I am thinking of entering into a lease purchase agreement with a house that is in trust.Is this a legal?

Asked by Guy Morrison, Joplin, MO Thu Jul 3, 2008

thing? I don't want to get screwed out of my down payment.

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Bill Eckler, Agent, Venice, FL
Sun Apr 19, 2009
Guy,

We agree with the concensus and feel your best bet is to be in touch with an attorney for this information.

Good luck
0 votes
Jo Kleinsorge, Agent, Joplin, MO
Sun Apr 19, 2009
Hello Guy,
Definitely have an attorney look this over to make sure it is handled correctly.
I am an Realtor here in Joplin.
You can call Richard J. Collins, Attorney-at-Law
(417) 782-2222.
He works with real estate and is here in town.
You should be able to get an idea of the price to handle it over the phone.
Ask the sellers to pay or split the cost with you. If they won't, go ahead and pay it.
It is better to put out some money up front than to take a big risk.
Good luck
Jo
Web Reference:  http://JustCallJo.com
0 votes
Ute Ferdig, Agent, Auburn, CA
Thu Jul 3, 2008
Hello Guy. As long as you contract with the person who has authority to make decisions about disposition of trust assets, you should be alright, but I would recommend that you have the agreement reviewed by a real estate attorney. I would also want to know what the motivation is of the seller to enter into a lease option. With so many foreclosures happening these days, you can't be careful enough as I would hate for you to put money down and then the property goes into foreclosure and you lose your deposit and your option to buy. If I were you, I'd see if you can tailor the agreement in a way that will not require you to put money down. Good luck to you.
0 votes
Dale Weir, Agent, Chesterfield, MO
Thu Jul 3, 2008
I would definately have a real estate lawyer help you with the contract to ensure that you understand all of your entitlements on this one.
Web Reference:  http://www.yourstlhome.com
0 votes
Don Tepper, Agent, Burke, VA
Thu Jul 3, 2008
What type of trust?

If it's a land trust, technically it's not a lease purchase. It works similarly, but you'd be a beneficiary (resident beneficiary) of the trust. After a period of time, the property would be brought out of the trust and you'd have the opportunity to purchase it.

A variation on this is that you could purchase the trust. A similar process is sometimes done with properties placed into LLCs. The buyer then purchases the LLC, which holds the trust.

I'm less familiar with other forms of trusts, but there, too, I believe that the property would be brought out of the trust, and you would purchase it.

So, to answer your specific question: Yes, the process--if properly done--is legal. It's also a good technique for asset protection.

However, you definitely need a lawyer familiar with trusts (and, specifically, the type of trust holding the house) to review the documentation. As an aside, most lawyers aren't familiar enough with trusts to provide the type of advice you're seeking, or the protection you need.

And a final comment: Whether using a lease-purchase or a land trust, even if you're fully protected, if you fail to purchase the property or default on the option (or purchase agreement), you will lose your option fee (in the case of a lease purchase) or your contribution (in the case of a land trust). Everything's negotiable, of course, but most lease purchases and land trusts (PACTrusts and NEHTrusts, for instance) are structured so that the upfront money is credited in some fashion if you buy, but is forfeited if you don't.

Hope that helps.
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