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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Use the AITD... Posted by Ward-CA- on September 09, 2004 at 5:45 PM In Reply to: Which one to use AITD or ILC? Please elaborate posted by Ca Ley on September 08, 2004 at 2:27 PM : A friend Rob Patton, referred me to this board, and I’ve been browsing it. The content is excellent. Ward, thanks for making it available. : I’m seller financing a house that I just bought with conventional financing (my very fist deal ;-) : Three questions: : I’m deciding whether to use an AITD or an ILC (installment land contract) : Ward, you said in a previous post: : >Use the AITD. It’s a lot easier to sell and is the right thing to do. : 1. Can you elaborate some more on the advantages of an AITD? : What I’ve heard, the argument against an ILC is that in case of buyer defaults, because of the equitable interest, you can not do a regular foreclosure, you have to do a judicial foreclosure, which takes 2 years and buyer lives there for free meantime (if he knows the law) : But my mentor prefers an ILC, because the deed isn’t recorded and the bank wouldn’t find out and trigger the due on sale clause. If buyer defaults, she just offers money for them to walk and leave the place in good condition, and thus she avoids having to foreclose on them. : The taxes on this property aren’t escrowed, so the escrow company said that even if I use an AITD, the bank would never find out. : I also read somewhere in your board that the banks do not have the staff at the county recorded to monitor when deeds transfer hands. : 2. Have anyone done an AITD, did the bank call the loan due? : 3. With an AITD, there is no need to put the property in a land trust, right? Since the deed will be transferred to buyer anyway. : My Re mentor is a student of Bill Bronchick and she totally believes in the ILC : These were my questions to her and he answers: : Pre-paid legal said if I use the ILC, the buyer doesn't get the tax deduction : Mentor: a lie : Me: I want the buyer to get the tax deduction, since the payment is so high. : : The PPL lawyer said the AITD would be a safer bet, especially due to the regular foreclosure process. : Mentor: they don't know what they are talking about : Me: I know you don't like the AITD, other investors I've been asking about said the banks don't have staff at the county records to find out if the deed transferred name, so they said the probability of banks calling the loan due due to an AITD is slim. : So, If I use an AITD, and the deed transfer names, then is there a need to put the property in trust now? : : Mentor: the bank will start checking aitds when the rates go up more. You want to live dangerously go ahead. : : Why are you bothering to ask for my advice? You go everywhere else for info? ~~~~~~~~~~~~~~~~~~ #1. It's easier to sell property by giving the buyer the deed today rather than making them wait to get it some time in the future upon the conclusion of satisfying a land contract. #2. An all-inclusive trust deed (AITD) is just a financing device--it doesn't hide the sale of a property from an existing lender. It basically allows the beneficiary of the AITD to take advantage of an interest rate disparity between the existing low rate on a senior lien and a new, higher interest rate of a "wraparound" trust deed that encompasses the senior lien in its balance. #3. Since title to property doesn't pass via an all-inclusive trust deed, you'd have to use a grant deed in conjunction with the AITD to transfer title and carry back the unpaid portion of your sales price. Pre-Paid Legal is right when they state the buyer doesn't get any tax deduction under a land contract until the day they record a grant deed in their name. Again, your PPL attorney is right when stating that the Deed + AITD is safer legally for both parties rather than the land contract. As I said before, lenders have no way of checking through the public records for changes in property ownership. The most common way for lenders to become aware that a change in ownership has occurred is through the change in the name on the insurance policy. Hope this helps. Follow Ups: Re: Use the AITD... kris 8:13 PM, 04/20/11 (0) Post a Followup: Name : E-Mail : Subject : Comments: : : A friend Rob Patton, referred me to this board, and I’ve been browsing it. The content is excellent. Ward, thanks for making it available. : : I’m seller financing a house that I just bought with conventional financing (my very fist deal ;-) : : Three questions: : : I’m deciding whether to use an AITD or an ILC (installment land contract) : : Ward, you said in a previous post: : : >Use the AITD. It’s a lot easier to sell and is the right thing to do. : : 1. Can you elaborate some more on the advantages of an AITD? : : What I’ve heard, the argument against an ILC is that in case of buyer defaults, because of the equitable interest, you can not do a regular foreclosure, you have to do a judicial foreclosure, which takes 2 years and buyer lives there for free meantime (if he knows the law) : : But my mentor prefers an ILC, because the deed isn’t recorded and the bank wouldn’t find out and trigger the due on sale clause. If buyer defaults, she just offers money for them to walk and leave the place in good condition, and thus she avoids having to foreclose on them. : : The taxes on this property aren’t escrowed, so the escrow company said that even if I use an AITD, the bank would never find out. : : I also read somewhere in your board that the banks do not have the staff at the county recorded to monitor when deeds transfer hands. : : 2. Have anyone done an AITD, did the bank call the loan due? : : 3. With an AITD, there is no need to put the property in a land trust, right? Since the deed will be transferred to buyer anyway. : : My Re mentor is a student of Bill Bronchick and she totally believes in the ILC : : These were my questions to her and he answers: : : Pre-paid legal said if I use the ILC, the buyer doesn't get the tax deduction : : Mentor: a lie : : Me: I want the buyer to get the tax deduction, since the payment is so high. : : : : The PPL lawyer said the AITD would be a safer bet, especially due to the regular foreclosure process. : : Mentor: they don't know what they are talking about : : Me: I know you don't like the AITD, other investors I've been asking about said the banks don't have staff at the county records to find out if the deed transferred name, so they said the probability of banks calling the loan due due to an AITD is slim. : : So, If I use an AITD, and the deed transfer names, then is there a need to put the property in trust now? : : : : Mentor: the bank will start checking aitds when the rates go up more. You want to live dangerously go ahead. : : : : Why are you bothering to ask for my advice? You go everywhere else for info? : ~~~~~~~~~~~~~~~~~~ : #1. It's easier to sell property by giving the buyer the deed today rather than making them wait to get it some time in the future upon the conclusion of satisfying a land contract. : #2. An all-inclusive trust deed (AITD) is just a financing device--it doesn't hide the sale of a property from an existing lender. It basically allows the beneficiary of the AITD to take advantage of an interest rate disparity between the existing low rate on a senior lien and a new, higher interest rate of a "wraparound" trust deed that encompasses the senior lien in its balance. : #3. Since title to property doesn't pass via an all-inclusive trust deed, you'd have to use a grant deed in conjunction with the AITD to transfer title and carry back the unpaid portion of your sales price. : Pre-Paid Legal is right when they state the buyer doesn't get any tax deduction under a land contract until the day they record a grant deed in their name. : Again, your PPL attorney is right when stating that the Deed + AITD is safer legally for both parties rather than the land contract. : As I said before, lenders have no way of checking through the public records for changes in property ownership. The most common way for lenders to become aware that a change in ownership has occurred is through the change in the name on the insurance policy. : Hope this helps. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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