Im tyrying to really understand one vs the other? My findings are telling me they are the same thing just worded differently. Can anyone help me distinguish the difference and what one is more beneficial to a REI???
Thanks Again Guys
What AITD? Can you get a shot for that? 
My bad, (AITD)
All Inclusive Trust Deed.
Jarod I really like the way you think.
Salsa, If you intend to keep the property either will work but if the seller is in financial trouble don’t do a LO. On a Wrap(AITD) you wrap around the existing mortgage with another one and get the deed. Have you considered a Sub2? Use the search function here to learn more on each subject. herbster
Salsa,
When you are the buyer in a lease option deal, title remains in the seller’s name until you exercise the option. The property is not sold until you exercise your option, at which time title transfers. Until you exercise your option to purchase, you are simply a renter and the “seller” is your landlord.
If your seller is offering to use an all-inclusive trust deed, then the seller is carrying some of the financing as a second mortgage behind his existing first mortgage. The seller has wrapped his first mortgage with your new second mortgage. The property is sold on an installment sale, you get title immediately.
Thanks Dave,
That is exactly what i needed to know. I did look for similar post regarding this q, and not one said it the way you did. So as a REI i am better off getting the All Inclusive Trust Deed if the seller is willing to go that way? The seller im dealing with is the one who mentioned doing it as an AITD.
What is my protection on a lease option, if im not on title till the option is made?
An all inclusive deed of trust (AITD), sometimes referred to as a “wrap around deed of trust,” is used when the seller has given a deed of trust to secure his mortgage loan.
Let’s say a piece of property is encumbered by a deed of trust securing a loan with a $1 million balance. The seller wants to sell for $2 million and agrees to take a $500K downpayment and carry back a secured promissory note for $500K. The buyer must come up with $1 million in cash or a new loan. If the buyer does not want to get his own loan or can’t qualify for his own loan, the seller can facilitate the sale by leaving his original loan in place and financing the entire balance of the sale.
To secure the additional $500K owed the seller, the seller will take a promissory note from the buyer in the amount of $1.5 million and secure that note with a deed of trust which “wraps” the first deed of trust (held by the original lender) but which is second to it. The seller has created an all inclusive deed of trust. In this case, the seller remains liable on the original $1 million note and will continue to pay it from the proceeds of the buyer’s payment to the seller on the new $1.5 million note.
There are issues that need to be addressed in drafting an AITD, some which center around the possibility of foreclosure. For example, is the buyer or the seller responsibile for making payments on the underlying note ($1 million in our example)? What is the recourse of the buyer against the seller if the buyer makes such payments to the seller but the seller fails to pay the underlying note and the holder of the first deed of trust forecloses? What if the underlying note becomes due and payable in full for reasons other than non-payment (e.g., the due on sale clause, or, a sharp decrease in market value has made the property upside down)?
If you have the ability to formally assume the buyer’s first mortgage loan, maybe you would rather do that and just have the seller carry back a second mortgage.
All questions to discuss with your attorney.
In the lease option situation you become a renter until you actually purchase the property. The option agreement gives you the right to buy the property at an agreed price at any time before the option expires, but does not obligate you to do so. On the other hand, the seller is contractually obligated to sell if you decide to buy (exercise your option) before your option expires. Title remains in the seller’s name until you actually buy the property. One risk here is that the seller might default on his loan and allow the property to go into foreclosure before you exercise your option to purchase.