Sub2 - Is it legal?

General Real Estate Investing
101

Gary,

You ALMOST had me convinced, so I decided to do my own due diligence after you posted the correct names for my search (thank you for the info), and here is what I found.

So you won’t have to search to much to verify what I am talking about, I have added links to the California Dept of Real Estate.

There is no license information on NORTH AMERICAN REALTY SYSTEMS from the California Dept of Real Estate.

North American Loan Servicing Corporation, at your Midpines address, however did at one time have a Real Estate License, which appears to have been revoked and then surrendered.

http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_id=01278218

And your trustee(s) also appears to also have some issues with the Real Estate Department.

http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_id=00631965

http://www2.dre.ca.gov/PublicASP/pplinfo.asp?License_id=00483382

102

BooBoo,

It’s No. Amer Realty SERVICES, Inc. It is not a realtor. NARS is engaged in the business of professional consulting in residential real estate sales and training. They specialize in facilitation of their Trust System through the Realtor and Investor communities . . . and through the NARS Professional Real Estate Network, comprised of over 3,500 Certified Trained Consultants. They have been in business since 1984, have completed thousands of land trusts, and I am very comfortable with their integrity and credibility. The trust program is certified by the Dept. of Real Estate Continuing Education Cert.#3309 in California

As for the Trustee, Thank you very much for the tip. He owns the NA Servicing Co. to which you referred (his payment processing company), and his equity holding company, both of which have nothing to do with NARS. I will be investigating immediately (I always give someone the benefit of the doubt). His performance on my properties has been outstanding.

========================

Your inquiry provided responses from Both Bill Gatten of NARS and Mr. Standen. First, Bill:

Here are the facts. My wife and I gave up our real estate license a couple years back (don’t need them…they are often a hindrance).

My company NARS has never needed to be licensed by anyone other than the city and state.

Neither North American Realty Services, Inc. nor North American Loan Servicing has ever needed any sort of licensing through the Department of Real Estate…in ANY state. Roberta Standen was at one time an extremely successful Coldwell Banker Broker, and may have had a license suspension and voluntary surrender (as many highly visible brokers do)…I know nothing about that, and it has nothing what-so-ever to do with our respective companies. As far as Tom Standen’s restriction, whatever it may have been, is concerned, it was obviously a minor charge and happened more than twenty-five years ago. And again, these occurrences have nothing to do with either North American Realty Services or Equity Management or Equity Holding Corporation. North American Loan Servicing is not a part of our consortium, but is none-the-less one of the most respected loan servicing agencies in the United States…with an impeccable record and reputation (any past DRE dealings notwithstanding).

No company with which I am now, or have ever been, associated has EVER had a license revoked. Period! One’s not renewing a real estate license is not surrendering it…none of us at NARS needs a RE license or has any intentions of ever applying for one.

Our trustees have no issue of any kind with the Department of Real Estate (that’s ridiculous!). We (NARS) were investigated by the Ca. Dept. of Real Estate some 10-12 years back when we were offering DRE CE (continuing education) courses and found to be completely (100%) in compliance with all laws and regulations and licensing restrictions. During that time, like anyone who has EVER provided DRE courses, our advertising was scrutinized by idiots and directed to be changed a few times (e.g. for saying “100%” versus “virtually all” of the benefits of ownership or by saying “does not violate” versus “gets around” the due-on-sale clause; or saying “full commissions” instead of just “commissions,” on another occasion I got nailed for not signing a lady out for 5 minutes who had to take a bathroom break).

And I also had a personal run-in with one of their dim-witted lead attorneys who tried to tell me that county property taxes couldn’t constitute a federal income tax deduction.

Gary, we’re about as pristine as we can get. Don’t listen to half-baked amateur nay-sayers who haven’t a clue, and whose only reason for existence is to make the world simple enough for them to understand without every needing to learn something new. And know full well that when you go to these other sites you are asking for trouble. You can’t help but be jumped by those who are jealous, envious, mean-spirited, resentful, and angry: and who have nothing better to do than sit on their phony butts…pretending…while the rest of us are in the dirt buying and selling and managing real estate, and making money at it everyday. I’ve put up with that silly crap for twenty years and don’t have time for it any more.

I think twenty years without a failure…law suit, lien or challenge, or failed audit—EVER–should shut these nay-nay birds up, but somehow it doesn’t.

What you’re up against is the didactic statement versus the question. In other words, instead of asking why it happens, they make the statement that it doesn’t happen, then sit back and wait for you to defend a negative and change their minds against their will. That method of inquiry is considered among scholars to be one of the lowest forms of Logic and Finding of Fact (“Argument by False Didactic Assertion”). The AFDA forces the opponent into a defensive posture, requiring argument versus debate. Unless you can convert the assertion into an honest question you lose before you start.

Bill

From Tom Standen:

If you have a desire or need to know about all the dealings we have had with the many companies over the years with DRE I would be pleased to discuss them with you. Rest assured there never has been any person or entity suffering a loss of money because of their dealing with us.

All challenges we had with DRE deal with software issues with corrupted data base files. The costs associated with defending yourself against the department are extraordinary. Business decisions were made to stop all the actions because of these costs through settlement agreements.

Again, thank you for the opportunity of acting as your Trustee; hopefully, our relationship will continue as before.

Thomas K. Standen
Equity Holding Corporation

BooBoo, I am now completely satisfied. In addition to the above I received a very poignant letter from Mrs. Standen that described a horror story fighting off the DRE Gestapo and spending over $67,000 to do it. In addition, she said: “Yes, Tom had a minor infraction 25 years ago just prior to having a Stroke and the Department disciplined him. They wanted $10,000, which we paid them in lieu of Tom hiring an attorney to argue with them and having to deal with the issue in light of his physical condition at the time.”

Thanks for allowing me to discover for myself that I have associated with the finest professionals in the industry, BooBoo, and don’t be so quick to judge people.

Peace.

Da Wiz

103

Wow. I had already dumped this thread, but the recent activity intrigued me. And what activity it is!!!

Here I thought that all this time, Doc, it was just you that resorted to name-calling and bad mouthing when you couldn’t answer a response in a civil manner. Apparently, Mr. Gatten is even worse!! Does he train you guys to do this? Personally, I’m more impressed with Bill now than ever. He can speak to and about people in such a way and he still convinces them to buy his stuff? I don’t know if he is a marketing genious or just sells to idiots, but either way, I guess it works.

I think that I’ll try that marketing strategy: If you don’t think the way I do, then you’re a blank, blank, blank and blank. If you invest any other way then you’re a blank, blank, blank and blank. Now, give me your money so you won’t be a blank, blank, blank and blank anymore!!!

Or how about, “the sub2 guys “conceal” the sell from the lender. They are bad.” This one is good. First, how does a sub2 sell conceal the sale when the deed is recorded in the public records. Second, why is it that you consider sub2 a concealment, yet you coaching the seller to setup a land trust so that you the investor can get a controlling interest in the property NOT a concealment?

At the very least, the sub2 investor can admit that he is buying the property to make money. Heck, you can’t/won’t even admit that. If you do, then it confirms that the purpose of the land trust was not for “asset protection” or to “manage the seller’s property to the best possible outcome” (this is great btw. The seller doesn’t want it managed, they want it SOLD. And to who’s best possible outcome?) or any of the other reasons that you cite. The purpose of the trust was so that the investor could gain a controlling interest with the lender’s knowledge or consent.

Or this: “If you think that it is sooo illegal then PROVE IT!!! So me one case that confirms that a properly structured land trust was proven illegal in court.”

Well, in response, right back at ya, Big Guy! You always spout off about the sub2er’s. Show me one court case about them. It would be difficult at best, if not completely impossible. Why? Because most of these cases are settled OUTSIDE OF COURT, so no court case. Heck, even the NC case that sparked the house bill is NOT a court case that you can find. The only reason that most of us know about it is because a) it’s been on the boards and b) the gurus took an interest in it. And that’s including Bill Gatten himself. In fact, his interest was because she was using a land trust to do the deals (I know, not PROPERLY setup though. <btw, any case that people do find, make sure to use that, okay.>)

And while we’re on case law, you always say that you have the law to prove your land trust system works and site some case laws to “prove it.” First, if there are NO case laws specifically concerning the NARS system, then there are NO case laws to specifically prove that they will pass in the courts, Second, do you have any idea to what is in the case laws that you site?

Why does CA laws prove that your system is legal in all 50 states? How does court cases that have nothing to do with land trusts at all prove it?

Doc, I personally love a spirited debate any day. Unfortunately, that seems beyond your grasp. After a brief swing around the 'net looking at other sites, I see that you’re just as popular and flame-tongued on their sites as you are here. Glad to know that you don’t just save it all for me! :slight_smile:

Raj

Btw, Doc. “Rajah” means Great King. Thanks for the compliment! ;D

104

You know nothing about trusts and demonstrate that lack of knowledge so eloquently. What a pathetic and impotent post littered with personal attacks and a bunch of nothing. The new NC 725 law not only exempts land trusts, they even passed a new state law specifically FOR land trusts.

Subject to’s will be illegal in NC under this new law due to “hundreds of defaults” according to the AG.

Land trusts are legally exempted from the DOSC by Garn - St. Germain Act of 1982. Subject to’s are not. Every one is a violation of the DOSC, unless of course you use a land trust and the reason is not an issue. Land Trusts are ALWAYS exempt.

Back to the litter box, “King”. :smiley: :smiley: :smiley:

Peace.

Da Wiz

105

Gotta luv you, Doc! You’re debating skills are awesome. When posed with questions/concerns, you answer with “Nana, Nana, Boo, boo!!!” Definitely hard to argue points when you respond with “My daddy is bigger than your daddy!” Would you rather just go behind the gym and fight it out, since you obviously can’t get over the twelve year old level of name calling and whining instead of calmly debating the issue.

Btw, Land trusts created WITHOUT any false pretenses are exempted. Unfortunately, forcing a seller to setup a land trust before you will “assume any role” in the outcome of that property is NOT “asset protection” and so IS a false pretense. That’s so obvious even a twelve year old would understand it. So what’s the problem?

Raj

106

That is hilarious. You didn’t ask any questions! You can set up a land trust WITHOUT ever having to give a reason and it’s legal. Nobody FORCES a Seller to do anything unless that’s how YOU do business. As I said . . . Pathetic.

::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile: ::slight_smile:

End of topic.

Da Wiz

107

Gary,

You keep side stepping this question and for some reason refuse to answer it. (see quote) We all know you are scared to death of a DOS violation, so please:

“WHAT HAPPENS IF THE DOS IS VIOLATED”, inquiring minds want to know, and please explain in DETAIL without name calling and rhetoric.

108

I’m not at all afraid of the DOSC. My trusts are exempt – REMEMBER?.

For those who use the subject 2 without a trust, your loan becomes payable in full in 90 days and if you don’t pay it in full, they foreclose. If you happened to have a tenant/buyer in the property as an investor in Michigan recently did when the lender invoked the DOSC which you claim never happens, you can not only lose your property, but be sued by your tenant who in this case was buying the property on a land contract.

As for sidestepping the question, people on this forum know that I don’t sidestep anyone or anything. All of your posts have attacked land trusts, you do nothing else and offer nothing positive to this forum. I think Bill said it best and I’ll repeat if for you:

Don’t listen to half-baked amateur nay-sayers who haven’t a clue, and whose only reason for existence is to make the world simple enough for them to understand without every needing to learn something new. And know full well that when you go to these other sites you are asking for trouble. You can’t help but be jumped by those who are jealous, envious, mean-spirited, resentful, and angry: and who have nothing better to do than sit on their phony butts…pretending…while the rest of us are in the dirt buying and selling and managing real estate, and making money at it everyday. I’ve put up with that silly crap for twenty years and don’t have time for it any more. What you’re up against is the didactic statement versus the question. In other words, instead of asking why it happens, they make the statement that it doesn’t happen, then sit back and wait for you to defend a negative and change their minds against their will. That method of inquiry is considered among scholars to be one of the lowest forms of Logic and Finding of Fact (“Argument by False Didactic Assertion”).

BooBoo: That describes you and Rajah to a tee. Who are you and what is your agenda? What do you do besides attack others? Why have you never posted on any other topic since we all know you know little to nothing about the DOSC or land trusts. Otherwise why would you be asking such silly questions? We all would like to know. Waiting . . . . .

Da Wiz

109

So in other words, violating the DOS is no big deal.

IF the loan should ever be called, you would still have plenty of time and opportunity to refinance the property.

110

Who are you and what is your agenda? What do you do besides attack others? Why have you never posted on any other topic since we all know you know little to nothing about the DOSC or land trusts. Otherwise why would you be asking such silly questions? And why are you so afraid to answer these questions? We all would like to know. Waiting . . . . .

Da Wiz

111

Doc, maybe you ought to reread this post from the beginning, Big Guy. There have been several rather basic questions that have been posed by myself and others that you have failed to give an honest answer to or have chosen to reply with the “you’re an idiot!” type remarks or other, more slanderous statements. Hardly professional.

As to my knowledge of land trusts, I use them in my business practices too. In fact, my attorney is originally from Chicago, IL the birthplace of the land trust, so I’m pretty confident that he is up to date on the latest information regarding them. THE use of the land trust has NEVER been in question. You calling us “land trust haters” is just you trying to defect questions that you can’t/won’t answer.

What has been questioned is your implemention of the land trust. In my, namely that you coach the seller to setup a land trust solely so that you can gain an interest in the property without the lender’s knowledge. You don’t believe that there is anything wrong with that. I get it. I do. It is loan fraud, plain and simple. Are you likely to get caught? Probably not, unless you really piss of someone else in the deal, but where’s the profit in that? If you can sleep at night with the risk, so can I? 'Nuff said.

What has been questioned is that you site case laws and say that they “prove” that your method of land trusts is legal. My question is how do those sited cases prove anything, especially when they don’t have a thing to do with land trusts at all? And how do they prove that YOUR NARS system is legal IF they do not deal directly with that system? Saying a land trust is legal and proving that your method doesn’t violate any laws is two completely different topics. Stay on topic!

What has been questioned is why you can’t answer practically ANY post without some flame on the poster or a plain out libel statement? Haven’t you ever heard the saying, “if you don’t have anything nice to say…?”

You say that YOU don’t have to have a reason for setting up a land trust. Well, my question to you is this, IF, and it’s a big IF to you, I understand, at some point in your deal down the road, the original seller decides to change his mind and you do have to go before a judge to settle, what position do you feel a judge would take on the land trust when the seller tells him, “I really didn’t know what I was doing. I called this guy and he said, if you setup this trust in this way, then I can take over from there, and for doing this you get $X dollars.”? The property was actively for sell when the land trust was created, so it was NOT for “asset protection.” The beneficiaries are not related so it was NOT for “estate planning purposes.” The lender would not have approved of the transfer without the creation of the trust, so it must have been to hide a transaction from the lender. That’s my opinion of what might happen. What’s yours?

And finally, since it seems so important, who are you and what is your agenda, Doc? Out of 700+ posts, 650 or more have been more or less board spamming threads with posts like “that wouldn’t have happened if you’d been using the NARS system,” or “the NARS system is so great, you ought to try it.”

No one has been “out to get you,” or to “attack land trusts.” You play the card well, though. You bring the topic of your system to top, get people to question it, then cry, “Oh whoa is me! The land trust haters are attacking me! Please help!” And you want to call me pathetic? Tell me, how many customers has this one topic brought you? That is the point, isn’t it?

Raj

112

B-O-R-I-N-G

Da Wiz

113

As are all your repetitious Land Trust does everything answers.

114

Thank you, Doc, for you knowledgable and professional answer to my post. All my questions have apparently been answered to the best of your abilities. Your response was so simple, I’m sorry that I didn’t realize it sooner. The answer to legitimate questions is: BORING. Now I know what to say to that judge. Thank you.

Sadly, this also means that this thread has come to it’s logical and some might argue, obvious, conclusion.

Have a fine day.

Raj

115

Rajah said, " I understand, at some point in your deal down the road, the original seller decides to change his mind and you do have to go before a judge to settle, what position do you feel a judge would take on the land trust when the seller tells him, “I really didn’t know what I was doing. I called this guy and he said, if you setup this trust in this way, then I can take over from there, and for doing this you get $X dollars.”? (EVERYTHING IS IN WRITING FOR THE SELLER) The property was actively for sell (SALE) when the land trust was created, so it was NOT for “asset protection.” (OH YES IT WAS). The lender would not have approved of the transfer without the creation of the trust, so it must have been to hide a transaction from the lender." (LEGALLY HIDING TRANSACTIONS IS A BENEFIT OF LAND TRUSTS, CREATED FOR THE WEALTHY AND USED BY THE WEALTHY FOR PRIVACY AND ASSET PROTECTION)

“That’s my opinion (AND NOT A VERY EDUCATED ONE) of what might happen. What’s yours?”

THE SELLER CAN’T CHANGE HIS MIND. HE IS BOUND BY THE CONTRACTS HE SIGNS AND ALWAYS IS ENCOURAGED IN WRITING TO REVIEW HIS CONTRACTS WITH AN ATTORNEY BEFORE SIGNING. A SELLER NEVER CHANGE HIS MIND IN THIS TYPE OF DEAL BECAUSE HE GETS MORE MONEY BY PLACING HIS PROPERTY IN A LAND TRUST THAN HE WOULD HAVE MADE WITH A STRAIGHT SALE. HE GETS HIS EQUITY, PLUS HE IS ABLE TO DEPRECIATE THE PROPERTY FOR 3 YEARS DURING THE TERM. HIS CREDIT IS ALSO IMPROVED. HE GETS A GREAT DEAL. THE JUDGE WOULD LAUGH . . . AS I AM AT YOUR QUESTION.

Da Wiz

116

If what you say is true that: “THE SELLER CAN’T CHANGE HIS MIND. HE IS BOUND BY THE CONTRACTS HE SIGNS AND ALWAYS IS ENCOURAGED IN WRITING TO REVIEW HIS CONTRACTS WITH AN ATTORNEY BEFORE SIGNING.”, then your trust is no longer revocable by the seller, and therefor a violation of the Garn - St. Germain Act.

117

Bingo, Boo! Just another problem with the NARS system.

The seller NEVER changes their mind? Obviously, you haven’t done this very long. If the seller’s financial situation or personal conditions change that forced the sell of the property in the first, you can damn well bet that 1/3 to 1/2 will want to reconsider, if they can. But now, you say that they can’t, even though it’s supposed to be a 100% revocable trust that does not change any occupancy rights, yet their is a renter in the property that is NOT the original owner.

Doc, contrary to your belief, you can’t pick and choose which parts of the law that you want to follow and which that you don’t. Having a seller setup a trust for the sole reason to get you in as a beneficiary (ie avoiding a sale transaction) is done to prevent the lender from knowing that the property has changed hands. That’s loan fraud, plain and simple.

The trust is either revocable or it’s not. If the seller CAN’T change is mind, then it’s not. If the seller gives up 90% of his interest in the property (which, I’m sure is a REQUIREMENT of your taking interest in the property), then even if he does change his mind, it doesn’t matter, because you would have to agree to it at that point for it to be revoked. Again, not revocable by the original party.

You can’t transer occupancy rights. It doesn’t matter if it’s included in the trust or not. If part of your deal involves a transfer of occupancy rights, then you are in violation.

And that’s the whole point. ALL of the above are in your “deal” when you first talk to the seller. IF they don’t agree to ALL of the above, then I’d guess that you don’t do the deal. You simply can’t put ALL of the pieces of your complicated method together without it be construed as fraud.

Boo, I’m done here. Everything has been asked and we’ve gotten the best (or worse) answers that we’re going to get.

I’m personally going to take my education from Doc: This is getting BORING! Doc can’t even make a simple reply without a flame in it.

Raj

118

BooBoo: The seller can’t unilaterally revoke the trust, because BY written agreement, there are now 2 or 3 owners. It remains a revocable trust a revocation MUST be unanimous by the vote of all owners. This is standard and many trusts have more than one beneficiary.

Rajah: “You can’t transer occupancy rights. It doesn’t matter if it’s included in the trust or not. If part of your deal involves a transfer of occupancy rights, then you are in violation.” WRONG. YOU ARE ALLOWED TO LEASE THE PROPERTY FOR LESS THAN 3 YEARS UNDER GARN-ST. GERMAIN:

§ 1701j–3. Preemption of due-on-sale prohibitions
(d) Exemption of specified transfers or dispositions
With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, . . . a lender MAY NOTexercise its option pursuant to a due-on-sale clause upon—

(4) the granting of a leasehold interest of three years or less NOT CONTAINING an option to purchase; MY LEASE DOES NOT.

(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 TRUST REFERS ONLY TO THE TRANSFER OF TITLE TO THE TRUSTEE, A LEGAL TRANSFER OF TITLE PROTECTED BY SECTION 8) IT MAKES NO REFERENCE TO OCCUPANCY RIGHTS.

=============================

THE TRUST IS NOT REAL ESTATE, IT IS PERSONAL PRIVATE PROPERTY. THE DOCTRINE OF EQUITABLE CONVERSION IS HOW THIS IS ACCOMPLISHED. THAT’S WHY ALL DOCUMENTS CREATED WITHIN THE TRUST REMAIN LEGALLY UNRECORDED, THEY ARE PRIVATE PROPERTY AND YOU CAN BE PROTECTED, EVEN FROM THE IRS. YOU WOULDN’T WANT TO GIVE AWAY ANY MORE RIGHTS OF PRIVACY WOULD YOU? THE SMALL INVESTOR CAN DO VERY WELL DOING WHAT THE WEALTHY DO. IT’S ALWAYS LEGAL.

Once your Trustee takes title, he owns the real property. You own a beneficiary interest in a trust which is categorized by the IRS as securities and listed under stocks and bonds.

MORTGAGE LAW VS. U.C.C. REGULATION (ART. #9)

“Mortgage law" would rarely, if ever, govern a security interest in a beneficiary’s land trust interest.

• Eric T. Freyfogle, “Land Trusts and the Decline of Mortgage Law," University of Illinois Law Review, Vol. 1988, p. 76-99, spec. referring to: “Horney v. Hayes [1957] and its Progeny” (See “Personal Property” below).

IN OTHER WORDS, MORTGAGE LAW NO LONGER APPLIES – THE TRUST IS PERSONAL PROPERTY COVERED UNDER THE UNIFORM COMMERCIAL CODE – NOT MTG. LAW.

Enough of the CAPS, the rest is from me:

The Uniform Commercial Code, adopted by all 50 states, characterizes interest in an Illinois-type land trust as Personal Property. However, for federal income tax purposes, the beneficiary/ies of land trusts are treated as if they owners of real estate. Because local laws view a land trust’s beneficiary interest as personal property rather than real property (except in Louisiana and Tennessee who treat such beneficiary interest as realty), it is UCC regulation (i.e., Article #9), rather than mortgage law, which governs the interest of the parties.

If you need legal references, I am not an attorney but was provided this by a friend:

University of Illinois Law Review, Vol. 1988, p 68, FN#11 (Freyfogle, “Land Trusts and the Decline of Mortgage Law”)

Land Trusts for Privacy and Profit, Atty. Mark Warda, Galt Press, Clearwater Florida, (2002)

=============================

To summarize, Garn-St. Germain not only exempts land trusts from the DOSC, but fully supports the transfer of ownership as long as the seller retains a beneficial interest and as long as it’s a lease of 3 years or less. This should about do it, don’t you think? Nice try, kids. No charge for the education.

Da Wiz

119

HUH???

120

Does that mean you finally get it?

Da Wiz