This information is for informational purpose only. The people involved should seak their own legal and tax professionals for specific advice of this topic.
An AITD is a wrap where the "Tenant" pays the "Owner" a fee. The Owner takes the fee and pays HIS mortgage. The Tenant does not own the property until the final payment is made and the Owner signs the deed AND the title is recorded in the county where the property is located withh the Buyer's name. Then the Tenant becomes the Owner.
An AITD is illegal in many states.
If the Owner does not pay HIS mortgage, the house is foreclosed upon and the Tenant gets nothing except an empty wallet. If the Owner has a law suit placed against them, the house may be frozen to pay a penalty. The Tenant cannot get a new deed recorded and the property is now frozen in time.
If the Owner's mortgage company is made aware of the issue, they may call the loan as the Owner signed their rights away from the property of the initial mortgage. The owner will be required to pay all of the amount due to the loan or face foreclosure. The foreclosure will start with the Owner's mortgage company to gain possession of the collateral on the Owner's loan.
If the Owner takes a 2nd mortgage or home equity loan on the property, who gets to pay it back? The Tenant may not even know it has happened.
If the state is a community property state and the Owner becomes divorced or gets married, the spouse or ex-spouse may have a legal claim on the property that the Tenant has been paying on.
The Owner, not the tenant, may claim the interest on the loan, taxes, and maintenance of the property as it is really a rental to the Owner. The Tenant claims nothing.
Let's chat about hazard insurance. Who owns the property? The tenant has no coverage using the Owner's policy. The Owner has no coverage using tenant's policy. You may need both policies to protect everyone. If there is an injury or a reason that the property owner is sued, who gets the suit. The Tenant if he claims to be the owner and if a deed was recorded. The Owner if the new deed was not recorded.
There are many agents that have completed an AITD / Wrap. They are gone when the issues happen years down the road. You absolutely need an attorney to set up an AITD. The Tenant needs someone to sue when the deal goes sour. The Owner is happy as they have all of the money from the years that the tenant has been paying.
A simple eviction is all that is needed in most cases to get the Tenant out of the property if the tenant does not pay the Owner the agreed upon fee.
The Real Estate agent gets paid, the Owner gets the rest of the money from a down payment (deposit) and the Tenant gets a monthly bill.
A properly executed "owner will finance" causes a deed in the name of the "Buyer" to be recorded in the county where the property is located. That action causes the Buyer to be the owner of the property. The Buyer may be able to deduct the interest paid on the loan (to the Seller or bank), and other fees allowed by law on their taxes.
The Seller will need to complete a foreclosure to get the Borrower out of th property if the Borrower does not bay the agreed upon fee.
Call me if you would like to discuss the options you have to purchase a property. I do not suggest an AITD. In my opinion, an AITD is not the way as the future pitfalls are enormous.
Please contact me immediately if you know a person that cannot make their mortgage payments. I will work with them to avoid foreclosure or bankruptcy at no charge or fees to them.
The Brodkin Group
Steven Goldman, CRS
Certified Distressed Property Expert (CDPE)
Certified Default Advocate (CDAT)
Certified Short Sale Professional (CSP)
Certified Probate Real Estate Specialist (CPRES)
GRI, ABR, SRES, CNHS, PM, CCI
Realty One Group
10750 W. Charleston #180
Las Vegas, NV 89135
Seller Financing: is when the Sellerâ€™s equity is not being paid at closing in full but is being paid by way of creating a Note and Deed of Trust in favor of the Seller paid by the Buyer with loan terms specific to the contract
AITD: All Inclusive Trust Deed is created when the Buyer is going to assume payments for the underlying loan belonging to the Seller plus a portion of the Sellerâ€™s Equity is included in the dollar amount of that AITD and Note. Sellerâ€™s equity must be a minimum of $1,000.00 or more. The payments would be handled by a loan servicing company who would manage the payments by separating out what is due to the existing underlying loan and what is due the Seller and forwarding payments accordingly.
If I can be of further assistance and answer
Any of your other questions please contact me
Realty One Group
CERTIFIED FOORECLOSURE ALTERNATIVES CONSULTANT (CFAC)
I KNOW LAS VEGAS AND HAVE FOR OVER 40 YEARS
There is also Lease Options, Contract of Sale, OWC, etc.
If you need assistance finding a seller willing to do creative financing please let me know.
I look forward to hearing from you!
The Adams Team at
Rothwell Gornt Companies
Visit my website: http://www.LVrealestateHELP.com
CONNECT with me on LinkedIn: http://www.linkedin.com/pub/robert-adams/2a/971/a93/
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Hope that helps.
Neil Ackerman, Esq
624 S. 10th Street
Las Vegas, NV 89101
Fax: (702) 974-1557
Or feel free to call me directly with more questions at 702-596-7821.
With over 30 years of experience helping families call Las Vegas "home!"
Here is a very simplified example of an AITD:
Sales price: $200,000
Seller's existing loan 100,000
Buyer's down payment 50,000
Since the buyer only has $50k to put down, the seller would give him a new mortgage, an AITD, in the amount of $150k, the difference between the down payment and the sales price. They would negotiate the terms of this mortgage separately between them as to interest rate, number of years, etc. The seller's existing mortgage would not be paid off, and the $100k mortgage would remain as the first deed of trust on the property. That is why the new mortgage is "all inclusive" as there is an underlying first loan.
Simplistically, the buyer would make his monthly payment to the seller on the $150k mortgage, and then the seller would make his monthly payment on the $100k loan to the bank.
DO NOT DO THIS WITHOUT SEEKING LEGAL ADVICE! These are actually complicated transactions and you need to be aware of all the legal ramifications. The biggie is that since most existing mortgages contain a "due on sale" clause, the mortgage holder of the $100k note could technically call the note due immediately - the AITD is considered a sale. That being said, in over 30 years I have never seen a note called due where the payments were made on time, but the possibility exists and both the buyer and the seller need a contingency plan were that to happen.
Also, what happens if the seller doesn't make his payments and simply pockets the buyer's monthly payment? How do you make sure the taxes and insurance are paid? Also the buyer will need separate home owner's insurance because the seller's policy will not cover him. What about tax write offs?
Normally a collection account is set up to cover all these items, but you need professional assistance to set up an AITD properly and avoid complications. Usually an attorney and a REALTOR can work together to iron out an agreement that is as protective as possible of both parties' interests.
Hope this helps!