Home Loan Banking board felt that GSG was too lenient on the mooches (the borrowers) and too strict for their own kind (lenders), so they decided to take it upon themselves “tighten it up” in their own
favor: none-the-less the LAW still stands and will still prevail.
2. There is nothing in a land trust that prevents the beneficiary from borrowing against the property…but even at that I don't see how that information can affect the bank in any manner, since they already have the collateral assignment by virtue of the mortgage or the trust deed.
3. There is also nothing in GSG that says a nominee trust can't have a nominee…that also is silly. Anyone can be nominated to be a trustee in a living trust…especially one in which the beneficiaries retain the full power of direction.
4. The Bank may demand a copy of the recorded deed and the trust agreement, but can take no exception to it, unless there has been a violation the federal regulations' governing the transfer and the bank's rights under FDIRA (Garn-St. Germain).
5. The Bank cannot demand a copy of the trust (though they always do and sending it to them is no big deal since the trust itself needn't show any beneficiary other than the borrower…that's why we advocate having the trust in the borrower's name only), as the entire purpose of the trust is to keep all matters relating to title safe and secure from other creditors and prying eyes. And they most certainly should never be given any other document relative to the overall transaction.
6. There is nothing in Garn St. Germain that says a living trust must be created by an attorney (these people could have bought a living trust kit from Nolo Press and done it themselves): or especially that an attorney has to certify that the transaction is an “effective transfer (whatever that is supposed to mean).”
7. There is nothing in any law relating to trusts, or within the original loan documents that would require issuance of a W-9 re. the beneficiaries.
8. “Possible enforcement of the DOSC” --- Baloney! Some attorney could get famous on
9. this one (we'd give it to Fred Crane of Riverside, California if he was still practicing law…he's the attorney who caused GSG to come about in the first place by winning the landmark Wellenkamp decision…against this same Bank of America…in 1980 or 1981). Talk about your Functional Fixedness Manipulation! This is an example of the banking industry's mentality for you. Pay someone $29,000 per-year and all the Diet Coke they can drink and you have a Nouveau Hitler on your hands (“to Hell with law, we'll control people's lives in any way we see fit…it's the Golden Rule…We got the gold, so we make the rules: and if there aren't any rules…we'll make some up”).
Bill Gatten
A LETTER TO ADAM
By Bill J. Gatten
One of our newer network members, Adam Albright, posed the following
scenario. My response to him follows his question.
Dear Bill,
I've been visiting a lot of homeowners lately following my telling them that I'd be willing to buy their home from them if they would be willing to leave their equity in the property and stay on the loan for a year or so while I take over the burden of ownership.
However, when I get to the appointment, after explaining everything about the PACTrust, they invariably end up wanting to "Think it Over," or they get greedy and want more of the deal!
Please help me with a way to get them to "cut to the chase" and make the deal with me.
Regards
Adam
-0-
Adam,
First of all, cutting to the chase is not their job…it's yours. You're the one in charge of your sales call.
Secondly, you can NEVER, NEVER sell the NARS PACTrust™ to anyone! It's taken you weeks to understand it “pretty good”: how is a seller going to get it in 15 minutes? The PT is the WAY you do it all, not WHAT it is. All you ever have to sell is the idea of the prospect's keeping their loan in place, agreeing on a value, and letting you take over all
the responsibilities.
The PT is the way you protect the seller and the property's title. It's not at all something you can, or need to, sell. Say I'm a frankfurter salesman, and I tell you what's in my hot dogs, I'll bet you'll have to “think it over.” Chances are, however, that you will still have a hankering for that dog, but now you'll go over to my competitor who has inferior meat, and you'll buy his hot dog…“BECAUSE” he doesn't tell you what's in it.
Here's the deal, Adam. When these prospects don't end up doing what you think they should, it's because they are playing a different game than you are, and they simply don't know the rules of your game or that its you who is running it. They always think they are, but their rules
don't involve you: so that has to change, and you're the one who has to change it.
The most important part of acquiring properties is setting out the buy-sell rules at the start and not playing the game at all until all players are in agreement about the game to be played and by whose rules it will be played. Think about, if you set down to play Poker with me and
I sit down to Play 'Hearts' with you at the same time, the fact that the cards look the same doesn't mean anything. Neither of us will ever get what we want, and chances are good that within ten minutes we'll each think the other is clearly stupid.
Here's the solution to your enigma in a nutshell…remember never to vary from the following…ever again…(it's solid gold). When you make the initial call:
Establish rapport
"Hi, 'saw your ad. 'How are ya? Nice Day. Got any warts? Is that a booger on your lip? Can you tell me a little about the house; etc.”?
Determine that the prospect has what you want
I.e., don't play tin-can telephones with a stump: I.e., YOU set out the rules (YOUR rules)
early. That is: “What I'm looking for is someone who for X would be willing to do Y. Or, “What I'm looking for is someone who, for a faster sale and better selling price, might be willing to keep the existing financing in place for a while, and be able to carry it for a few years,
while I cover all the costs and responsibilities of the property in exchange for some tax benefits and the option to refinance it in 3 or 4 years."
If the answer you get is not what you want to hear, you merely say: “I see, and why IS that?” If that doesn't draw out an easily solvable objection, and the prospect insists on being obstinate, or is totally nonplussed with you, just offer your 'thanks' and move on the next call (they're free and there's an endless supply).
Locate the Pain (You can't cure 'em if they ain't sick)
E.g., “How long have you had the property? How long has it been on the market?
What condition is it in? Are you getting many calls on it? Yeah there are lots of those in the newspaper these days. I'm hoping the economy holds for a while, but it's looking little bleak out there for some. Is the property listed with a broker? No? May I ask why not? Aren't
the payments and upkeep starting to be a real burden for you? Do you have any idea why it hasn't sold? Was that ASKING PRICE determined by an Appraisal, or is it pretty much a PFA? (*Plucked From you're A..).
Close the deal by making an appointment
I'm open to take a look this evening if you are. How does 6:30 sound?
Set the parameters of your meeting
"Mr. Jones if you'd bear with me for a minute more, I need to verify some of the issues re. our
meeting at the property. Assuming everything I've said so far and everything we'll discuss in detail this evening works out to your satisfaction, is there any reason you can think of that we can't come to a firm conclusion tonight? (No? why is that?) Let me also ask if I may...Are you
the sole decision maker re. the property, or will there be someone else we'll need to get involved? (There is? Well, let's be certain that they're a part of this evenings meeting…because when you're ready I want to move very quickly).
Also, please assure me that when we do agree on all the terms, assuming we can, I'm not going to be told that someone else has to be consulted or that someone will "Have To Think it Over…as there'll never be a time you can't change your mind…fair enough?" (You say I 'might' be told that? Well, that's no problem then: what more do you need from me for you to be able to make the decision? And for what day should we reschedule our meeting?”
Meet at the property
OK, now you're at the property with Mr. and Mrs. Jones. You've arrived with your Option Agreement completed; your Purchase Offer completed but not signed; and your Real Estate Authorization (to talk to the lender) is completed as far as it can be...you now go over your favorite parts of 1 and 3 again, and you let them see you take notes on ever single little flaw in the property (more Pain)...
After the signing, give them a chance to back out
This further solidifies your deal, affirms your character, and prevents an attack of
'Seller's Remorse' later on. Without giving them the opportunity to back out should they change their minds…you'd lose anyway, and find it virtually impossible or imprudent to force them to proceed. It is therefore a good idea to give them the chance early on. I.e., once the deal
is signed and the hands are shook, pause and ask in all sincerity: “Does our arrangement feel good to you? It's not to late to change your mind. I just want to make sure you're as absolutely comfortable with everything as I am.” If we've missed anything or left anything out, it's
not too late to discuss it."
Adam, remember that the key in all of this is to make sure than you don't go out on an appointment (ever again) without knowing exactly what you're going to get when you get there and exactly what your going to bring home.
Good Salesmanship is no longer smoke and mirrors and hidden persuasion: Salesmanship today is simply showing up, paying attention, being honest and staying unassociated with the end result to the very end. That's all there is to it. If a prospect honestly doesn't want what you're selling and you've presented your proposal clearly, why push? Merely ask: "Is it over then? (Use that exact term)." If it is over (though it probably won't be yet) they'll tell you. If they just want to negotiate further they'll say, something like, “Well, that depends on you." Then you simply ask what they need from you to make it work for both of you.
How to make a mud pie from scratch
Or…”Making Seemingly Complicated Stuff Uncomplicateder”
By Bill J. Gatten
Along with our many accolades from the majority of our clients, in recent months we have received some (honestly deserved) criticisms concerning time-delays in the PACTrust(tm) documentation process, from inception to the Close of Escrow. To any who were affected, we offer our sincere apologies, and thought it might be helpful for all interested parties to understand our documentation processes, and know how they might be assisted and improved.
Understand that we offer full documentation, recording, title search and escrow processes. To do it right however, we have to rely on several unrelated outside entities in the process: title co., escrow co., trustee, collection service, insurance co., taxing authorities, etc. As a result, we find ourselves too often completely at their disposal and mercy…and unable to do much about it (maddening as hell!).
Essentially, there are three (3) ways for anyone to handle a PACTrust:
1) Do it all yourself without us, using the forms and instructions in your own documentation manual, thereby providing your own trustee and bill paying service;
2) Employ NARS to do it all in the safest and most accurate and secure way; or
3) Engage NARS to do it all, but do it outside our standard procedures. In other words, let us do everything for you and send you the package for you to “escrow” yourself, as one might, say, a L/O, Wrap, CFD or Equity Share, etc. (see the steps below).
Do note, however, that by handling PACTrust transactions within our “standard” parameters, we have garnered a 100% success rate relative to lawsuits, liens, judgments, IRS acceptance, lender acceptance and disputes between parties. However, we have no history to draw upon relative to doing it yourself, or using our “streamline” process (brand new).
The “standard guidelines” (the way it's normally done, and they way we recommend it always be done for maximum safety)…are these:
1) To start the documentation process, complete Appendices #1 - #5 in the “10-Step” Process of Documentation Manual, and forward them to us (preferably by E-mail or Fax). When received the appendices must be accompanied by our Retainer Fee ($500) AND a Check made out to Escrow for at least $250 (as instructed in Appendix 2): this “Good Faith Deposit” can be any amount up to and including the total estimated closing costs (any overage will be refunded at close).
2) We review your package the same day it arrives, for missing, doubtful or incorrect information. We then call you with questions or to complete missing information. You may, at that point, give us permission to speak with your clients (buyers or sellers) if you wish, and we can get the information from them. This call is always made on the first or second day following our receipt of your initial package…should we deem it necessary.
3) The Verification of Data Report (VODR) is then generated on the 1st or 2nd day following our contact with you and forwarded to you for your acceptance, preferably by E-mail or Fax.
4) We then wait up to 48 hours for your response concerning additions or corrections…or approval. If no answer we proceed to the next step.
5) Following acceptance of the VODR, first drafts of all documents are generated and mailed to YOU with special arrangements in advance, drafts can be E-mailed in PDF format. Simultaneously, we forward the entire package to Legal for review and acceptance. i.e., they give us the “OK” w/r to your Rider verbiage or alterations.
6) We then wait for your approval…up to 48 hours.
7) The second drafts are mailed to you (Fed Ex or UPS: Overnight if deemed necessary) and to all other interested parties.
8) We then wait [up to] another 48 hours for approval or alteration by all parties.
9) Upon approval, the final drafts are completed and sent to Escrow for the forwarding of them to all parties…ALONG WITH their Escrow Instructions and all transfer documentation.
10) Simultaneously with the forwarding of the final documents, Escrow forwards its Escrow Instructions for acceptance and signatures by parties. It's a GOOD idea for you, or an Escrow offer you know, to handle the signing and notary process and collecting of the appropriate cashier's checks. You may also see to the recording of the transfer documentation if you wish in order to prevent delays that are often imposed by stupid recording officials or local title companies.
11) Upon the signing of final documentation, all originals (with original signatures) are returned, along with all necessary funds (cashier's checks only) to Escrow. Overnight mail is always best should time be of the essence.
12) Upon receipt of all necessary funds, and all ORIGINAL documentation, transfer documents (the deed) are sent for recording; the original documents are sent to the trustee with the required funds being sent to the collection service; the Escrow is closed (if there aren't any problems with the local recordation authorities); and all moneys are distributed according to the unanimously approved Escrow Instructions.
Now...can there be any problems with this system? YES! 'Although below I'll show you how to ameliorate them):
1) If original information submitted is not accurate and/or complete, closing is shoved back two days at the get-go.
2) If the VODR is not responded to quickly, the Escrow is shoved back another 2 days (and when we proceed without VODR acceptance, this invariably imposes time consuming re-documentation later on).
3) If the drafts, when received, are not tended to and accepted or corrected immediately, another two days are added (more than a week wasted so far)
4) Since we cannot complete 2nd drafts without acceptance of the first drafts, if they are not accepted or corrected immediately...there goes another 3-4 days or a week, or more.
5) If, in any process following (1) or (2) above there is an error that should have been caught in the VOD report or in the first drafts, all documentation has to be redrawn (sorry, but that's the way our current system is designed...has to do with very precise checks and balances in our data cross-footing…the system does not allow “patches”).
6) If Escrow has not received full instructional information from us (re. the information submitted by you) along with its mandatory Good Faith Deposit (for at least enough to cover the cost of the title search or Lot Book report), it is directed to cease all handling until such funds are in-house (that's why paying them up-front is mandatory).
7) If a title company in a particular locality were to 'drags its feet' relative to providing the Preliminary Title Report or Lot Book (as happens occasionally), the entire transaction is held up until such information has been received (or else, disastrous errors could be made in your disfavor). Likewise, if a local registrar's office or title company balks at recording because of not knowing what a land trust is, or insisting that the deed must be completed by a local attorney…then further prolonged delays can occur.
8) If the insurance carrier does not provide Non-Owner Occupied hazard coverage, the transaction will be held up until a new carrier is located and new insurance is put into effect.
9) Obviously, at this point if the parameters of the original transaction change (as happens frequently…resident is replaced by someone else, the MAV or loan payoff changes, a partner is added, etc.) more time-delays ensue.
10) After final signing, should a locality create problems (i.e., as in Md.) re. recording the deed, the closing can be held up for weeks (as we learned the hard way).
11) If any parameters not already acceptable to Legal (e.g., new Rider verbiage) is required, we then have to wait for another legal review and acceptance. Should such review require research ('happens very rarely), we can do nothing until they get back to us…'could take up to a week ('though that has only happened once in our history).
How can I speed things up and guard against these surprises and make it simpler?
Well, first off, it's only complicated from OUR side, because of the protections and safeguards we've built in for you. From your side, you merely sign by the check marks and return everything in the provided envelope (no action other than acceptance or corrections is taken on the VODR and drafts).
1) Procure your own Preliminary Title Search or Lot Book Search and release Escrow from the task
2) Handle your own Recording of the Title and Preliminary Change of Ownership Documentation (We prepare everything, you merely see to its placed in the public record at the county recorder's office)
Is there a way I can avoid the Escrow and Title company process entirely?
YES.
You can order our STREAMLINE DOCUMENTATION SERVICE, wherein we complete everything for you and send it all to you for all handling. In so doing, the only fees included are the NARS Facilitation Fee (1% of MAV—1/2 off for Network Members) and the Trustee Acceptance Fee (from $250 to $500) and first month's Trustee Fee ($39 to $139 per month—half off for Network Members).
Do you really recommend that though? No! However, the choice is yours.
What NARS does in the Streamline documentation service program
1) Obtain and verify all data for Appendices #3, #4 and #5
2) Prepare all documentation including transfer documents
3) Provide local legal review of all aspects of the transaction
4) Set up the trusteeship
5) Set up the collection service
6) Handle VODR, First Drafts, Second Drafts and Finals
7) Interface with you through out the process
8) Receive and make all corrections, alterations and amendments
9) Remain on hand for client consultation (for all parties and/or their advisors)
10) Remain on hand for interfacing with you, your clients, the trustee, the collection service and our own legal department throughout the transaction and the term of the Agreement.
YOUR steps and responsibilities in the Streamline documentation process
1) Provide us with completed Appendices 1-5, or provide at least phone numbers and instruct our office to obtain the information from the parties.
2) Obtain signatures of all parties re. acceptance of documentation, changes, monies to be disbursed, etc.
3) Procure your title insurance or Preliminary Title Report (or Lot Book)
4) Collect and disburse all-up front funds to the appropriate payees
5) Handle payout of any need insurance policy pro-rations
6) Handle payout of any needed property tax pro-rations
7) Handle or arrange for all signing and notarization functions
8) Return and mail final documents (all originals, and only originals) to trustee
9) Handle the recording of the transfer documentation
For anyone who may have been delayed, waylaid, dismayed by our documentation processes in the past: Pleeeeese! Don't throw the baby out with the bath water! We have been able to correct counter balance these weak spots quite effectively and can promise you great service.
A CHANGE OF ATTITUDE
I don't mean to sound maudlin or too "new-agey" here; but the one bit of magic that I have managed to glean from my more than half-century-plus on this wobbly little planet of ours is that we as individuals are absolutely in-charge. We are not only in charge of our own destinies, but also in charge of the very clockwork of the Universe itself. Although most of us live our lives wholly oblivious to that fact, we are none-the-less in absolute control of our health, our fates, our bank accounts, and our aspirations for ourselves and others (and the world at large).
Think about it…didn't we (you and I together) send a man to the Moon and stand with him in awe as he took his first step? Didn't we send space ships and video cameras to all the known planets? Didn't we invent cures for Polio and Malaria? Didn't we build the Hubble Telescope and put it into orbit around a beautiful, inhabited water planet in a remote part of the galaxy, just because we wanted to? Didn't we harness the electricity that eventually enabled this Information Age in which we are now all basking? Of course we did! There is no one individual who can take credit for any of that…it was humanity that did it, and it will be humanity who travels to the stars and cures all diseases, and conquers aging one day. And that's exactly who we are, and what we are capable of. We need only to be in tune with all of it, and to remain steadfastly aware of all of it, in order to utilize it and take credit for it. With each and every one of these achievements, somewhere along the line, a single individual with a burning desire to succeed in altering the entire Universe forever—with a little help from the rest of us—simply DID SO because they knew they could.
Here's my own little affirmation (as it were…a mantra?), which I have taped to the dashboard of my car, my bathroom mirror and on the back of my TV remote (with which I spend entirely too much time). It's yours too, if you want it. I have to say that it's done all right by me. But here's the caveat: If you read it over once or twice and think you understand its meaning, you will be wrong…it's far more multi-faceted than it appears to be at first glance:
I am perfectly in tune with, and solely in charge of, the Abundance of, and which is the Universe and all of Life: I will, therefore, continue to prosper and excel in the most spectacular of ways…always!
Dr. Tom Johnson
The core message here is simply that whatever it is that we choose to have, if we truly want it (need it or not), it will be given to us on a silver platter when we know for sure that it is our right to have it, and when we honestly 'expect' to have it. We can pray for it. We can hope for it. We can ask Santa for it. But if we've already tried all that, and are weary of all that mewling and moping and hoping; if we're sick and tired of screwing around and waiting for the good stuff that others seem to have more of than we do: then we must dig in and holler. We have no choice but to tilt our heads way back and proclaim, from the diaphragm, as loudly and sternly as we can, that what we want is already ours and by damn, we're going to have it…NOW! Its funny, but sometimes God doesn't appear to hear too good when needs are whispered as supplications. But when they are boldly demanded with stern self-assurance, he smiles and says: ”Alright! You finally figured it out! It's about time!” When you have asserted your self in this manner (figuratively or literally)…and really mean it…my solemn promise is all that you honestly command into reality will indeed appear.
The most closely guarded secret relative to obtaining is not the fact that if you truly want it with a good reason, that it will be given to you. There's a far more valuable tool that we need to understand. I can remember the “poverty days (my own)” of not too many years ago, when I thought repeating my mantras and my affirmations daily…with stern conviction…and paying larger tithes than I could afford, would bring me financial relief. It did not. It didn't do diddly (so to speak) until I figured out the solution to the enigma.
The enigmatic mystery all along was simply that if you don't think you deserve it, no matter how bad you want it, and no matter what you do to get it, you will not truly desire it (burningly) enough to demand it with every screaming fiber of your body and soul. And, until you do exactly that, your plans for achievement remain too undefined to allow the Law of the Universe to “know” what the heck it is that you're supposed to have.
Consider you're walking up to an airport ticket counter and saying, “I'd like a ticket please.” The ticket agent then asks, “Yes, and where would you like to go?” You reply, “Well…someplace better than where I am now.” Think about it…how far are you going to get before your realize that you're going to have to refine your objective and know for sure exactly where you want to be. You also must know when you're willing to leave and when you'd like to arrive, and what your surroundings should be like, once you get there.
The resolution of the “Mystery” then is: know what you want; brashly demand it without apology; know that it is already yours to have; expect it without embarrassment or doubt. Then, Voila! It's on its way and you can't stop it. Just be very careful what you pray for…because your gonna get it!
But wait! There's still another catch. There are a few things you must to do first in order to get aboard the Achievement Train. These items are not necessarily daily exercises, or life-changing goofy stuff you can't live with for long, and which embarrasses your family when they see you doing it. But they are the 'catch' nonetheless, and are summed-up very succinctly in the following quote by Louise Hay:
In order to eliminate [any] 'scarcity' in one's life, one must identify and relinquish some [veiled] self-serving need that relies upon that scarcity for its fulfillment
In analyzing this simple, life-altering truism, it become obvious that if, for example, one were to desire to, say, lose weight, he or she would have no choice but to give up something. For the weight challenged, take your choice: any two of the following will do (and you can keep all the rest)--those scrumptious high calorie foods; that insulin-spiking dietary starch; that satisfying couple'a cold beers every evening after work (Oh God! Please! Not the beer!); your sedentary lifestyle; or a blissful hour of not exercising every day.
Another prime example of a deeply hidden self-serving need that relies upon a scarcity for its existence is “Failure.” In other words: “If I don't attain any success, my need to bitch about everything and blame others for my failure won't be impinged upon, and I won't ever have to face the prospect of…failing. If I don't try, no one can say I failed, and that way I won't have to come back for an encore (…and that's very important, because even if I did accidentally succeed once, who's to say I could sustain my roll I was on, or ever do it again).”
For the same reasons, if one wants to lose the depleted bank account, and the monthly late notices (“friendly reminders”), then he or she has no choice but to firmly resolve to give up something. For starters, how about giving up, say, a couple hours of TV watching per evening, two or three of those leisurely Saturday afternoons per-month? How about giving up the safety inherent in declaring that you don't like cold-calling? Or perhaps letting go of that that fattening poverty- building, oh so soothing, propensity for procrastination;
As Dr. Wayne Dyer says in his educational course by the same name: You will SEE it when you BELIEVE it!
For our purposes, the key here is to simply understand, once and for all, that in order to become successful in creative real estate financing, especially as it pertains to the NARS Equity Holding Trust™, you do not have to change your lifestyle, your religion, your spouse, your girth or the way pluck your nose hairs. You merely need to identify and select a few of those replaceable Self-Serving Needs, resolving to abandon them in favor of diligently taking for yourself what you REALLY want out of life.
WHERE'S YOUR ELEVATOR SPEECH?
By Bill J. Gatten
OK, you're on an elevator headed from the parking garage to the fifth floor and you have a man standing next to you looking up at the lighted digits above the door, who casually sizes you up and asks: “So what do you do for a living?”
What do you say?
“Oh, I'm in sales.” (Meaning: “None of your business, and your not going to be standing next to me long enough to get into any details anyway, so let it go at that.”)
“I'm an investor.” (Meaning: “Envy me for 45 seconds …and think of me as someone you wish you could be…whether I am or not. And always wonder what “kind” of investor I might be…as if you really gave a hoot”).
“For a living? Oh, not a whole lot these days…how about you? What do YOU do?” (Meaning: “None of your business. If you insist on talking, fire away it's your nickel…Me? I'll just pretend to listen as you babble…oops, why here's your floor.”)
“I'm a teletype operator having a bit of a struggle finding a job, what with all them photo facsimile machines out there these days. If it weren't for my taste for Spaghetti-O's, my wife taking in laundry and clipping coupons, I'd be SOL. How about you? What do you do?” (Meaning: “Are you a loser too? Gawd, I sure hope so because it's awfully lonely here on the corner of Out-of-Touch-with-Realty Street and Co-Dependency Boulevard.”) “ Alrighty then…(as the door opens and closes) you go and have yourself a nice day now (you say to the back of the elevator door). Hear?” As you whisper to yourself, “Dang I wish I could afford a suit like that.”
Or maybe you'd answer the question this way: “Well actually, I work here in the building during the day; but I also dabble in real estate.” (Meaning: I'm unhappy with my plight in life and am trying to better myself without turning loose of my life ring. So don't judge me by what my answer would have been, had I not added the 'but I dabble in real estate' part.”
Or, how about this one: “Who me? Oh, I'm a big time real estate investor.” (Meaning: “If you're really interested in what I do, you'll ask more questions and get me started, and, once on a roll, I'll explain how you can benefit greatly from my services.' Otherwise…I believe this must be your floor.”)
Now, think about it…that person who was standing beside you for the ride is now gone forever, but may well have been someone you could have helped, and received value from in the process…if you'd only had exactly the right response handy. That fellow passenger may in fact have had a house to sell at a bargain price; he may have been an owner in foreclosure; he might have been a flip investor. He easily could have been a prospective buyer for that house you just rehabbed. The fact is: that particular person was an 'all-ears, one-man captive audience' for that 45 seconds of your life. Why on Earth didn't you sell him something? Well, the reason you didn't even try, was because you presumed he was just nosey; or maybe just looking for a 45 second buddy; or simply too unconcerned about you to really have asked a sincere question.
All of these assumptions may in fact have been absolutely on the mark. But the big question is: Why didn't you use that time to your maximum advantage.
Consider what just might have happened if you'd said…
“I help folks buy and sell homes and investment real estate in all price ranges without cash or credit.” There you go…7 seconds on the button.
Then if they say “Oh really?” you continue: “Yup, if I'm buying, I pay full price, all cash or terms: if I'm selling I don't require loan qualifying, a credit reports or big chunks of cash up front. Here's my card. Call me.” There's another 10 seconds, and we're not even to the third floor yet…if the prospect is not interested, you just stare blankly at each other until the door opens.
Now…if that fellow passenger just happened to have been a prospect (buyer or seller) and by chance you had titillated his fancy (as it were) with your pre-planned elevator speech: did you give him every chance to know who you were and what you can do for him, were he to fit one of the criterion for your business? Sure you did! But with those other lame answers that others use…could any of them have made the slightest difference in your financial life? “Oh I'm an insurance agent: I make widows wealthy.” Nope! You merely wasted your precious moments with that person.
So what's the point of all this? Well let me see. How about the point being:
1) We should all find a tall building and ride up and down in elevators all day giving one-minute elevator speeches? No! Um…
2) Elevators are a great place to find motivated buyers and sellers? No! OK then,
3) It's all right to talk to strangers on an elevator? No!
4) If I ever caught between floor in an elevator…No! No! No…
This point is simply…
You must stop what you are doing right now and take an hour to work out your “perfect,” sure-fire concise elevator speech. Once memorized and refined, have it ever at the Ready when you get the opportunity for those 45-second presentations. You will be finding and qualifying prospects everywhere you go with the minimum effort and maximum effect. Your audience will let you know instantly whether they are prospects or not. The ones who don't need you and have nothing to offer you will say:
“Oh that's nice and begin talking about what THEY do for a living (at which point you remember having forgotten to turn off your coffee pot at home). The elevator speech is an absolute necessity for those of us in this business and it works everywhere: at Church, at a Chamber of Commerce Mixer, at the grocery store, your AAA meeting, when meeting your fiancée's parents for the first time; when meeting your daughter's fiancée for the first time (…the latter being far worse, believe me…whoever invented nose rings and tongue piercings is an idiot); standing in the Unemployment or Welfare Line (…Ok, scratch those last two…with a good elevator speech, you'll never need to do that).
The Message
Develop at once a brief and concise Elevator Speech: memorize it and be ready to recite it every time someone steps up and says: “What do you do for a living?”
WHAT ARE YOUR OWN WISHES, WANTS AND DIRE NEEDS?
Some of us are born with the gifts that seem to automatically make superstars of us without a lot of effort (natural athletes, natural actors, natural musicians, writers, the unnaturally lucky, etc); but unfortunately, most of us are not superstars by virtue of our birthright. In fact, most of us have to establish whatever stardom we ever attain, in the face of sometimes seemingly insurmountable handicaps that life has dumped on us. We did not choose our parents or their mindsets or the conditions under which they were raised or how they raised us. We are, however, victims of all of those aspects of our own heredity, parentage, peer-pressure and early environment. Fortunately, though, we have been given the gift of free will, and the right to override or neutralize any part of our personal programming that we are willing to look at and take the time to try to understand.
The most common error (and the most disastrous one) in goal setting is that of mistaking wishes (wants) with burning desire (dire needs). It is only the latter that can lead us to real life-change and abundance. To but make a wish, we need do nothing but put it out there and wait and see what happens: with dire needs, however, we die in some way when they are not fulfilled…we are simply incapable of allowing them to go realized without severe damage to our psyche, and we will fight hard to prevent that from happening.
The difference between wishing or wanting…and sincerely needing is analogous to the difference between asking Santa for something, or demanding it of someone who owes it to you. If you'd like to build a 40-story high-rise or a 1,200 foot-long aircraft carrier, you certainly are free to do so if you wish, and if you have the means and knowledge to complete your work. But, until completion of such work becomes an absolute dire necessity, you likely never will. It's when a major aspect of your life depends on it that you will do what all builders of 40-story high-rise buildings and aircraft carriers have always done…imagine it, design it and build it.
So…before writing out your objectives, choosing a mantra, and heading off on your trek to riches, take the time to figure out what your goals actually are; which of your “wishes” are worthy of being converted to “dire needs”; and what your resources are for accomplishing these aspirations. Should you come up short in the “means” area, then you need to write-out a plan for either attaining what you are lacking, or for replacing what your are lacking with something else of equal value that you have more than enough of (e.g., physical work can replace the need for cash; eliminating someone's burden can replaces the need for credit; patience can replace experience; caution, diligence and research can replace formal education; know-how replaces a college degree, and so on)
Never forget that, according to Epictetus in the 5th Century BC:
“A [person's] wealth is measured only by the expense of [that person's] pleasures.”
In other words, when life itself is your reward, and when the least expensive pleasures are your greatest reward, you are already wealthy beyond calculation: no matter how much or how little money you have. My own true net-worth quadrupled when my children were born, and quadrupled again with the arrival of my grandchildren. Think about it…who is wealthier, the man with a big mortgage and a 60 month payment plan on a new Mercedes Benz convertible, or a well-loved, warm Eskimo with eight good dogs, a jolly fat wife and two years worth of walrus meat in his locker?
Converting a need to a burning desire (dire need) is the first real step in goal setting and requires definitive action. To wit: If you're having difficulty in making the decision to jump off the high cliff into the cold raging river below, in order to save your own life…just do this: Tie the end of a long rope around your waist, then tie the other end around a massive round rock and roll the rock toward the cliff. When you've finally rolled the stone over the edge…your fate is sealed. You needn't worry about making the decisions any longer. Definitive action tied to need is what brings “pre-existent potential” into the physical universe.
To become successful in life you must first know what it is that you want, and then you must decide what you truly need. Just ask yourself which of the following you could live without if you had to…what's left over are your needs.
• Happiness
• Contentment
• Freedom
• Permanent Financial Security
• Acceptance/Popularity
• Good Health?
• Fame/Recognition?
• Monetary Wealth?
• A more fulfilling lifestyle
• A new career
• A new spouse
So what will be your Plan of Action?
Your “POA”…your “rope” and your “big ol' rock”)
Your POA is your design for success. It is the very map of your destiny. It becomes your guide to all of what you must do to become who and what you need to be, and to attain all of what you need to own and control.
Goals that are held only in the mind are never goals at all. They're just residual random electronic impulses left over from wishes. It's only when these wishes are physically transformed into matter by the process of putting them down on paper that they can begin to metamorphose into dire needs. Handwriting your goals is always preferable to typing them out in your word processor…the more arduous and physical the mind-to-hand task is, the more likely the transformation will be (i.e., moving a concept from the ethereal realm of potential into the realm of physical reality).
Forty years ago, I was dissatisfied living on only $326 per month (before deductions), but with that income I could cover a $60.00 per month rent payment, a $35.00 per month payments on my new Ford Falcon; I could buy gasoline, JC Penny's clothing and groceries; and I could still have enough left over to go to the drive-in movies once a month or so. In those days I was envied by many who couldn't afford even as much as I could: but I was also looked down upon by those with whom I most wanted to associate: high school friends who were coming out of college as doctors, lawyers, engineers, dentists, etc.). But now, 40 years later, I find myself earning more than most of my friends, but prone to becoming frantic if my monthly income drops below $20,000.00 (after deductions).
What do you suppose it is that I'm doing any differently today that I was forty years ago? Absolutely nothing except for following a plan. Because of my plan, I live in a bigger house now and drive nicer cars. And I've thrust necessities into my current lifestyle that weren't there before (vacation cruises, country clubs, frequent airline travel, nice hotels, fine dining, fine clothing, housekeepers, gardeners, maintenance people, big screen TV's, etc.): luxury items that were unheard of back then. But now a days I never think of these items as luxuries…today they are (in my mindset) integral pieces of whom I have worked and planned to become and whom I choose to be (and I ain't finished yet). And were I now to be deprived of any one of these previously unnecessary items and services, a part of who I envision myself to be would cease to exist (i.e., that part of my persona would die). My so-called luxuries are no longer just wants and wishes…but are now a part of my bundle of dire needs to be defended and preserved. Could I live without these things? Certainly! Could I be happy without them? Absolutely. Would I fight to hang on to them? You bet!
But I just can't seem to push the rock over!
The allusion being that if you tie one end of a rope around your waist and the other around a giant rock, then push the rock over the cliff, you no longer need to worry about making the decision to jump…when the end of the rope is reached…you're involved.
...and...therein lies your inability to do so, Luke Skywalker. Think back to the movie, when Luke was trying to get his space ship out of the bog by "thinking" it out (i.e., using The Force). After some failure, he became exasperated and said he just didn't think he could do it...and Yoda's comment was, "...and therein lies your problem Lukey Baby... " When you 'think' you can, only then can you…and not until.
The rock is over the cliff when you begin making calls and offers...when you're in too deep to back out.
How does a cowboy make the decision to cross a raging river? He throws his hat over to the other side, knowing full well that now--one way or another--he's gonna 'have' to go get that hat.
The Key: Be absolutely sincere, attentive, honest and wholly unassociated with whether they go for your offer or not. If you are sincere and honest and have sought out their problem (pain), they either will let you help them: or they never needed you, and you needn't have called them in the first place.
My secret lies in contacting only those who are likely to need what solutions I have to offer. I then offer those ideas to them in order to help THEM...rather than to help only me. If its a fair and honest offer, we both get exactly what we were looking for...if its imbalanced in either direction, we both lose.
In other words: go after the 'don't wanters' (motivated sellers): e.g., landlords with costs higher than rents; landlords who are tired of maintenance headaches; landlords who are tired of collections; FSBO'S; Foreclosures, Lease Optionors; Divorces, Bankruptcies, the newly unemployed, etc.
Never make a single call until you have sorted the following out in advance:
"If I can find out what their problems are, and where their pain lies, I can come up with a way to help them that will benefit both of us. I needn't give anyone a sales pitch: I only need to know where they hurt and what they are hoping to accomplish, then fill that need."
A good thing to say (ask) during your initial call: "What exactly are you hoping to accomplish in getting rid of the property?" This one question opens a whole new world of working together for mutual gain.
WORKING FOR RENT ADS WITH THE PACTRUST(TM)
Calling the Landlord...for Rent Ads:
YOU: "Hello. I'm calling about your 'For Rent" ad. Can you tell me what that rent is?
LANDLORD: Well...um...isn't it in the ad?
YOU: Well, yes, I think so, but there are so many here that I've kind'a lost my place (leaning him into the wind and allowing him to brace himself).
LL: I believe we said it was to be $1,000 per month.
YOU: I see. Is that negotiable at all? (More leaning, more bracing against the gust that he thinks is about to blow)
LL: No, not really. We think it's a fair amount to ask.
YOU: Ok, can you tell me...is it a pretty nice house in a pretty nice neighborhood?
ll: Well it's not too bad, I guess...most folks have been there a long while.
YOU. Oh great! About how OLD a house would you say it is?
LL: Oh, I don't know...maybe 20 years or so.
YOU: Really? Have you owned it all that time?
LL: No, I've only owned it for the last five years (if the length ownership is not coming with that question, then you ask: "Oh really...how long HAVE you owned it?"
You should now have the parameters you need to throw out your "cursory" offer:
1) If you know the rent you know the approximate value (multiply the rent by a factor of, say, 7.5 to 10...use a lower factor for more expensive neighborhoods and a higher one for less expensive or less desirable areas)
2) If you know your market and when the property was purchased, you can estimate about what might be owed on it now and what the actual PITI payments probably are.
3) By estimating the current payment and knowing the rental amount, the next step in judging whether your prospect has a high, low or negative cash flow on his hands.
The Cursory offer
YOU: "Yes, well actually I'm an investor and I'm looking for 'rental' properties in that 'rental' range wherein I could pay you the full amount of the rent -or just take over 100% of all mortage payments repairs, maintenance, upkeep, property tax and insurance for the tax benefits and the right to manage and own the property in a couple years."
LL: Well, it sounds good to me, but how do you get the tax write-off, and how much would you be buying it for?
YOU: Well we'd have to take a look at the property and the comps and come up with the best value. As far as the tax write-off is concerned, I'd put the property in a trust in your name and just take over all the payment and responsibilities. That way I can take tax benefits without you needing to transfer the title to me or taking any chances with me.
LL: Tell me more...
YOU: Sure, 'be happy to. When can we meet at the property? Would tonight at 6:00 be good for you or would 6:15 be better?
Now, let's presume you got the property...what next?
1) Present a signed offer for a an OPTION to acquire a beneficiary interest in the trust
2) Attached our Appendix #1 to the Option (unsigned) along with, say, a dollar bills (legal consideration)
3) Upon acceptance of the offer to acquire an Option, run to the court house and record the Memorandum of Option (not the option itself)
4) Next, get an ad in the newspaper (Penny Saver, Green sheet, whatever) that says: "NO BANK QUAL, NO DOWN, NO CREDIT APP. As little as 3 Pmts and Cl Costs Moves you in. Beaut. $150K 3+3 with FP, DR only $284 p/mo + tax and ins. Call now."
5) When the buyers start calling, you say, "Yes, I have the little property over their on Fir St. If you can afford the...oh...about $9,000 that it'll take to get in, and the...um...about $1,120 per month--by the time you add tax and insurance, I'll just GIVE it to you (Pause) The only thing I want out of it is to have you sell it or refinance it in your own name in a few years, and at that time IF there's been any appreciation, we can just split it between us (...'gives me a little incentive to hang in there)."
This little closed-end system should get you 2 properties this month. If it doesn't, that's because you have made a conscious decision to forgo the effort and therefore the rewards and resultant income.
A LOOK AT IT ALL FROM ANOTHER PERSPECTIVE.
Bill J. Gatten
This article is actually a reply to a recent post on our web site. The writer indicated that he/she and others felt somewhat uncomfortable to a degree lately because of the recent debacle that has occurred on some of the creative real estate sites relative to the safety of the PACTrust…a slowly dying public debate that has caused a lot of good in the rubble of a lot of wasted time and name-calling.
Irrespective of this "debate," or others, do note that NARS is not solely in the PACTrust business: we are in the creative real estate buying, selling and managing business. We don't care whether you buy real estate via land trusts, lease options, wraps, contracts for deed, or whatever….we just truly want to help you do it and help you make some good money at it. Though we do feel strongly (quite strongly) that the PACTrust is "usually (if not "almost always") the best way to accomplish that objective.
My answer to the question
You are absolutely right! You should not have to take MY word for something that involves your own financial safety and security. However, the following is the best I can do for you in that regard. Just for the asking, I will send you the collection of codes and cites that our advisors have provided over the years, and you can check for yourself.
We have spent--not 'thousands (as someone said)' but 'hundreds of thousands,' of dollars on developing our system, our network and our documentation over the years. We currently have two laws firms that we draw upon for confirmation of our information (actually three, but one is my son's company) and we make sure that what we say is authorized and sanctioned by them. One of these firms is a rather lofty Beverly Hills high-rise firm that has had its run in with a certain detractor about a year ago. The difference of opinion was quickly resolved and the said detractor backed off completely (until recently). They (and I) felt the issue of our legitimacy was resolved then, once and for all. Another of our law firm back-ups (the newest one) is currently in the process of assisting us with a grid of every conceivable challenge to the PACTrust, which will be made available to members and other sincerely interested parties as soon as all new research and verification has been completed.
Please understand that...everything we say in our courses, our seminars and our documentation is based upon existing IRS codes, prevailing laws, regulations and citations and the information we've been given by our law firm. Our lawyers simply...refuse to get into debates with detractors, or those who are less informed than they should be about what we do...we pay them to approve and support what we say and teach...not to bring them to the levels you've seen on other sites lately.
The reason we created the PACTrust originally was for our own personal use and purposes. We desperately needed a safer way to do creative financing (for ourselves). In the process of seeking qualified attorneys, we were introduced to the concept of the land trust through Attorney Stephen Wayner in Florida and Attorney Martin R. Slater in California (both highly respected attorneys). By working with both of them in the beginning (Wayner through his education materials, and Slater on a personal level with weeks of meetings and planning) together we created a new Equity Share arrangement whereby we could stop worrying about the DOS calls I'd experienced; and stop worrying about the eviction problems we were having (claims of Equity in order to forestall eviction and force foreclosure); and about the my tenants' legal problem tying up my properties (all instances and problems I had encountered personally).
Once we began with the program, I discovered a company in Torrance, California that was proposing something very similar to what we did, but they deal with National Banking Institutions (Chase Manhattan for one) and the State of California (the then Governor Deukmejian was very much in favor the program and had indicated that he was ("might be") willing to commit many millions of dollars to it (3 billion, I was told. Who knows the real number). Their concept had to do with providing for the creation of "Equity" or "down-payment" paper in Equity Shares using the land trust in order to match the Debt paper of FNMA, GNMA and FHLMC. The idea was that investors would buy paper destined for down payments and residents would qualify for the debt paper, and the two of them would later share in appreciation upon retirement of the loan and the sale of the property. According to Robert Pless, the former president and CEO of PAC, the program was broadly accepted for use in the Affordable Housing arena…for a while…until the California Real Estate Recession of 1990 at which point interest waned at the Capital causing the banks to back out as well.
Having dropped their marketing efforts because of the recession, the company (PAC) was fallow when I came along. They did however have a great corporate shell, excellent software, documentation, a good legal staff and a cool name…all of which we sorely needed. At that point, we signed an agreement to use their resources and their attorneys on a per-case basis. We were to pay them from $380 to $500 for every transaction we generated, and from $40 to $140 per-month for their related collection services. To date, we have paid out to them approximately $1,400,000.00 (to PAC…Partners with American Corporation) for the sole privilege of their backing and legal support (which they have given in abundance over the years). In fact, I have made them far more money than I've made for myself in the process in that time (the penalty one pays for not being a lawyer). The law firm in question is the firm of Johnson, Poulsen, Slater and Coons in Los Angeles, and they have been our primary legal service since the inception of the PACTrust in 1992 (BTW, our company has been in existence since 1985).
We are now aligning with a second law firm in order to be able to have someone on immediate staff who can create opinion letters and such when needed and less for than $10,000 to $15,000 a whack. Once again, setting up this new relationship is costing us more than we make (other than from our own real estate purchases, of course). The reason we are willing to pay out all this money is to make sure that we and our students are protected to the very best of our ability.
Think of it this way: We did not create the PACTrust in order to create any more benefits than may perhaps be present with other forms of creative financing. We created the PACTrust (as it is today) almost accidentally…while merely setting out to eliminate the shortcoming and perceived risks that we had with all other forms of creative real estate...with specific regard to the Equity Share program that we had been dealing in very successfully for seven years at that time.
For example...
In an Equity Share, if a resident were to default, it was impossible for us to get them out of the property without a judicial foreclosure if they dug in and claimed "Equity." And while going through the foreclosure process, we had to face exorbitant legal expenses and mortgage payments...while the deadbeats lived rent-free, giggling and sneering at us all the way, until we prevailed. We had to fix that.
Sellers were insisting that the due-on-sale clause was being violated with seller carry-backs, and refusing to sell to us on those grounds. Buyers (resident investors) were saying the same thing and would not buy from us for the same reason in many cases. We were also concerned ourselves about the issue, and found ourselves always having to explain how banks "hardly ever call for that reason," and we were tired of doing so, and were not convinced that we were telling the truth in that regard (after two DOS calls of my own).
We also needed clear path to dealing with creditors (lenders, insurance company, etc.) without subterfuge… the PACTrust helped there too (the property had merely been placed into a living trust and leased out as far as they were concerned…no DOS call there).
Next, we set out to come up with a way to separate the interests of the parties so that one beneficiary's liens, suits, creditor judgments and IRS penalties would be FAR LESS likely to affect the other parties in the transaction.
Next, we had to figure out a way to prevent one party's death from adversely affected the other party (i.e., re. Probate issues).
We also had to design a means for figuring out the best way to avoid the problem of who makes the payments. If the seller were to make payments to the bank, the buyer would have no guarantees, and wouldn't know whether its interests were being protected or not; If the buyer paid the bank, the seller would have no guarantees or protection. If one party sent a cashiers check to the other, and the other party didn't post it properly or promptly could be foreclosed upon before the resident even knew what was happening. It happened to us several times...once in my own Equity Shared home, as a matter of fact...I sent my payments to the non-resident investor (a really nice guy with a really nice wife and really nice kids…with just a touch of larceny) and he paid everything he was supposed to…except for the hazard insurance policy. Alas, the Northridge Earthquake hit and destroyed our home...you figure out the rest).
Another issue to be resolved was, how could Realtors make money on what would otherwise be a simple lease or lease option, during times of real stress in the California market? The PACTrust was the answer to that too, and made some brokerages millions in extra commissions.
So, understand that we did not set out to create benefits...we set out to ameliorate risks along with as many of the negative that were confounding us as possible.
The ideas regarding whether or not a non-resident beneficiary could take tax benefits or not came up much later as a side issue that was offered by several of the accountants we worked with over the years (i.e., "If the house is not being "sold" and only being leased out as far as the transaction is concerned, from the settlor's point of view, why wouldn't he have access to the write-off for passive tax losses since he'd likely have it imposed on him anyway?
To sum up what we do or say...understand that maybe it could all be said this way:
"No matter what you do, be it a land contract, Wrap, lease option, Equity Share or contract for deed: doing it with the property being owned by a land trust trustee makes a lot of sense and can create a much safer and secure transaction.
And, too, there are even excellent justifications for many other benefits that were not possible before. Some of these benefits include the ability to pass tax deductions while still being able to evict; sealing and securing a seller-carry without involvement of the title to the property; being able to hypothecate one's interest in a co-owned property with the least difficulty, being able to hide ownership; being able to protect the property from prying eyes, and on and on."
Please don't be bamboozled by the detractors...they've always been there and they'll always be there, until the whole thing is eventually seen as having been self-evident all along.
"When a Finger Points to the Moon, It is the Slow of Wit who Studies the Finger"
(Chinese proverb)
"Great Spirits Have Always Encountered Violent Opposition from Mediocre Minds."
(Albert Einstein)
"I think my shorts are too tight"
(Bill Gatten purportedly…well that's what Jim Pasquini claims Bill said anyway)
Expired Listings, A Different Approach
By Bill Gatten
Network member Adam Albright in Arizona has come up with another twist on working expired listings without having to do all the footwork and being able to elicit the services of a Realtor for the hard stuff. Adam has taken it upon himself to begin contacting Realtors in lieu of (or as well as) homeowners when 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 terms and conditions, and see that they get paid for their services.
Obviously this approach garners great interest from Realtor 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
Rainbow, Montana
Dear Ms. Angler,
The MLS records indicate that your sales listing 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, please make special note of the following very important points in anticipation of concerns you may have, or which may arise from your broker, your company's attorney or the sellers themselves.
There are two ways to transfer real estate ownership:
1. by a transfer of legal and equitable title, or
2. by a transfer of beneficiary interest in a trust, wherein the trustee is vested with the legal and equitable title
Although not widely known or used by the vast majority of individuals, 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 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 particular trust structure is not held wholly valid and legal.
Unlike other inter vivos trusts, the beneficiaries of a land trust are the directors and make all decisions. The land trust trustee holds the full ownership of the property and the full power of sale as directed by the beneficiaries. Also 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).
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 12USC1701j-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, liens, judgment creditor claims, IRS tax liens, bankruptcy and legal claims in marital dissolution. Holding any real estate in one's own name can be an invitation to lawsuit.
The process of 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 the bundle of rights in fee simple real property ownership.
Please hold all the above facts in mind as you peruse the accompanying purchase offer,
Respectfully,
___________________________
The Offer
Ms. Angler
As indicated in my offer, I am prepared to acquire the subject property under the following conditions.
Seller to holding the current mortgage financing in place for a minimum of three 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 leave its present equity (if any) in the property until such time as the property is re-sold or refinance at the termination of the 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 effect 15-30 days after the date shown below, during which time the following 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,
4) freedom from zoning and building code ordinance violations, freedom from utility company liens, income tax liens and mechanics liens
Signed: __________________________ Date ______________________
To find out more about Landtrust and Equity Transfers Using Landtrust, Click Here.
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