In the real estate market today, finding a property where the seller is in default is not a difficult task. Default can be defined as the outstanding mortgage balance being higher than the value of the house. To profit, the investor may offer an exceptionally low price, get it accepted by the bank, and attempt to quickly sell the property an end-buyer. This technique, when successful, can yield impressive profits. Unfortunately, trying to this with short sales can be challenging for several reasons. First, the lender must approve the offer. Second, even if the investor can negotiate with the lender to accept the offer, if they have an inclination of a back to back closing the lender may not allow it.

A land trust may be the resolution to both these hurdles. A land trust is simply a private agreement where the property is placed into a trust and a named trustee is authorized by the documents to sign over deed The “beneficiary” is the one entitled to all the “benefits” of the property just as if that property was in his or her name.

The Investor acquired title to the property merely by purchasing the interest in the Trust, and this type of purchase does not require a deed recordation. The new lender will only expect to see a deed from the Trust to the end-buyer. In essence, the Investor becomes “invisible” to the lender and this eliminates any title issues. Although this is an advanced investor strategy and only to be used under the guidance of a competent real estate attorney, this may be the best way to get short sale transactions done in today’s real estate market.

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Filed under: Short Sale Deals

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