Q: What benefits and protections to I have when owner-financing by placing my property in an EHTrust™ and giving full homeownership benefits to a resident co-beneficiary?
A: Here are some…
- Your lender’s due-on-sale clause (“alienation of title” admonition) is not violated
- Due to the property’s tile being held in the name of your 3rd party trustee, neither you nor any co-beneficiary can cause a judgment-creditor lien on the property—including that of the IRS
- In the event of a tenant-buyer default, foreclosure is not necessary…’only simple eviction and an unlawful detainer action at most (i.e., versus long and costly foreclosure, ejectment and quiet title frustrations)
- All collections and disbursements are handled by a FREE third-party bonded and licensed collection (bill-paying ) service acting at the behest of the beneficiaries
- The resident beneficiary (tenant-buyer) remains responsible for all management, maintenance and upkeep of the property, as well as payment of all mortgage obligations, insurance, property and homeowner association fees.
- You ownership of the real estate remains secret, anonymous and unrecorded in the public record (hidden from nosey neighbors and ravenous “ambulance-chasers”)
- Legal exposure re. the property is shifted to the trustee who is acting as a fiduciary and virtually immune to litigation…when not culpable in any matter related to the claim at hand
- The EHTrust allows you to keep your existing financing in place in order to accommodate a would-be home buyer with weak or marginal credit, or insufficient funds for a standard down-payment (‘any such lack can easily be compensated-for by taking a larger commitment fee in advance of granting possession).
- Even though the resident beneficiary in the EHTrust™ is entitled to the active tax write-off for your mortgage-interest and property-tax expense: you too can take the same deduction should you opt to declare the monthly obligation as income and neutralize it by your own deduction privilege and py taxes only on yur positive cash-flow. [Do note, however, that this is rarely done since the resident beneficiaries payments are made to the 3rd prty collection service, leaving you only with the same positive cash-flow on which to be taxed)
- By placing an over-encumbered property into a n EHTrust™ one can give ownership benefits to a resident beneficiary who might be unconcerned about the over-encumbrance in view of “owning” a nice home with reasonable payments on a long-term basis (i.e. an owner-of-record, in such a scenario might consider paying part of the payment to bring the monthly obligation in keeping with what a 100% loan would be on the true value of the property)
- The EHTrust™ can be used to accomplish the objectives and benefits of any type of “creative” seller-carry financing vehicle, i.e.: Lease Option, Land Sale Contract, Contract for Deed, Wrap-Around Mortgage, Equity Share or Lease Purchase
Q: What do I do if my tenant-buyer (my resident beneficiary) defaults on payments?
A: The EHTrust™ always requires that the resident beneficiary post at least one (if not two) extra monthly aggregate payment in a contingency fund to be held by the trustee to cover unexpected circumstances (‘such as a late or missed payment). When a payment is late by ten (10) days, the mortgage payment is made from the contingency fund, and a Pay or Quit Notice is issued to the defaulting party, followed by his/her eviction.
The eviction itself then becomes Constructive Notice to the non-defaulting beneficiary of the defaulting party’s intent to sell his/her interest in the trust at full “Fair Market Value” as must be determined only by an MAI appraisal paid for by the defaulting party (should there be a disagree re. terms)…following payment of a $2,000 (or more) Default Fee. If such appraisal would in-fact prove the offer by the non-faulting party to have been insufficient, then the amount so proven would be paid by the non-defaulting beneficiary…’by means of an unsecured promissory note: to be retired at, or prior to, the trusts scheduled termination date (‘assuming sufficient funds would be available to do so at that time).
Q: What is the resident beneficiary damages the property through overt action or neglect?
A: Following a 10-Day Notice to Make Repairs or Quit, any default in any contract provision can be met by the same punitive provisions that relate to payment default
Q: What if the resident beneficiary would opt to terminate the contract ad move on prior to te scheduled termination date.
A: Doing so would constitute a clear contract violation and would incur litigation for damages (i.e., ‘all remaining lease payments in the contract, all remarketing expenses, a $2,000 default fee, and the costs of refurbishment)
Q: Since the trustee holds full titl ownership of the property, what’s to prevent them from selling the property out from under me or absconding with the title?
A: Doing so would incur extreme punitive action, most-like entailing years of incarceration (“for “conversion of stolen property”). One must remember that even though the title is held by the trustee, 100% of the Power of Direction and Management remain with the beneficiaries. Also note that te trustee we use is a bonded, licensed non-profit, charitable 501C corporation, acting as trustte for its members (i.e., all the beneficiaries of the trusts for which it holds title)
Q: How long has your company been in business, doing this?
A: More than twenty-five years.
Q: Have you ever been sued relative to an EHTrust™?
A: No but we have had had threats of lawsuit by disgruntled beneficiaries who thought they could take advantage of their co-beneficiary counter-part (i.e., wanting to cancel and change their minds because the property increased in value more than they thought it would; of a non-resident wanted to move back in; or a resident wanted to shirk his responsibilities and move out, etc.. They were all thwarted in their untoward efforts by the protections that the EHTrust™ provides (i.e. it works just like it’s supposed to). Through the years, we have been named in various state and federal lawsuits, in which we prevailed, as did our clients.
Q: Who says that a resident beneficiary who is not on tile or on the mortgage loan can take all of the homeowner’s income tax benefits?
A: IRC 163(h)4(D), Rev. Rul 92-105 .
Q: What percentage of EHTrust™ transactions have ended in default and foreclosure by the underlying lender?
A: prior to 2—8 the percentage would have been less than 7 or 8 percent; however, since the real estate depression and the national economic crisis, that percentage umped to around 30 or 40 percent, and is only now beginning to return to normal as market values increase in some areas, and as the national economy improves little by little. One should note however, that the EHTrust™, in many instances, saved the day for both grantor and resident beneficiary relative to b eing able to deal in properties without standard bank approval, and credit and down payment requirements.
Q: Do you have names of satisfied clients I could talk to about their experiences with your company and the EHTrust™?
A: Yes, we do, though we will need their written permission to release their phone numbers to you (‘because of the secret and anonymous nature of the land trust.
Q: Do all attorneys known about this system?
A No. Out of 100 attorney, you might find a dozen who are familiar with trusts in general. Then out a hundred of those who know about trusts, you might find 2 or 3 who know anything about land trusts; then of that group you might find one in a hundred who has ever heard of the EHTrust™. However, we do have our own attorneys on staff, should the need to speak to them arise.
Q: How do you screen prospective resident beneficiaries?
A: Any screening is the responsibility of the owner of the property who has the right to ask for creditor reports, applications, statements of identity, etc. However, in that shortcomings in credit can be compensated for by asking for more cash up front; or the shortage of cash can be made up for by having superior credit…the screening process is usually minimal. It is, though a good idea to always verify employment, bank account, and police records if possible.
Q: What is the most important aspect of deciding whether or not to bring someone in as a resident co-beneficiary?
A: Assurance that they have regularly gainful employment and dependable income, and that they have never gone through an unlawful detainer process…unless it was a part of a foreclosure process. In this day and age, those who have gone through foreclosure may be your best prospects in that they are likely coming out of a larger house with much higher payments than you will need. These folks are also much less likely to be overly concerned about a property that is over-encumbered by its mortgage.
Q: Should EHTrust™ end up in court, would your company represent my interest in a court of law?
A: No. We could do that due to the law related to Conflict of Interest, as we would be sued along with you and would only be able to represent ourselves (although, certainly to your advantage). We would, however, always be immediately available to testify and/or serve as Expert Witness if called upon to do so, unless (again) doing so would be perceived as a conflict of interest.
Q: Also, you say that an EHTrust™ transfer does not violate a lender’s due-on-sale clause; but what happens if a lender doesn’t believe that and forecloses for unauthorized title divestiture anyway?
A: We’ve actually had that happen a number of times, and our response has been merely to refer them to Title 12 of the U.S. Code of Law, paragraph 1701-j-3 which clearly indicates that they are whistling up the wrong Dixie. We’ve then had them attempt to refer to Title 12 of the Code of Federal Regulations, which contradicts the US Code ruling. We then had to inform them that if they’d simply read Title 1 of the same Code, they would know that Title 12 of the CFR has never been proposed or enacted as law, and is in not supported as such by any branch of the government (i.e., this, ‘as per the Office of the Law Revision Council, US House of Representatives)