Land Trust questions ??

Foreclosures, Short Sales, Tax Foreclosures
1

re: Land Trusts (for ss deals)

Is it true that using Land Trusts you can circumvent seasoning rules with the buyer lenders and FHA loans?

Also is it true you do not have to pay transfer taxes in New York when the end buyer buys the beneficiary rights to the Trust in the final purchase?

Do conventional banks or FHA loans have an issue lending to end buyers who purchases beneficiary rights of a Land Trust ?

Does anyone know a Title company that is comfortable with this type of transaction?

[b][/b]Would really appreciate help with these questions.

2

True in the sense it is harder for them to find out. False in the sense you are deceiving them.

Taxes are owed if the beneficial interest changes. Same thing applies if you try to sell an LLC or entity to circumvent the transfer tax. Tax authorities are wise to these tricks.

Not if they are the grantor of the trust. There is a problem if someone else is the grantor.

3

BLL thanks for quick reply.

–whe you say “deceiving” lender by using a Land Trust is it illegal to deal thru a Land Trust if a lender has seasoning rules?

–So generally lenders have no issue? please explain regarding the “grantor” of the trust? is it the same as the beneficiary or trustee?

Thanks.

4

You can use a land trust. What you can’t do is use a land trust as a means to hide a change in ownership to get around seasoning rules. It’s like inflating your income to qualify for a loan.

Issue with what? using a land trust? No. Using a land trust to avoid their rules? Yes.

The grantor sets up the trust.
The trustee manages trust assets.
The beneficiary gets the benefits of the trust (income, capital, access to assets, etc.)

5

BBL,

I am seeking short sale properties and have potential end buyers, is there a legal way to avoid the seasoning rule imposed by some lenders and FHA loans ?

If not. Are there sufficient number of lenders who do not have seasoning requirements?

6

Not that I am aware.

Find a bank that holds its loans instead of selling them.

7

I here the following banks do not have seasoning requirement:

Bank of America
Wells Fargo
Wachovia
local banks etc.
credit unions

are you aware of others??

8

since most short sales will take longer than 90 days to complete, simply record your Deed into the Land Trust to start the seasoning clock.

When it’s time to sell to you end-buyer, there most-likely won’t be an issue.

Keep in mind the 90-days “ends” when you buyer SIGNS THE CONTRACT, NOT WHEN YOU CLOSE!

good luck.

9

Thanks for the reminder. The devil is in the details!
Obi

10

Using a land trust can avoid the FHA seasoning issue. The hard part is finding a title company who will close such transaction. I know of a title company in Tampa Fl that will close land trust transactions in all 50 states. There are a # of local title companies that I’m aware of that don’t have a problem with it. People sometimes tend to think its illegal to use a land trust and its not at all. The title companies have just decided its a risky transaction and have decided to stay away from the “risky” deals with all the crazyness going on these days.