HOW DO A LAND TRUST WORK? WHAT LIABILITY IS THERE FOR THE OWNER WHOSE NAME THE MORTGAGE LOAN IS IN. IF HE QUICK CLAIM DEEDS THE PROPERTY INTO THE TRUST FOR WHICH I NOW HAVE CONTROL AS BENEFICIARY IS HE FREE AND CLEAR OF LIABILITY FOR THE MORTGAGE LOAN FOR WHICH HE WAS THE ORIGINAL BORROWER PRIOR TO THE PROPERTY BEING DEEDED TO THE TRUST? I REALLY NEEDS TO KNOW THIS ASAP.
You don’t control anything as a beneficiary. The trustee controls trust assets.
If you sign a mortgage, you are responsible to pay the mortgage until it is paid off regardless of who owns the property.
First of all, stop shouting.
Unless the mortgage is non-recourse, the only thing the borrower can do is pay it off or get someone else to pay it off. Quit claiming the property into a trust doesn’t discharge the debt and may make the bank think you’re trying to defraud them.
Really? Inter vivos trusts are set up all the time for the benefit of estate planning. A Land Trust (now, “title holding land trust”) is equally as innocuous, isn’t it? There are all kinds of good reasons to move the property into a trust that don’t have anything at all to do with fraudulent activity, not the least of which is owner privacy.
Quit it. You’re scaring me! :help
I am not trying to scare anyone. Here’s the point:
What is the purpose behind land trusts? To transfer ownership of property without violating the due-on-sale clause. Therefore, land trusts are stupid, in my opinion. Why? Two reasons:
-
STOP WORRYING ABOUT THE FREAKING DUE ON SALE CLAUSE! The due-on-sale clause is the boogey man of real estate investors, they lie awake at night in fear of the due on sale clause. But banks are not going to foreclose on performing notes! They just aren’t, unless interest rates hit 14% or something. It is such a minuscule risk that it is not worth worrying about, and yet it consumes real estate investors. It is the #1 question I get, over and over.
-
If you INSIST on worrying about the due on sale clause and want to create a land trust to avoid violating it, whoops, that didn’t work either. Creating the land trust may not violate the DOSC, but assigning the beneficial interest to your buyer sure does. So it doesn’t even do what it says it does! And like I said, the bank doesn’t care, but if the bank DID care, it would want to know why you’re trying to conceal everything from it. It would look bad… if it ever came to that.
To sum up: land trusts don’t work, and are not necessary.
I haven’t been that excited by what I’ve learned about land trusts so far, although Mark Warda has a book and a system for using them in Florida. (I haven’t read his book). I had thought they might be useful since Illinois and Florida (where I live) are the only two states that have strong land trust laws, but the attorney said not to bother using one. If people are saying not to use them in this state, I imagine they’re even less useful in other states. I’m still not clear on what they accomplish, exactly. I wouldn’t want to pay to create and maintain an entity just to get extra privacy.