Posted by Lee Allen The Garn St. Germain Act allows several exemptions to the due on sale clause. One of the exemptions is that if the property is transferred into a trust and the seller remains a beneficary of the trust the DOS clause cannot be called. The seller just has to remain a beneficary of the trust. What happens if the trust has to beneficaries. I am a 99% beneficary and they are a 1% beneficary. I have still complied with the law and the bank cannot call the loan due. The banks just want to be paid. They don't want to own the house. I even know one investor that the bank called him up and told him that they were aware that the house had been transferred without the underlying loan being paid off and they asked him what he was going to do. He told them he wasn't going to do anything other than keep making monthly payments. The bank decided not to pursue the matter any further. The most that the bank is going to do is foreclose on the property. If the bank forecloses on a property then they will lose big time. Suppose you took over a property that was worth $100,000 and the seller owed $98,000 on it. If the bank forecloses on this property it will pay $3000-$5000 for an attorney to foreclose on the property, then it will pay a Realtor $6000 to sell the property, it will pay at least $2000 in closing costs, and it will lost at least 6 months of interest. It may even need to spend money getting the house into saleable condition. 100,000 - Sale Price Even Bob Bruss who died earlier this year even mentions using a trust in this article If you want to do some research go to some of your local banks and ask them which they would rather do. Foreclose on a performing mortgage and lose $15,000 or keep getting their monthly payments and not have another non-performing loan on their books. I have knows banks that were initially upset at the transfer but agreed that it was in their best interest to not pursue a foreclosure and they may even ask you to pay a $500 assumption fee.
on 10/30/2007, 1:26 pm, in reply to "Book entitled "How to Conquer Expireds""
74.183.168.26
There is a way to legally get around the Due on Sale clause and it is called a land trust.
If you were the bank would you rather keep receiving your monthly payment along with the interest or would you rather take a $15,000 loss?
- 3,000 - Attorney fees for foreclosure
- 6,000 - Realtor Fees
- 2,000 - Closing Costs
- 4,000 - Lost interest
----------
$85,000 <- This is what the bank nets
after paying its fees
Here is a lawyer that recommends the land trust
http://www.reiclub.com/articles/no-due-on-sale-jail
http://www.reiclub.com/articles/due-on-sale-clause-2
http://www.paloaltoonline.com/weekly/morgue/real_estate/1996_Jan_12.ESTATE12.html
Message Thread:
« Back to thread