How do I do this…?
 |
Jawsette is correct, the Trustee should be a third party with no interest in the property. Trustee should be someone the beneficiary has confidence in or “trusts”.
Herein lies the dilemma of the land trust. Put B buyer as Trustee and submit the trust document to A Lender as part of the original short sale, then they are going to be concerned that it is not an Arm’s length transaction, tell A Seller is in violation of the terms of the promissory note, or that Trust is in valid because the B buyer and the Trustee are the same . All of the above arguments I have had to deal with personally.
Is this legal? My attorney has written several letter’s arguing it is legal mainly because these are not regulated entities and there is no case law challenging the validity of the transaction.
However, it is clearly gray because it can be argued you are forming the trust for the benefit of your corporation and accepting the trustee role is a conflict of interest becuase you have a fiduciary responsibility to the beneficiary (A Seller). Of course, it can also be argued that you are facilitating a
sale of a short sale and as long as the seller is not being harmed, you can claim, you are acting in the best interests of the beneficiary.
I disagree with your title companies assumption that the C buyer’s lender will agree to underwrite the loan because your a trustee on the document. Clearly, any underwriter may question the fact you essentially formed a trust and are selling all within a six week period.
I know Wells Fargo, Bank of America, and others will not even look at underwriting with a land trust involved. I guess what I am trying to tell you is that it is still no slam dunk.
Are you using old school? Is the C buyer FHA? If they are conventional, which lender are they using?
In theory Land Trusts seem great, but they have equally as many problems as any other contract type. It boils down to the C buyer’s lender whether the underwriter is comfortable with the transaction. If your title company has experience with using trusts with this particular lender, then go for it. If not, I would be concerned with this advice.
real estate internet marketing
Hey Dustin
I think I can help
Michael
Add a Comment