Question About Real Estate and Trusts

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CFordUNC

CFordUNC

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I've reached out to two different local trust and estate planning attorneys but am waiting to hear back from them, and I thought I'd ask this question on this board knowing that there are tons of unbelievably intelligent folks with lots of different experience and backgrounds.

My realtor received a Subject-To Letter of Intent from a real estate investment company on my house that I'm trying to sell as we move back to North Carolina. The offer was for the exact asking price. The offeror, presumably, is interested in my low interest rate (3%) and since the mortgage is not assumable, they are proposing that we work with an attorney of my choosing to place the deed in a trust. I imagine this enables them to acquire the property while the existing mortgage remains in place, allowing them to take control of the property but not assume the loan itself. Instead, the LOI states that they agree to make the mortgage payments on my behalf.

In addition to assuming the mortgage payments, the LOI also states that the Buyer would be responsible for maintenance, repairs, taxes, insurance, and any HOA dues from the date of closing. The Buyer would also cover all closing costs. And last but not least, there is a provision in the LOI that states that "If Buyer defaults on loan payments for more than 30 days, the deed to the property will be transferred back to the Seller."

I am a very naturally skeptical person so my initial reaction was to dismiss it out of hand immediately, but my realtor- whom I've worked with before and whom I trust- thinks it's worth discussing with an attorney. Has anyone ever heard of, or have any experience with, a transaction like this? Seems way too good to be true that they'd offer exact asking price, cover all closing costs, assume all maintenance/repair costs, and agree to the stipulation that if they default on payment for more than 30 days, the deed returns to me.

Would love any thoughts, recommendations, advice, or insight- if any- from the community here as y'all are way, way smarter than me.
 
CFordUNC said:
I've reached out to two different local trust and estate planning attorneys but am waiting to hear back from them, and I thought I'd ask this question on this board knowing that there are tons of unbelievably intelligent folks with lots of different experience and backgrounds.

My realtor received a Subject-To Letter of Intent from a real estate investment company on my house that I'm trying to sell as we move back to North Carolina. The offer was for the exact asking price. The offeror, presumably, is interested in my low interest rate (3%) and since the mortgage is not assumable, they are proposing that we work with an attorney of my choosing to place the deed in a trust. I imagine this enables them to acquire the property while the existing mortgage remains in place, allowing them to take control of the property but not assume the loan itself. Instead, the LOI states that they agree to make the mortgage payments on my behalf.

In addition to assuming the mortgage payments, the LOI also states that the Buyer would be responsible for maintenance, repairs, taxes, insurance, and any HOA dues from the date of closing. The Buyer would also cover all closing costs. And last but not least, there is a provision in the LOI that states that "If Buyer defaults on loan payments for more than 30 days, the deed to the property will be transferred back to the Seller."

I am a very naturally skeptical person so my initial reaction was to dismiss it out of hand immediately, but my realtor- whom I've worked with before and whom I trust- thinks it's worth discussing with an attorney. Has anyone ever heard of, or have any experience with, a transaction like this? Seems way too good to be true that they'd offer exact asking price, cover all closing costs, assume all maintenance/repair costs, and agree to the stipulation that if they default on payment for more than 30 days, the deed returns to me.

Would love any thoughts, recommendations, advice, or insight- if any- from the community here as y'all are way, way smarter than me.
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Run. Run far away.

1. You still will have that debt affecting your DTI ratios on the next purchase and other financing.

2. If they default on the payments, it is your who will take the hit on your credit and you who would have to pursue them to effect this transfer of title that they are saying they agree to.

3. This is fraud. It is definitional loan fraud to attempt to circumvent the promises made in your promissory note. While it is true that the loan servicer may never know or care this occurred, that's not a chance I would be willing to take.

If you're going to keep all the risk, then throw the ball back into their court with an installment contract where you still hold the legal title while they pay you in installments. Something tells me they won't be willing to trust you in the same manner they expect you to trust them.
 
wmheel1287 said:
Run. Run far away.

1. You still will have that debt affecting your DTI ratios on the next purchase and other financing.

2. If they default on the payments, it is your who will take the hit on your credit and you who would have to pursue them to effect this transfer of title that they are saying they agree to.

3. This is fraud. It is definitional loan fraud to attempt to circumvent the promises made in your promissory note. While it is true that the loan servicer may never know or care this occurred, that's not a chance I would be willing to take.

If you're going to keep all the risk, then throw the ball back into their court with an installment contract where you still hold the legal title while they pay you in installments. Something tells me they won't be willing to trust you in the same manner they expect you to trust them.
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As wmheel said, “RUN!”
 
CFordUNC said:
In addition to assuming the mortgage payments, the LOI also states that the Buyer would be responsible for maintenance, repairs, taxes, insurance, and any HOA dues from the date of closing. The Buyer would also cover all closing costs. And last but not least, there is a provision in the LOI that states that "If Buyer defaults on loan payments for more than 30 days, the deed to the property will be transferred back to the Seller."
Click to expand...
So if the buyer defaults on loan payments the deed is transferred back to you. What happens if he defaults on property taxes or HOA dues or doesn’t maintain insurance? You’d be left holding their bag. I’m surprised your realtor thought this was worth exploring.
 
Great points, all! Thank y’all so much. It looks like I was absolutely right to be highly skeptical. This is going to be a “hell no” from me, dawg.

Really appreciate y’all!
 
farce© said:
So if the buyer defaults on loan payments the deed is transferred back to you. What happens if he defaults on property taxes or HOA dues or doesn’t maintain insurance? You’d be left holding their bag. I’m surprised your realtor thought this was worth exploring.
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Wait, your realtor brought you this?

I’d think about a new agent or realtor.
 
Zoo_View said:
Wait, your realtor brought you this?

I’d think about a new agent or realtor.
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Yeah, I’m definitely now having second thoughts…. I knew it sounded really strange to me but I also didn’t really understand the mechanics of it enough without talking to an attorney. Looks like I don’t even have to do that, WM and farce just saved the day!
 
CFordUNC said:
Yeah, I’m definitely now having second thoughts…. I knew it sounded really strange to me but I also didn’t really understand the mechanics of it enough without talking to an attorney. Looks like I don’t even have to do that, WM and farce just saved the day!
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Caveat - I know NOTHING about real estate transactions.

It may be that your realtor/real estate agent has to bring you ALL offers. Are they allowed to opine about offers or the offering people/entities?

I DO NOT KNOW.

Your realtor/agent might have been doing their job.

That said, follow wmheel’s and farce’s lead and RUN from this.
 
Ramrouser said:
He brought you the offer and advised you to consult with your attorney.
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But the realtor isn’t a neutral party in this transaction. He is being paid by and is supposed to be working in the best interests of the seller. When the seller expressed doubt about the offer, the realtor didn’t offer an opinion (he is the supposed expert in this scenario) but merely recommended the seller incur further expense in consideration of an offer the seller already didn’t trust. I want my realtor to have an opinion.
 
CFordUNC said:
I've reached out to two different local trust and estate planning attorneys but am waiting to hear back from them, and I thought I'd ask this question on this board knowing that there are tons of unbelievably intelligent folks with lots of different experience and backgrounds.

My realtor received a Subject-To Letter of Intent from a real estate investment company on my house that I'm trying to sell as we move back to North Carolina. The offer was for the exact asking price. The offeror, presumably, is interested in my low interest rate (3%) and since the mortgage is not assumable, they are proposing that we work with an attorney of my choosing to place the deed in a trust. I imagine this enables them to acquire the property while the existing mortgage remains in place, allowing them to take control of the property but not assume the loan itself. Instead, the LOI states that they agree to make the mortgage payments on my behalf.

In addition to assuming the mortgage payments, the LOI also states that the Buyer would be responsible for maintenance, repairs, taxes, insurance, and any HOA dues from the date of closing. The Buyer would also cover all closing costs. And last but not least, there is a provision in the LOI that states that "If Buyer defaults on loan payments for more than 30 days, the deed to the property will be transferred back to the Seller."

I am a very naturally skeptical person so my initial reaction was to dismiss it out of hand immediately, but my realtor- whom I've worked with before and whom I trust- thinks it's worth discussing with an attorney. Has anyone ever heard of, or have any experience with, a transaction like this? Seems way too good to be true that they'd offer exact asking price, cover all closing costs, assume all maintenance/repair costs, and agree to the stipulation that if they default on payment for more than 30 days, the deed returns to me.

Would love any thoughts, recommendations, advice, or insight- if any- from the community here as y'all are way, way smarter than me.
Click to expand...
1. The realtor is probably unfamiliar with this sort of arrangement. This type of offer has to be new; it only makes sense after a rise in interest rates and we haven't had that for a while. So of course the realtor tells you to talk about it with a lawyer. Realtor gets free information. Ask your realtor their opinion if you tell them, "If I do talk to an attorney, I'm not going to tell you what I learn." OK, don't and you wouldn't, but use it as a thought experiment.

2. The remedy sounds good but is actually useless to you. Do you want the deed on your house? You do not. You want to sell the deed. So a provision giving it back to you if the Buyer fucks up isn't all that helpful. Especially since the Buyer isn't going to just hand it over. You're going to need a lawyer to sue, and you're not even going to be in state,

3. Even if it's a bona fide deal, why? Didn't you say you're going to be making nearly 750K as a household? If so, why the fuck do you care about getting your full ask? I don't know the numbers, but let's say you're listing at 400K. This offer comes in at 400K; maybe you get another offer that comes in at 370K.
Is it worth the risk and all the potential headaches to get that extra 30K, which is about 5% of one year's income even after tax? I mean, here's one lesson of living an upper middle class lifestyle that people don't often appreciate: the whole point of making 750K a year is that you no longer have to sweat the details. Sure, you can buy fancier cars and a vacation house and everything, but the most important benefit -- in my view, at least -- is anxiety reduction. It's that you don't have to sift through the details of bizarre offers because you don't really need the money. I mean, if you're a climber who wants someday to have a net worth in 9 figures, it's different -- those people live for these types of bizarre offers because money in their pocket gets them hard. I don't take you for that type of person.
 
farce© said:
So if the buyer defaults on loan payments the deed is transferred back to you. What happens if he defaults on property taxes or HOA dues or doesn’t maintain insurance? You’d be left holding their bag. I’m surprised your realtor thought this was worth exploring.
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My guess is that the actual contract does not limit the remedy merely to missed mortgage payments. It almost certainly would apply to all other costs that, if unpaid, could burden the property.

The bigger problem, in my view, is the remedy. He'd be left holding their bag in any case. He'd get the deed back (after a fight) and then . . . wait, wasn't he trying to sell the house?
 
CFordUNC said:
Yeah, I’m definitely now having second thoughts…. I knew it sounded really strange to me but I also didn’t really understand the mechanics of it enough without talking to an attorney. Looks like I don’t even have to do that, WM and farce just saved the day!
Click to expand...
Any thoughts on keeping the house as an investment property and renting it either through a property management company or on your own?

We sold a house 14 years ago, when we were buying a new house, and I constantly regret not keeping it as an investment property.
 
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ZenMode said:
Any thoughts on keeping the house as an investment property and renting it either through a property management company or on your own?

We sold a house 14 years ago, when we were buying a new house, and I constantly regret not keeping it an investment property.
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That's what my son is doing. He has a nice house in Tucson and has relocated back to the east coast for a new job. He made recently made a number of improvements which he wasn't going to realize immediately in the sale of the home. He elected to keep the investment (in a rising market) and hire a management company to lease and manage it.
 
Ramrouser said:
That's what my son is doing. He has a nice house in Tucson and has relocated back to the east coast for a new job. He made recently made a number of improvements which he wasn't going to realize immediately in the sale of the home. He elected to keep the investment (in a rising market) and hire a management company to lease and manage it.
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Is it a standard lease rental or vacation rental situation? I can’t believe some of the places I’ve seen VRBO type properties. Tucson is a far more desirable place to visit than some three stoplight town in Missouri.
 
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