Buying REOs and Short Sales in a Land Trust

Investors are increasingly learning about the benefits of acquiring and holding investment property through the Title Holding Trust (Land Trust). The Title Holding Trust (Land Trust) provides privacy and confidentiality of ownership, it provides protection from liens and judgments, it protects against partition actions and charging orders, and much more. It is a very effective and inexpensive tool for buying, holding, managing and ultimately disposing of real estate.

This is certainly true when the investor is acquiring troubled assets such as short sale, foreclosure or REO properties. The Title Holding Trust (Land Trust) can be a great tool in these transactions, especially when there are multiple investors/owners involved.

Contracts Can Not Be Assigned

There is one catch that the savy real estate investor needs to be aware of before using a Title Holding Trust (Land Trust) to buy short sale and REO properties. The sale contracts used by lenders and other financial institutions, including FHA and Freddie Mac, are generally written so that the party making the offer (buyer) can not assign their rights to purchase to another party. 

The investor will not be able to assign the contract to their Title Holding Trust (Land Trust) or any other person or entity in most cases.  This can complicate the transaction if the investor decides after they have made the offer to acquire and take title in a Title Holding Trust (Land Trust) or any other type of trust or entity. 

This policy is frustrating (at best), but is designed to curtail certain abuses that can go unchecked without this policy. Investors must generally close and take title to the property in the same name of the person or entity that they originally made the offer through.  Acquiring and taking title in the investors name and then deeding the property into the Title Holding Trust (Land Trust) won't work because you will lose the benefit of privacy and confidentiality of ownership once your name appears on recorded title. 

Make Offer Thru the Land Trust

There is generally an easy way around this problem provide the investor knows that he or she wants to acquire and take title to the property in a Title Holding Trust (Land Trust) up front.  Investors can set-up a Title Holding Trust (Land Trust) in advance and make their offers through their new Title Holding Trust(Land Trust).  This is referred to as a dry trust because there are no assets held in the trust. 

The offer to purchase the troubled asset would be made through and in the name of the investor's new Title Holding Trust (Land Trust).  The closing would occur and the property would be conveyed into the new Title Holding Trust (Land Trust).  There is no need to assign the contract because the offer is made in the name of the Title Holding Trust (Land Trust) right up front. 

Comments

[Bill McKee]

Still can't get a title company to insure title for properties in which a land trust was established (where trustee holds title for benefit of trust) in Oregon. Found any title company in Oregon that will insure title where Land trust is involved? IF so, please post!