Due on Sale Clause

Tony (Bobo),

You are confusing the two. NARS charges the 1% setup fee to establish the Trust, which is easily recoverable when the Tenant makes his initial payment. Many times we have a tenant ready with his money in hand and the money does not come out of the investor’s pocket.

The trustee, Equity Holding Corporation, charges a $40 fee for its services commensurate with industry standards, that fee is merely included in the tenant’s monthly lease payment. EHC is a totally different entity from NARS, who uses their services because of their credentials and industry experience.

EHC takes care not to disqualify the Equity Holding Trust and render it “dry” or invalid. Therefore Equity Holding Corporation does not charge fees for handling collections, disbursements or other bill paying and collection functions. Additionally, Equity Holding Corporation does not become involved in managing property for the beneficiaries nor are the business interest of the trustee merged with those of the Settlor.

The 1% fee applies when you have a two-party (PACTrust) or three-party (NEHTrust) transaction. If you simply want to put your own home into a trust the cost is $325.

What kind of protection do you need? I didn’t get an answer on the question as to who takes title and actually owns the property in your land trust. If your Trustee owns it as an individual, you had better be protected. A creditor judgment, bk, or his death will jeopardize your property. If you own the property, your selection of a trustee won’t matter because you are subject to the same perils.

Big distinction. You own real estate, I own a beneficiary interest in a trust (personal property). When I fill out an application I list it under “Stocks and Bonds”, not real estate.Your name is on title, mine is not. You can be found under public records, I cannot.

You can use a NARS Trust and select your own trustee, but why not use the best? I’d rather have Tiger Woods on my side, than a 15-handicap amateur.

Da Wiz

the real estate business itself is risky as an investor, so if i cannot swim with the sharks i am not going to invest.

NARS just seems like too much work, gary. if i wanted to jump thru hoops, i’d join the circus but my back problem prohibits me from doing that so i am stuck here making great coffee and helping solve real estate problems.

my grand dad always told me, “if it ain’t broke, don’t fix it” so if ur method works for u, more power to u. thanks for u explanaiton 8)

You’re welcome, Tony. It may seem like a lot of work, but it’s really simple. I fill out the initial documentation and NARS prepares the paperwork; their accounting department makes sure the figures are correct, and their legal department reviews the docs so I don’t worry about making myself making any mistakes.


You probably just overlooked a question for you in a different post, since this is a “simple process” how many “total” pages does a seller look at and are involved using your method of investing?

John $Cash$ Locke

Gary, to me, it seems the 1% and $40 per month are just too much. I saw where you mentioned above about recovering the 1% from your tenant…but i can get the initial payment from them and keep that 1%. I don’t necessarily think a NARS trust is a bad idea, I just am not seeing something important enough to justify the cost to set it up.

I also really don’t want a seller having any percentage of what I own. It doesn’t mena they won’t get any part of their equity…should there be enough to give them any. I know many sub 2 deals here will not have any equity. But if there is, solid paperwork and ethical business operations will ensure they get what is agreed to.

The bottom line…I don’t think a NARS trust is bad, I just haven’t seen anything important enough to justify the expense.

Regards, Tony

Tony, here’s an additional reason why I prefer a non-profit corporation to an individual. I still don’t have the answer as to who holds title to the property under your land trust program, but I do know it’s an individual. What happens when an IRS lien is placed against that individual? I’ll tell you. Your property is placed at risk. Period.

The non-profit Trustee not only shields you from creditor judgments, bk’s, probate, etc., but also from the IRS – legally. An IRS lien cannot attach.

The use of a Land Trust as a method of concealing ownership of property has gained enormous popularity. The real estate entrepreneurial community has latched on to the land trust as a creative method to convey interests in property without awakening the institutional sleeping giant - the infamous due on sale clause contained in almost all Trust Deeds and Mortgages held by Federal and State Chartered Banks, as well as for complete asset protection and privacy as described above.

John, I answered your question in a prior post which may well have been deleted. I secure the property with a simple option agreement. The Trust document itself is six pages, with a one-page addendum which clearly describes what happens at termination.

“I still don’t have the answer as to who holds title to the property under your land trust program, but I do know it’s an individual. What happens when an IRS lien is placed against that individual? I’ll tell you. Your property is placed at risk. Period.”

what i see here is protection for whom the property is deeded to, not to whom u have a L/O with or a CFD with. with those methods, the deed is still in the investor’s name. so y this protection for the honest business person? i don’t understand.

w/o a trust and the DOSC, if it’s called, it’s called. to me a trust, any trust w/o the legitimate use it was designed for looks like blatent DOSC circumvention, plain and simple and the sharing of this and that with the tenant/buyer looks more like a guilt tradeoff because of the trust to begin with


You wrote, “to me a trust, any trust w/o the legitimate use it was designed for looks like blatent DOSC circumvention, plain and simple and the sharing of this and that with the tenant/buyer looks more like a guilt tradeoff because of the trust to begin with”.

Tony, section d (8) of Garn-St. Germain says the DOSC may not be invoked if: "(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property;

The seller simply places the deed into his trust and names a Trustee who takes title to the property and the deed is recorded. It has nothing to do with the rights of occupancy. Whatever occurs within a trust is LEGALLY UNRECORDED according to Federal law. Sharing with the tenant buyer brings much higher rents and allows for more flexibility.

As to protection, my property is owned by EHC and is shielded for the benefit of everyone who is a beneficiary of the trust, the seller, the investor and the tenant. We are protected from the IRS because personal property owned by two or more unrelated individuals may not be partitioned.


i understand what u r saying. my point is not how it works, i am sorry if i was unclear. my point is that it LOOKS like a blatent DOSC circumvention even though the intentions are all well and good. that’s all i was saying.


“Never confuse information with knowledge.”

The Dirty Dozen from the IRS and look at what is number 1.

The IRS urges people to avoid these common schemes:

  1. Trust Misuse.

Unscrupulous promoters for years have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits, and the IRS is actively examining these arrangements. More than two dozen injunctions have been obtained against promoters since 2001, and numerous promoters and their clients have been prosecuted.

As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.

The owner of the family residence transfers the residence, including its furnishings, to a trust.

The parties claim inconsistent tax treatment for the trust and the owner. The trust claims the exchange results in a stepped-up basis for the property, while the owner reports no gain. The trust claims to be in the rental business and “purports to rent the residence back to the owner”; however, in most cases, little or no rent is actually paid. Rather, the owner contends that the owner and family members are caretakers or provide services to the trust and, therefore, live in the residence for the benefit of the trust.

What I see here also if you leave the seller in the property you are pretty much assured that they will not pay. becasue they did not in most cases in the first place, so this is only a temporary stall tactic until they are evicted, I would think that this may come up sooner or later as “Equity Stripping” or something like “Dreams Foreclosed.”

John $Cash$ Locke

I understand, Tony. One more important item as to cost. For the general public to use a NARS Trust, it’s 1% of the MAV. If a NARS member is a participant in the transaction, we get a 50% discount.


As you have said many times, you don’t know much about and don’t understand trusts. Your post demonstrates that. You can only transfer real estate into a land trust, NOT furnishings. Your post applies to a regular trust, not a land trust. HUGE DIFFERENCE.

As I told you, I don’t handle foreclosures. Bill Gatten recommends for his member who do that they ALWAYS protect the existing equity of a seller if they deal with foreclosures. The article you posted is regarding trusts, not land trusts.

The Illinois land trust model has been extant in California for nearly a hundred years and has been challenged, tested, tried, favorably adjudicated and fully authorized in the California courts as well as by the IRS. End of story.


Well that’s what your here for is to explain trusts, so you really should not feel threatened or tell me what I do and do not know.

So what is the legal name of this “Regular Trust” that can hold the assets of a seller including the property since the article says “rent back to the owner” one would assume this trust has a name that I could find because it holds title to the property.

Also how long have you been with the PAC trust folks, I noticed you like to post alot here and in checking Bill’s board I see you joined in Dec 05 and have 30 some posts, hard to believe you could have been with them for years and keep quite that long, just curious.

John $Cash$ Locke

I joined the PACTrust in 2003 and have posted a couple of hundred times. When they converted the website a couple of months ago, many members were forced to take new usernames and about 100 of my posts were lost.

I’m not sure what kind of a trust the IRS is referring to as my expertise is strictly in the land trust. It may well be a living trust. I do know that with a land trust (which is a form of inter vivos living trust) you are limited to real property only. You cannot place your auto or furnishings, jewelry, or any personal property in such a trust. And, I really don’t ever feel threatened, John – I enjoy communicating with others and it would be really boring if we agreed on everything.


Living Trust is described as a revocable living trust. It is sometimes referred to as a revocable inter vivos trust, or a grantor trust. A living trust may be amended or revoked by the person creating it (commonly known as a “trustor,” “grantor” or “settlor”), at any time during the trustor’s lifetime, as long as the trustor is competent.

In a Land Trust the owner will transfer title in property to a bank or another person as trustee of the property by way of a deed in trust. At the same time, the owner will enter into a trust agreement with the trustee which basically reserves to the landowner, as beneficiary, most of the rights in the land. In essence, the trustee ends up with the right to hold title to the land in the land trust and to convey that land at the direction of the beneficiary.

Something to think about is a land trust does not have the flexibility of a living trust. Living trusts are often much more complex, containing additional terms and provisions and holding title to property other than land.

Then we have a trust you create for your own benefit, you have established a “self-settled trust”. If the trust instrument contains provisions that prevent your creditors from reaching your interest in trust assets, the trust is known as a “self-settled spendthrift trust” (or, more commonly, an “asset protection trust”)

Just a few trusts.

John $Cash$ Locke

i’d be curious to know just how protected can one individual be? i guess my point would be, for instance the L/O, CFD nonsense in TX that led to the bill that converts all L/O to executory contracts, and the rest of that idiotic mess: some judge somewhere, or lawyer or some itchy-trigger finger happy, bureaucrat lawmaker decides a trust use in this industry, for what u are using them for, Gary is just TOO much protection and they see thru it. can a trust be pierced, like a corporate veil? or do they offer that much protection? complete, foolproof, and bulletproof? there has to be a papertrail somewhere.

p.s. in all my 900 plus digital cable channels i have never found better entertainment than this lol

The trust and occupancy agreements are not executory contracts. According to Bill Gatten, it is armor-plated and cannot be pierced. In a conversation with Tom Standen, the Trustee, with all his mortgage, real estate and law enforcement experience, he echoed that statement. It cannot be pierced if two unrelated parties hold a beneficial interest.

We are writing a lot of Texas trusts now that the new law has gone through and Investors are seeking protection from paying capital gains taxes.

Remember, Tony. States can say what they want, but Federal law makes land trusts legal. Try telling people busted by the Feds for using medical marijuana that their state’s legislature and voters consider it legal. The Feds don’t and no state attorney general can override Federal law, no matter how creative they try to get.

Just like the DOSC’s that say you can’t place your property into a trust and transfer title to anyone or they can exercise their right to call the loan. The words “unless prohibited by law” follow and prohibit them from doing so.

By the way, I’m enjoying it too, Tony.