How To Overcome The Due On Sale Clause On A Subject To Deal
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- čas přidán 5. 08. 2024
- Is it possible to overcome the due on sale clause in a subject to deal? In this video, I'll discuss overcoming the due on sale clause on a subject to deal. In addition, I’ll show you how to get paid four times from the same deal.
A subject to deal in real estate refers to a property that is not yet fully owned by the buyer. In other words, the seller retains some ownership of the property until a certain date or condition has been met. This can be done in many ways, but it usually involves selling the house to someone else and then having them sell it again to you at some point in time.
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To those buying a subject to deal, be sure to watch this video! I'll teach you how to get around the due on sale clause and make the most of your purchase. From negotiation tactics to using strategies, I'll show you everything you need to know to get the best deal on a subject to deal!
When buying subject to deals, the seller will often include a due on sale clause. Meaning that if you don't take the subject within a certain number of days of the sale, the seller can resell the subject to someone else.
Although this might seem like a difficult clause to overcome, you can do a few things to make it easier. First, make sure you understand the clause and what it means. Next, is to gather the best information possible to help you navigate through the process. Finally, watch this video to learn more about what powers you have in this scenario.
If you enjoyed the content, then remember to like, comment, and subscribe for more. Also, don't forget to check out my other videos and leave a comment below if you have any questions or comments about this video. Thanks for watching!
Show Notes:
0:00 Intro
0:20 Subject To Deals
1:35 The Situation
6:22 Protect Your Interests
9:20 Payday
14:04 Outro
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ABOUT CLINT COONS
Clint Coons, Esq. is one of the founding partners of Anderson Law Group, Clint has grown his legal and tax firm to over 400 employees by assisting real estate investors with creating and implementing solid entity structuring plans. His success in these regards is in large part due to his personal investing experience. A successful attorney, real estate investor, and speaker, Clint has used his innovative and dynamic strategies coupled with knowledge borne from experience to help thousands of people save millions of dollars and build real wealth.
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The information provided in this video should not be construed or relied on as legal advice for any specific fact or circumstance. Its content was prepared by Anderson Business Advisors with its main office at 3225 McLeod Drive Suite 100 Las Vegas, Nevada 89121. This video is designed for entertainment and information purposes only. Viewing this video does not create an attorney-client relationship with Anderson Business Advisors or any of its lawyers. You should not act or rely on any of the information contained herein without seeking professional legal advice.
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I thought they recapture the tax savings on the cost segregation accelerated depreciation when you sell? I believe this strategy makes the most sense if you are going to hold the property for a while
This is such a good video. Thank you
Thank you so much for this. I was told by a real estate attorney that this was illegal, when clearly it's not (when done correctly). Thanks Clint!
So the lender won't freak out when the see the recorded Memorandum of Interest (MOI)?
I have not come across it.
How soon after you list them as the trustee do you have a trustee deed drawn up?
Immediately
Wow! Clint, this is a gem of informations...thanks
Glad you enjoyed it!
great content, best real estate attorney on here.
Thanks
Awesome
Hello Clint, thanks for this old video. Isn't the title company supposed to do all that legal papers such as "Trustee Deed and POA" or do I need to ask the escrow if they're familiar with closing this type of transaction safely?
This will fall on your shoulders.
What about the state of Texas?
What part?
How do I become an Anderson customer???
If you would like a FREE 30-minute consultation, you can request one here
- aba.link/clintss
Clint. Lets say you have taken title directly in an LLC. Is it possible to go unravel that and transfer it back to the owner and then do it the proper way or is the initial transfer already put you at risk for the Due on Sale regardless if you went back and restructured it properly?
@ 8:35 so Tom is the initial trustee-sounds like you're saying when its changed to a successor and a third party may have a problem -Drop the trustees deed (use Tom anyway ) and risk losing the deal? Or is POA the final doc that can supercedes a trustees deed?
I live in Arizona. How is this not a violation of ARS 44 1522? This is a framework to circumvent the due on sale clause. This seems like a clear violation of this statute.
You mean this? The act, use or employment by any person of any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely on such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice . What merchandise are you selling?
WOOOOOOoooo!! Yeah!!!! Thanks!!!
Are all docs filed at title company or court clerks office, or does it depend on state laws?
Clint Coons does an excellent job in clearly explaining complex business transactional and deal formation scenarios. As you watch more of his videos and start to believe you understand the topics of asset protection and staying anonymous, you realize the great importance of having an expert to guide you through these issues. There is a high level of sophistication with these formations/transactions that the consequences could be very costly if someone wants to pursue a claim against you.
I've really warmed up to this guy, and to a great extent! And that's a good thing...and bc I rarely trust those with whom I do business.
Thanks Courtney.
Overall, I have been very happy with Anderson as a Platinum customer. They have helped me establish multiple LLCs, a land trust, and a living trust. They did a great job with tax preparation and guided me on record keeping for each business entity. I do wish their staff could spell my name correctly in correspondence.
@ClintCoons, if the seller of the subject to is within an LLC what would be different in the strategy?
Maybe consider buying the LLC
@clintCoons How do you move a personal mortgage to an llc?
You dont. The mortgage will stay in your name.
Could you make a video if we wanted to sell out do this LT… it seems way more complicated to get out than get in. Thank you
That 4th payday gets paid back when you owe recaptured depreciation when that tenant executes that lease option right? Doesn't seem like as much of a payday as it is a "cash advance" in a sort of ways.
Correct - when you sell the property you must pay taxes on the depreciation.
i was thinking about the same thing when I watched it, glad you asked and Clint answered. Deprec "savings" is only good as long as you don't sell.
Great content and love your whiteboard scenarios! Thank Clint!
Thanks
I have a client who has a senior position at a major US bank in the Loan Servicing Dept. She told me they have been having meetings with other top execs discussing a "Reset", in fact using the word "Reset" many times in their meetings. They will be shutting down nearly 50% of walk-in branches and laying off a large percentage of employees including underwriters. They are tightening up their loans to avoid another mid-2k situation; looking at ways to protect themselves when the reset takes place. Next weeks meeting will be on BRICS (looking forward to that).
Clint, what are your thoughts on how this might affect fix and flip investors and what we could do to hedge against this inevitable occurrence?
The problem that I always see is with the Property Insurance.
You will need to get new insurance showing the new insured is the Trust and to the mortgage company may require that the Borrower is listed as additional insured, if this happens and there is a claim the. The check will be written to the borrower also which is the seller and is long gone. How would you overcome this issue? If you add yourself as the additional insured that could raise some flags with the mortgage company?
Yes you name yourself and the trust as additional insureds.
@clintcoons Hi Clint, love the content!!! if you are offering owner finance… And they are putting down about 20% Is there a way to prevent them from taking out a loan without you knowing about it? thanks.
No but your record a deed of trust against the property you are selling to protect your position.
When the coach speaks I'm all ears
I was recently in a Real Estate CE class, where one of the speakers said subto was mortgage fraud. Most of the other realtors just shook their heads in agreement. Is it true that it is NOT mortgage fraud because you weren't involved with getting the loan?
Was the speaker an attorney? This is the type of misinformation that holds people back. There is no mortgage fraud when buying a property subject to.
No, not an attorney. I'm a Morby Subto student and a new realtor and new to Anderson Platinum. I have so much to learn to grow my confidence to proceed.@@ClintCoons
Can the lender require Tom to provide the land trust documents?
I’m sure that whenever lenders start seeing these videos they’ll start making that a condition of their loans going forward.
@@GM_____ yep. Sad but true.
@Angela East - Yes the bank can require you provide the trust agreement if the bank has reason to suspect the property was transferred. That is why it is important to avoid alerting the lender.
In Montana a bank accelerated on a subject to change of ownership deal. A lawsuit was filed and the Montana Supreme Court held for the bank. I would not encourage people to enter into subject to deals unless you have cash to pay off the mortgage. The risk of acceleration seems high in hot real-estate markets.
Very true. Do you have info on this case. The reason I ask is I am working on a video about a client who was recently accelerated and what to avoid tipping on lenders. Additional material would be great. Thanks in advance and you can send me an email to ccoons@andersonadvisors.com.
Why would the Trust Deed be made out to us, the individual? 6:37
Because the trustee deed is changing the name on title from the seller as trustee to you as trustee of the trust. The title is still in the trust but it is held via the trustee.
Clint, I'd assume if you were going to follow this strategy of setting up a land trust with the seller as the initial trustee that you specifically wouldn't want the seller to be the grantor of the trust.
correct
Clint, are we still concerned about bank finding out about the transfer to trust and accelerating note when we employ this strategy for anonymity purposes (transfer our own property from our name into Land Trust with WY LLC as trustee) or is it not a concern due to Garn-St. Germain act?
It is still an issue but its is greatly diminished. I have a video coming out in a few weeks detailing a client scenario where the loan was called on a subject to deal. Its very real and can happen if mistakes are made.
I've been following your videos for a while. Do your tips on LLC work if you are INC.
Mostly but the tax issues are different and should be analyzed by someone who understands how the strategies could impact your taxes.
Hey Clint, why would you get a Trustees Deed over a warranty deed??
A trustees deed is only a change in trustee.
1,2 and 3 can be done on the same day with an attorney? How does it work? Thanks
I thought you had to pay accelerated depreciation back if you sell ?
Yes you do unless you sell via a 1031
@@ClintCoons ah! Did not know that. Thank you for the knowledge
How about Texas ?
Yes it is an issue an Texas that you must work around.
I'd prefer to take the risk of the loan being called due than having to jump through all these hoops. This is very complicated and a lot of moving parts. Plus, anytime a strategy involves creating "a fiction" and trying to hide something from the bank, it's not a good strategy (in my opinion). I prefer to do the opposite - disclose to the bank that the deed is transferred to me or my LLC. If they're going to call it due, let's get it over with early.
It's appealing to buy properties subject-to because you use lower interest rate mortgages and maybe pay less money down. But with the risk of loan being called due (even if it's a low risk), the safest thing to do is have a plan to refinance or pay the mortgage off (if you want to do the right thing by the seller). This disqualifies a lot of "low equity" subject-to deals that a lot of investors and teachers are promoting out there. The deal needs to be a real deal whether or not you buy it subject-to.
What if the seller snitches you out to the mortgage company/bank after he gets paid off by you?
The seller is liable for the debt so it does them no good to have the bank accelerate because it will effect the seller's credit.
if you send me a email i ll send you a case where the local community wide credit union called the note after we made 3 payments . still in court
They have the right to call the note and it doesn't matter if you've made payments. It's all based on change of ownership. The bank does owe you the money back though but its going to be difficult to prove its you and not the original mortgagor who made the payments. I would not do subject to deals in hotter markets, to much risk.
Did they follow this pattern and protect their anonymity? First I’ve heard of this strategy but I’ve seen the old way a bunch of times.
@@justinwalz1149 Not sure but I dont think they used a land trust it was just a transfer to an LLC. The LLC was making payments to and the bank accelerated. Regardless, banks can easily suspect there is a change of ownership if the property is put in a trust anyway. They will look at the property history and notice the deed was transferred to a trust. They will ask to see the trust document from the original owner. Of course, the original owner will spill the beans that there has in fact in been change of ownership and won't want to commit fraud. The bank will call the mortgage.
@steven Kollar - please send me the case to ccoons@andersonadvisors.com
@@ClintCoonsI see the person said they sent you the case of the credit union calling the note due. Would u explain what happen and what we could do to stop this or overcome it?