Questions on Owner Financing: Trusts, Deeds, Loan Servicing and more

Questions on Owner Financing: Trusts, Deeds, Loan Servicing and more

Hi I'm Susan Tierney, this is Scott Horne
and we're back with Ask the Attorney and some more questions. So Scott, I hear
a lot about land trusts and trusts first of all what's what's the
difference between a real trust and a land trust?
Well a land trust is typically set up to hold land just like the name indicates.
Typically a legitimate trust a Inter-Vivos living trust, revocable, irrevocable trust whatever it might be.

First and foremost oftentimes they have
a tax ID number associated with it. They file their own tax ID number. With a
land trust so often the tax return is filed under the beneficiary's social
security number or tax ID number so it's handled a little bit differently in that
regard but typically only interest is there to hold land or real estate or
some type. Okay what's this I hear about a pack trust? Well a pack trust is a
trust that incorporates multiple parties into it as the beneficiary. And there are
some guys who espouse that this is the way to handle trust to get around due on
sale and we'll talk in a moment about whether a land trust gets you around due
on sale or not and what to think about in that regard. But with a pack trust
what you often time are doing is you're incorporating the seller, yourself as the
investor, and maybe some may be a back end home buyer even into this one trust
arrangement. Okay. I just think there's some issues that are generated with that
unfortunately. Okay so tell me why do so many investors feel that you
have to close a sub-2 transaction with a trust? So probably the most prevalent thing
that I hear at least is a lot of people say they want anonymity.


to that I ask, why? Right, from what? They're going, well I don't want anybody to
know what I owe. Well what if I get sued and of
course my response is is I've been doing this for a very long time I have done
more deals than pretty much anybody I've met before out there and I have never once
worried about anonymity, My philosophy is really simple if you do things the right
way you take care of people you don't need to hide from things.

Sure put your
your assets into corporate entities for protection whether it's LLC's,
corporations, limited partnerships, or any and all variations thereof for asset
protection. But I just don't necessarily know the need for anonymity because if
you do get involved in a lawsuit, trust me guys the attorneys are gonna find
your assets through depositions, interrogatories, whatever it might be and
you're going to have to have to do that. And if someone has a strong enough
interest to pursue you the mere fact they can't find anything in deed
records doesn't mean they're not going to file a lawsuit so I don't see that as
a really a very good excuse and sometimes I just think that utilizing a
land trust just over complicates the transactions a little bit. Okay, so
basically they they don't really understand. No they don't
understand it and one of the things I really want to point out is is so often
it's not the seller who's creating their own land trust the investor is creating a
land trust for the seller and then usually they do an assignment the
beneficial interest after closing but when you're doing that you're setting up
a trust which is a legal document mm-hmm it can also be construed as a financial
planning document of some sort and then in my mind I'm going is the investor
inserting themselves into the transaction as an attorney or maybe a
certified financial planner and are are they you know practicing law of a
license or something like this so I think those are real possibilities in
those instances so I just want everybody to understand that and be cautious and
if you are gonna do those no bringing the right people to handle the paperwork
for you don't try to do it yourself just as a protection mechanism it's out
there okay I got a question for you on a trust if you're getting a tax ID number
on a on a trust are you paying taxes on the money you have in your trust well
yeah I mean it's it's taxable like any other entity because it's a once you
have that that tax ID number and you're filing your own tax returns every year
okay it's just like any other corporate entity to a certain extent and then
income generated by a trust becomes taxable and it's not a tax shelter
like maybe a Roth IRA or something of that nature that is out there so just
know one more part about land trust in the owner finance world again a lot of
people think that a land trust becomes some type of a financial planning trust
mm-hmm and of course my question is is what was the intent by the seller may
set it up was it really for financial planning purposes or was it to sell the
property an attempt to circumvent the due on sale clause right putting a
property into a Land Trust does not circumvent do on sale in fact it's a
violation of due on sale day one the venn if you're going to do a wraparound
loan to a back end buyer that wraparound transaction is a violation to do on sale
if so why do you want to put this land trust into the middle of the transaction
when it's not needed I simply don't see the mechanism for that out there so be
smart as you're thinking through your transactions a little bit and think
through how to set your deal up properly I like to use a land trust as a stop-gap
per se that if a due on sale violation occurs and the lender calls it do you
know the first thing I try to do is talk to lender about garden saint-germain or
their attorneys and so often they don't know what that is and of course that's
an act where a homeowner can transfer their property
into a financial planning trust and not buy light to on sale so as I said
earlier though the land trust when it was originally originated was never set
up as a financial planning trust and if you ever get into a lawsuit on this
these mortgage companies have a lot more horsepower than we small investors do
they can bring a lot more high-powered attorneys to solve that prompt they want
to but I guess the last part of that is is if you're going to buy a home and
your intent is to lease the property long term and not do a wraparound or
your intent is to sell the home under some retail format in those cases I
don't have an objection to using a land trust but what an attorney set it up so
you don't get involved so this one can answer questions on behalf of the seller
if they're asked and then even though you may take an assignment and have
beneficial interest the great odds are that the lender won't know that occurred
and since you're just leasing the home I think it might be a good system in that
instance so it's knowing when to use a land trust I think is what all is all
important and keep it simple keep keep it simple stupid yes ma'am I wasn't
calling you stupid baby okay okay Scott we get lots of questions about
foreclosures you every day get phone calls about it but what is the standard
foreclosure process here in Texas you're licensed here in the state of Texas so
tell us is it the foreclosure of a rap or a sub to loan any different in a
foreclosure no and everybody thinks for some reason there's a difference now as
you said Suzanne I can only talk about foreclosures here in Texas other states
may have very different laws or timeframes are involved up I know for a
fact there many states that have long drawn-out processes but since Texas was
founded by robbers and thief's way back in the eighteen hundreds they said our
laws up correctly there were probably all attorneys obviously
but to start off with we have to know know what type of a property before
closing on so let's talk about a homestead so maybe someone bought a home
as their homestead through a subject to type transaction and in that instance I
am hoping that that buyer gave the seller back a deed of trust of some type
or if there's a wraparound mortgage then there should obviously be a deed of
trust now the course is is I see a lot of transactions where a an investor
takes only a deed to the property mmm-hmm
there's not even what's called a vendor's lien and the deed and no deed
of trust and if you've done that guys and there's a default that seller has
one recourse which is to retain an attorney to file a lawsuit our goal is
to keep attorneys out of the transactions whenever possible that's
why we always recommend giving your seller a deed of trust to protect them
and that's a traditional mechanism to regain the house okay Eve or closure so
basically if you have a homestead property it doesn't matter how they
bought the home with a subject to transaction or a wrap around first and
foremost I tell everybody read your documents know what they say what type
of a notice must you give them here in Texas most of our deeds have trust at
least say as per the Texas property code okay in that instance that would be a 20
day notice to cure the default so once they received that 20 they noticed they
have 20 days to pay all the back payments current not all a month not the
whole amount now there's a lot of deeds of trust that are totally silent if
that's the case it's gonna be the property code most likely but I also so
you need to trust that say you have to give the borrower a 30 day notice now
there in fact I'm dealing with one of those right now and I don't know why you
want to get them more times you don't have to and that's typically how a
Fannie Mae Freddie Mac type loan is set up so once that 20-day nose has expired
of course we have to send them notice to cure enough data in their Fair Debt
Collection act notices and things of that nature
the noses of May up we mail out we mail them out by certified in regular mail
and they have 20 days basically from the time they've been mailed out in which to
to pay now during this process of course if they haven't paid I always suggest to
clients to take the time and try to call your client and see what's going on
maybe they need a little bit of help maybe they need a little bit of a
workout plan you know but it's worth taking the time make a phone call right
but a 4-year sending the notice after notice has been set always be proactive
always bear it be fair bit firm okay and don't let people give you lip service I
have learned over thousands and thousands and thousands of residents and
tenants that talk is cheap mmm-hmm actions are all that matter out
there so do the right thing then work a deal out after you started the clock
running okay so what's that clock has run and they had performed let's say
they're out there plain ostrich not doing anything or they keep telling you
they're going to send a check in and they don't the next step is is called
acceleration and that is now where we accelerate the promissory note which
means now the entire amount is due not just the unpaid principal and interest
but now the print the monthly payments plus all unpaid principal now here in
Texas way to send that out at least 21 days before the first Tuesday the month
so guys if you're doing the math look at a calendar I'm the first choosing a
month and Monday is the first day and count back at least 21 days and that is
the last day the drop-dead date that you can have your acceleration notice sent
out by certified in regular mail and it's the last day that you have to post
it down at the County Courthouse as well so we try to do that we know this well
because we are always at the last day running down there posting stuff we are
but the key is is trying to do it before the last day so it doesn't stress
everybody out and don't miss it by one day because we missed by one day you
have to wait a whole nother yeah you just lost a whole month again
and that cost a lot of money for clients not pain so be smart guy guys they're
the instance and and now what about a good a deed in lieu of foreclosure well
can you get that after you've given them the 20 day notice absolutely or even
after you've posted for the seller acceleration but here's what we do as a
law firm at least and in essence we're talking from a legal perspective about
this before we accelerate the loan we are going to pull a title search on the
property okay and what we're looking for are any judgments that may have been
filed or liens that might exist against our the borrower and the property yeah
specifically an IRS tax lien or a federal tax lien FTL for short because
if there is a federal tax lien on the property we must give the IRS a
statutory 25 day notice in order to extinguish the IRS lien if we don't do
that then their lien would become primary on the property so we want to
make sure we check I don't know why I thought it was 120 days that's a
Redemption period you're thinking about so we want to check our title first make
sure we comply that 25 day notice okay there's nothing else out there so are
you doing that 25 day notice before you send the 20 that had the acceleration
yes we are or you can do it the same time if the 20 days – sure have re run
okay but before you can take a deed in lieu of foreclosure mm-hmm
you want to know those kind of things too because let's assume for a moment
that this borrower has no other liens against the home now here in Texas we've
already talked in other videos there's only a few kind of liens that can
actually attach to a homestead but if these liens are out there have been
filed especially an IRS lien and you take a deed-in-lieu back you may very
well wind up having those attached to your property and then you have to deal
Wow so if you find that unfortunately a deed-in-lieu may not be an opportunity
you have to go ahead and go on through with the foreclosure okay but what I
like to do is I like to provide solutions to borrowers one of these I've
never found is I've never found a borrower who wants to be foreclosed on
but what it is is they act out ignorant they act out of fear they don't know
what to do and so oftentimes if we as an investor can give them options
maybe that option is we can take a deed-in-lieu maybe we can help them sell
the property that will may get some of their money back or something and put it
in the foreclosure but still work viable for us for our plan and every deal is
gonna be a little bit different as a business decision in that regard but if
we can give our client some options maybe we can forego the foreclosure get
the house back quicker heck cash for keys right sign a deed in lieu here's
$1,000 to move u save legal fees it's well worth it time is money also but
it's always about being wise and finding that out and so it doesn't matter
whether in this scenario it's a wraparound mortgage or whether it is a
some type of an assumption or deed of trust you secure performance type
transaction that we use it's the same process now if there is an IRS lien and
we foreclose and we as the investor are the purchaser that property we have to
wait a hundred and twenty days for the IRS is Redemption period to run that
means they have the right to come in and to basically purchase the home for what
you have into it but that never happens well it does happen but it's in my my
opinion and what I've seen in my experience has been very rare at least
out there but it can it's the government I probably don't even respond well
oftentimes I don't most of the time they don't but they could that's there's
always a little risk factors that you have to consider as you go in through a
do this now if the property is a non owner-occupied property again you have
to read your data trust so many circumstances maybe you sold the house
to an investor maybe the resident you sold to no longer lives there they've
moved out maybe they've bought another house they've leased the house out to
somebody else and it's no longer their homestead well
that's the case again you have to read your documents doing a transaction right
now where even though that is a situation we had to give the borrower a
30-day notice typically an idea of trust a borrower who is a non owner occupant
waves various notices and therefore you could based on your documents simply
accelerate the loan and post it for foreclosure 21 days prior to the first
Tuesday of the month so you can forego that 20 day notice period now I think
it's always a nice thing to do to give them 5 or 10 days to cure in those
instances if possible ok but if you're putting smart deadlines are occupied
which is most properties as investors right well a lot of times we're doing
doing that yet it's owner-occupied why do you have a lot of investors who sell
to other investors with these kind of deals and buyers can move on to other
houses so we have to know a little bit of what we're dealing with to make the
right decision but end of the day when in doubt always err on the side of
caution send that 20-day notice take care the
issues don't have to worry about those anything else arising and move on from
there okay Scott let's talk about collections and loan servicers tell us a
little about you know what is a loan servicer and why should you use one and
how does it work you know Susan years ago whenever used loan servicers was a
lot of need for it I think in the industry today it's a great tool to have
and I call the loan servicer of course our fraud preventer
so that if an investor has sold a home to a homeowner and there's an existing
mortgage let the the borrower pay that servicer okay
service will pay the mortgage company first and pay us the investor second it
gives the buyer peace of mind that the underlying debts gonna be taken care of
now do you have to use a loan service from every deal know a borrower and
lender can agree to do whatever they want to do right I just think it's a
wise thing for insertion especially if you get a lot more properties I would
think one you might be able to handle multiple but I think that's one of the
things that you that they should do and think that way for those reasons now if
you have it your house is debt-free Wow you can source your own loan in that
case and there's no way that if this borrower doesn't make a payment and the
house is getting foreclosed over some reason you can't come in and claim that
you did something hokey the service are there to help you know be that that
buffer yeah in those situations a little bit so what is the loan servicers
obligation okay well let's just go through that a little bit so you know
first off I think everybody needs to understand what their obligations are
and so often investors just don't take the time to read their documents to see
what they actually say you know what is the monthly payment when is it due when
is it late what is the actual late charge and guys you can only charge a
late charge based upon the principle and interest amount you cannot charge a late
charge on the escrow also here in Texas the Texas Finance Code governs the
maximum you can charge for a late charge which is 5% I see a lot of people try to
treat a mortgage like a rent where they try to put a per diem per day late
charge I want five percent in twenty five dollars a day thereafter hmm or
they'll use a flat number I want 200 hour late fee plus plus plus right you
can't do that so know what your doctors say first and foremost so you can
communicate properly with your borrower and/or if your loan servicer and when
the case may be with with your attorney so when you
look at a loan servicer you know especially in this our finance industry
I think we need to separate ourselves from traditional mortgages or the only
have a plus borrowers out there in our world our world is totally different
right we're not going out getting three and four percent interest rates dealing
with a plus bars who pay on time and take care of things
mm-hmm we're doing that people who are paying eight nine ten percent Interest
Rate rates who oftentimes are late and making payments they have one two three
jobs trying to make ends meet sometimes out there and things like this so
there's a difference mentality I think in the owner financing Loan Servicing
world and I think there's a lot more work to be done sometimes – that's we're
asking there needs to be a marriage but basically I think alone so number one
first collect the payment and distribute them appropriately pay any underlying
debt first pay the investor second next if there's escrow being collected which
in most cases there is and usually if there's an existing lender make sure
that is passed on through to that lender if not they're going to hold that in
some type of an escrow account on behalf of us as the investor I think a loan
servicer should send out late notices a payment is doing the first late on the
10 to the 15th it's not paid yeah they should make send out a standardized late
notice of sometime right and in some cases some servicers want to
send out pre foreclosure notices now I'm not a big fan of that because I think
that's the 20 day notice – sure in most cases because I believe that a a
borrower is going to pay a whole lot more attention to an attorney's letter
then their loan service room the pain every month over and over again and I
think that probably holds true in most cases out there so what what will a loan
servicer not do or should not do well I think there's some things they shouldn't
do you know first off most loans hawsers don't want to accept partial payments
unless they've been put on notice to do that and in some cases that's
great but they'll usually hold those in suspense in some format next a loan
servicer is not there to negotiate it out a workout plant that is our job as
the investor to do that they're just there to collect that payment and
distribute it properly but if we're gonna be a workout plant we as an
investor need to set that up properly and make sure I buy as notified we'll
talk about that a little bit more here in a moment and they really shouldn't be
the sitting there calling your client all the time I want you to think about
this look at a rental property in a owner Finian's property we talked about
the difference already with a the owner finance world versus the traditional
mortgage world be a lot more work loan servicers collect a very small amount
every month to handle these things twenty to thirty five dollars or so
that's it not a lot what does a property manager collect usually it's a 10% of
the rental amount so if you have a thousand dollar rental they collect
hundred dollars a month if you have twenty five hundred dollars it's 250 a
month and yeah they're gonna be a little more proactive
now in that rental collection but they're getting paid three four five
times much more money to do that same thing so keep that in mind guys as you
are wondering what your servicer should or should not be doing and remember it
is our money it is not the loan service money the debt if we have done the
property is our debt our obligation it's not theirs
no one is going to have you know collect your money better right than yourself
yes and so I always recommend that our investors be as proactive as possible
out there okay I know you'd see in your law firm you'll have people call you to
foreclose and they'll be three four five months behind and they're with a loan
servicers so they're not they're not paying attention
well the investor unfortunately oftentimes treats it as mailbox money we
say that all the time – and they're not following up what they need to be
following up on it's not the loans versus JA
to retain in this industry per se to retain an attorney in foreclose unless
they have agreed to do all those things but what if you as the investor don't
want to foreclose you're going to go out and work a deal out your borrower that's
why you have to be proactive in this industry and get it done whether you
have one loan or ten loans or a hundred loads take charge of your money you used
a servicer for what they should be there to do the fraud preventer right but
everything else go after it okay and you don't want to take partial payments why
well I'm okay to collect a partial payment when there's on a default but
they're still gonna incur a late charge but at some point in time you want to do
that because you just keep getting this rolling late charge and they're paying
later and later out there you want to encourage them to pay on time you know
if you are in a pre foreclosure mode let's say that 28 notice has been sent
out the loan servicer should put on notice not to accept anything but the
full payment now usually if we do that our notice letters tell the borrow that
that pay the entire amount not a partial payment because they collect a partial
payment and actually transact at cash it it will invalidate the foreclosure
notices you need to start over again so usually to hold those in suspense that's
what they should be authorized to do in that regard okay
and now if they're you the loan servicer is sending out these notices and then
the 20-day notice who pays that the investor or the pays for those that's
gonna be the borrower cause it's the responsibility of paying their doctor's
state that that's what they have to do in most instances and if a that has been
the case from a sourcing perspective okay okay then and the borrower doesn't
pay it in the investor is going to instigate foreclosure proceedings
they're gonna pay for that one way or the other right right all that happens
is if the servicer and or their attorney got the ballgame rolling a little bit
faster yeah does a cop it costs a mess for anymore
money it's just probably helping them be a bit more proactive out there that
regard now if there is a need though those that the situations arising out
there and the investor is going to contact their borrower talk them about
some type of the payment plan it's fine but if you put it do a payment plan
get it in writing right agreed to it sign it let's your servicer know what
you're doing right if it's a substantial situation maybe you're changing the day
of the month the payment to be due I did a loan just like the other day by the
way where the the gentleman was always late and making payments because of how
his payments came in from his job they kept incurring a late fee we
changed the payment date okay so it would accommodate that so he won't be
hit with all his late charges the lender didn't have to do that but it was the
right thing to do to help solves the problem in that instance and sometimes
you've got to a loan modification to restructure transactions if there are
more difficult things to be done out there based on various things maybe
you're going to change the interest rate a little bit instead of going through a
foreclosure if you can just reduce things a little bit maybe it becomes a
win-win for everybody but those are always decisions in conversations that
go from the lender to the to the buyer never from the service or you never want
them well the servicer has no idea what we as the investor want but I mean they
don't know what the servicer wants or needs the servicers position maybe or
the investors position maybe I'm done take the house back or it may be no I
don't want to deal with this I've got one of those right now where they they
really hope that the borrower pays can restructure alone somehow they don't
want to foreclose now we're still moving forward the process but a servicer has
no idea what the needs are for every investor out there or would make which
made change from time time and so we as the investor have to
take the bull by the horns and make these decisions and guys whether you
want to do it or not if you're in this interesting business you have to step up
the plate and do it and if not you can't do it contact your attorney contact us
that's why we're here and sometimes a loan servicer may do
those things for you if they're empowered or they may do it for a fee
that will be between you and your loan service or to discuss those items but
they need to take the time and be proactive as I go through this okay
so if you and I know you handle a lot of foreclosures do you can you foreclose
all over Texas or are you just in DFW no we have a foreclosures all over Texas
and we foreclose everywhere from although we're in Dallas Fort Worth
which is easy to do we do of course the five six County area here we regularly
do foreclosures in Austin San Antonio Houston Corpus Christi I haven't done
the valley in a very long time I've never done one in El Paso but we can
we've got them in East Texas as I said as well and what can investors expect is
an average of what that would cost them if they're going to go into a you know a
foreclosure we're a little bit more of a unique law firm than other firms are
okay you know I've seen foreclosure fees anywhere from 1,500 to shoot as high as
$4,000 based on various transactions out there probably averaging seventeen
hundred and fifty dollars or so seems to be the norm sometimes it's a little bit
higher because we have multiple businesses and what we do we're trying
to provide a service to our Investor industry and we don't represent these
big banks we represent our Investor communities around Texas typically you
know if it's local it's going to be about $1,250 but we got it also do that
title search and you got recording fees if it's we call it out of our county
there might be a hundred dollar additional fee added to that maybe two
hundred if certain thing or out there but we try to keep that
cost down as much as possible for their benefit okay Scott let's talk about some
of the mistakes that investors make and you see mistakes all day long we could
this could be a two-hour question with all the mistakes here you tell me about
so let's talk about one of the more common ones using the wrong contracts
these are something that doesn't happen literally this week mm-hmm so coming
back up where investors they will prepare a contract in their mind they're
gonna do a seller finance but they write an all-cash contract and they sign it
hmm well they bound themselves now to an
all-cash deal with their buyer even though they intended to do something
differently instead of getting the thing done correctly and drive exclosures they
kind of jumped the gun a little bit at that point can they cancel that contract
and tell it and void it out and say I made a mistake and get a new category
you would hope they did do that very might agree to it
I see transactions where they're intending to do some type of a sort of
an immediate transfer of Tahoe that they may want to do either have a short-term
lease option and it is non-owner occupied transaction
contract for deed but they've already executed a full contract for doing a
full seller finance transaction so then they go back and have to amend their
transaction so long as the parties agreed to it cause the buyer could hold
their feet to the fire they wanted to so you see those kind of things that happen
and so the cube that is is how I say this out there know before you go write something you never intended to do all
right and if you're maybe if you're a newbie
in the business you know to avoid those mistakes you might want to hire an a
note pro that you could help structure the deal for them and help fill out the
contract well either a note pro or attorney until you get comfortable
mm-hmm doing the transactions properly okay you know one other things that
we've seen this week susan has been where a and by the way this has been
around for a long time it's where investors once sell their home and
something like that go through a closing they don't record the transaction they
don't file the deed they don't file the deed of trust and of course what happens
is well let's back up they're doing that because they think that by not recording
their documents that it won't affect the do on sale is what you usually see out
there mm-hmm but this opens a whole nother can of
worms now here in Texas there is no legal obligation for a third party to
record a deed actor's been executed once you sign that document it's been sold
okay but what could happen now that closes at a law firm or entitle office
we normally have a 30-day rule where we have to record those okay so hoping that
it's done the right way we'll be taken care of but if it closes
through a title company it doesn't have to be recording okay we have an
obligation that time to make sure those are recorded out okay and I'll record as
the patient enters put the world on notice in those instances but I see so
many investors who they'll close the deal
they closed outside of the law firm closed outside the top of office and
they're holy of that but thinking what can happen one the investor could sell
to somebody else and we've seen that happen before
mmm-hmm you don't like it but again okay it's kind another mistake investors make
that we see a lot as they don't record the mortgage yeah and this has been on
for a long time right so an investor will close a transaction mm-hmm
they don't record the deed for their mortgage because they're afraid of do on
sale they think that if I do that we're gonna do on sale violation and the
mortgage companies would call the loan did and we all understand what those
risks are a little bit right but the risks of not doing that are even bigger
now normally if a transaction is closed in a law firm or in a title company
mm-hmm we kind of have what's called the 30-day
rule where we're required to record those have been 30 days of closing how
can we do okay but if an investor closes a transaction outside of that they do
that proverbial kitchen tabletop closing they hold it back
mm-hmm but my gosh think of what could happen so the investor sells the house
to somebody else who then goes down and records the document well here entails
we are first in time state whoever gets the courthouse first wins other states
may have different rules and regulations about that but not here in Texas Wow
so that's terrible that's horrible by the way that happens in fact we saw
that happens just recently down in sanity
mmm-hmm others so we stopped for a second I gotta ask you this so if that
happens what happens to the people that bought the house that are in the house
well they could be evicted they could sue the seller who has run off with
their money it has nothing left hmm and they could
actually lose their home so again you want to inform seller who knows how to
do things right also Wow it's right there just things that people
do that just don't make any sense and you understand why right but I mean
again real-life scenario here where an investor did that on a closing ten years
ago mm-hmm think about this what liens IRS lien judgment liens could have been
placed against the seller in that time frame that would attach that property
which means the person who bought it or thought they bought it mm-hmm that those
could be attached to their home ahead of their mortgage and they intended that
because the seller might be gone that's not good
I don't think about if you don't convey the property to the borrower they don't
get a chance to get a homestead exemption on their home that costs them
money huh what if they're over 65 over 70 or have other scenarios ongoing that
allow them additional exemptions they can't take mmm-hmm
we have a lawsuit that I'm aware of right now where this occurred and the
investor never sent a 1098 to the home on it hmm could never write off their
interest ten years of that add that up well you
think they would asked after the first year homeowners don't know sometimes Wow
they don't know what they don't know huh they weren't able to get a tax write-off
they didn't know their pain even though they were paying escrow they weren't
allowed to get the insurance they wanted and when you take it
deductions you take property tax deductions the fact that they lost all
these exemptions that could have had years and years ago that cost tens of
thousands of dollars additional monies and taxes okay
this investor is going to have a huge you know suit filed against them for
this all right it's just wrong so guys do the things the right way
record your transaction your documents it's okay but you're you're telling them
to record it shouldn't the title company in the attorney record it if your
closing title and your closing the law firm they will record it okay but if
you're doing it yourself well you should do it as well hmm
I didn't know you could close it yourself you can pretty much do anything
yourself I didn't know that I thought you had to just not advised hmm okay
okay well tell me about and this is a mistake in you and I were in court just
the other day about this about trying to use a lease option yeah well again just
like not recording documents okay trying to go around doing sale a lot of
investors who again is simply haven't been trained properly think you can do a
lease option long term for the same thing hmm and what they don't realize is
is that they had just talked to an attorney spent a little bit of money up
front where I could have averted huge issues right in this one scenario where
there was a five years lease option and it was intended to be a subject to
transaction with a balloon on the end mm-hmm they had nothing was done
correctly in this transaction absolutely nothing I thought I would go into all
the details but had they done a proper subject to transaction gone to attorney
to construct it correctly the investor could have now saved tens of thousands
of dollars in the non payments that have occurred in the attorney fees and the
bankruptcy fees and on by just having things the right way the first time
mm-hmm I see so many investors though who try to take a buck and the day as
they say you know you step over a dollar to save a dime right right so sometimes
it's worth that a little bit more money and take care of things the right way
okay that's great well reach out to us at info at the owner finance
and let us know if you have any ask the attorney questions that we could include
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