Question:
Lou, I am a new investor. I want to wholesale properties to begin to generate a little cash flow.
Answer:
Which is exactly the way a lot of us start out. We have to do that cash flow situation so that we have enough to eat on, and live on while we build our portfolio of holding properties. One of the best ways to do that is to find properties for other people and flip it to them.
However, that’s not our only venue. That’s not our only resource that we want to look at. We want to look at all the properties. We don’t want to just look at the ugly properties that we can buy for cash, enough of a wholesale that we can mark it up a little bit and sell it to another investor to do the fix-up. We want to look at every property that comes down the road. The ones that we flip out are the ones that require a lot of cash, that do need some repairs, or a lot of repairs that we don’t have time or the cash resources to do the rehab and then hold them, or flip them out to an end user. So, we want to look at every one of those properties that we have paid good money for our advertising and getting the word out there that we buy properties.
Those properties that do not fit that mold, which, by the way, is the home investor’s mold, that the home investor’s, “we buy ugly houses” people, they can only buy ugly houses, basically. They can’t do a number of the things that we teach under the home investors franchise agreement. Buying a property subject to doesn’t need any cash. Even better yet, a property that the seller’s willing to pay you to take off their hands, and you take over the payments on the mortgages; now those properties, I call those my holders, those are my long term hold properties. They just don’t require any cash, and those are the ones that we build our portfolio with.
We can actually get into those properties, not in the way that we’re getting into the ugly properties, or the properties that we’d be flipping out, because they generally have some decent mortgage that the seller has qualified for, so you don’t have to qualify for. They need to sell the house. In many instances, they might be upside down after you show them the cost of sale that is included in the seller presentation kit. They really need to pay you so that they can move on down the road, or you basically take it over for next to no cash, but you have good positive cash flow.
One of the properties I did, not too long ago, actually we are now out of the property. We were in for 33 months; the seller paid me to take over the property. It was a four-year-old house in gorgeous condition. They didn’t pay much. They only paid $1405, which was for next month’s payment. I was able to put a buyer into the property that had great credit, with one major exception, that was an IRS lien, he was in business, and in trouble with the IRS on withholding taxes on one of the three businesses, he owned. By the end of the holding period, the 33-month period, my positive monthly cash flow on the property was $1480. This is a property we took over a first and second loan on at a total of $296,600, turned around 12 days later, sold it, initially it was on an option, but we rolled that option into an agreement for deed about three months later, at $309,900. Then we rolled some points into the financing that we did. In the end, we had a positive cash flow of about $51,000 just during the holding period. When our buyer cashes out, got his IRS problem cleaned up, and cashes out, we got another $49,600. We actually made over $100,000 on a property over a 33 month period that literally didn’t have much in the way of equity.
The market on that house when we got it was right at 320, maybe a little bit over 320, but not by much. We sold it for 349,900. We created equity, but the beauty of it was that we had a mortgage situation where we’re paying our underlying, and had a good positive cash flow throughout the life of that property; life in our portfolio.
Now, when you see, and when you’re hunting for properties and something comes down the road at you, or comes in the door at you that doesn’t fit your model, don’t close your eyes. Don’t put your blinders on to the fact that, oh, I can’t do that one because it’s going to take some cash. Maybe it doesn’t need cash because it’s got good underlying financing that you can take over the payments on.
Question:
What do you see the most effective methods of generating a buyer’s list to wholesale to?
Answer:
One of the most effective means is to talk to your other people in your real estate investors association group in your local area. Call the ads in the newspaper that we buy houses. Also, call the ads in the newspaper that say; come fix me up, or fixer-upper, or needs repairs, buy for cash. Talk to those people that are running those kinds of ads. Also, talk to the other sellers that are active in your rear group. You could, possibly, become a finder or a bird dog for them in getting started.
You can see what they are looking for. Many of them will pay referral fees or bird dog fees just for you to find them properties. In many instances, you won’t even put those properties under contract. You’ll just go ahead and bring your wholesaler, your investor into the deal right from the beginning.
If you got our standard signs in the market, again, same questions you want to be asking these people; what kind of houses, what criteria are you buying houses on, because I find houses from time to time. I might want to be able to pass them on. Just ask the question. Shut up and listen.
By the say, you can also take these people out, you probably should find the largest wholesaler in your market, or in your rear group, and offer to take them out to lunch. They always want lunch. You may have to drive across town to go wherever they’re at to take them out to lunch, but just spend some time with them and learn from them. Buy them lunch.
I, for one, will many times go out to lunch with even a new investor that wants to learn the business. Just for the cost of a meal, I give away a lot of information. Lou does the same thing. At our events, you need to schedule Lou’s lunch or dinner. Buy him dinner. He’s more than willing to talk about whatever you want to talk about, as am I.
Question:
If I collect cards at REA to find buyers
Answer:
You can go ahead and start. If you find one or two houses that you have contract on, in the REA group you can advertise it. I don’t know about every REA group in the country, but Georgia REA, the largest one in the country, at their monthly meeting has a marketing session at the beginning of the monthly meeting. People who have things to sell, and it can be nothing more than a contract that you’re looking to flip; and putting a house under contract for $10 earnest money, and if you don’t close the most you can lose is $10, is well worth it, even if you’ve done it wrong. Even if you have not negotiated the best deal on that contract, it gets you used to talking to people on the buying side.
I suggest you try to get a 60-day closing period when you are planning on flipping a property because this will give you much more time to market the property.
Okay, I think I’ve covered the newspapers; we buy houses ads.
Question:
Also, another topic: phone and web sites. My husband is in the technology field and was very impressed with the capacity, capabilities of your web sites and the work David has put into the development of them. We have looked at cheaper systems that don’t begin to compare, but for now, and until I get financially going, it will be the system. How important is it, in your opinion, for the caller to hear a live person when responding to my marketing – at least on the buy side.
Answer:
For one thing, Jean, the web sites that you get that are cheap, look cheap, generally speaking. They do not perform as well as ours do. Actually, we do have, though we don’t really push it very much, we do have the ability to get you into the public side, buying web site, for as little as $9.95. You don’t have the full capacity of the access to the backside of the web site at that price. You, basically, only have the public side, but it does send you an e-mail. When you can afford to go ahead and upgrade and buy the back side, all your data is in the back side for you to be able to utilize so you don’t have to start from scratch and rebuild that whole buyers list, or sellers list in this case, you don’t have to redo all of that. When you’ve done your first deal or two, you’re just going right to the next step by purchasing the access to the back office. This way you have the same web site, the same e-mail address on your web site. You have the same look, feel. It is the same web site on the public side, but then you have the access to the backside, the back office, the deal manager, and all the tools that go along with that.
Your leads, when you only have the public side, are sent to you via e-mail. You have all the information that your sellers have entered into the questionnaire, but you have the look and the feel of the full system. You just don’t have the access to the back office until you upgrade to the full management system. I think that is a much better situation.
Now, with Voice Whiz, you can have an 800 number that will follow you wherever you’re at. It is always better to have a live person answering the phone; however, with Voice Whiz, it is an 800 number. Any of your callers and any of your sellers that are calling you are giving their phone numbers so that you can return the call. Voice Whiz is very, very reasonable.
If you call the office at 800-578-8580, either Helga or Robin can get you set up on Voice Whiz. It’s actually cheaper than having the phone line in your house because it is $49.95 per month, unlimited long distance, and a phone system, a phone tree that will follow you, go anywhere. It will receive faxes for you, and you can eliminate a number of the phone services in your house that you already have. You need to have one phone with it. If you just have your cell phone, it’s the only phone you have, and have your 800 number out there.
You can also have, for an additional $3.00 per month; you can have a local phone number for the area you are in, with that local area code so people don’t feel that they’re calling somebody out of town or, who knows where in the country. So, for an additional $3.00 a month, that gives you that access and it gives you literally, unlimited number of mailboxes you can set up, number of greetings you can set up. You can even, for say another $3.00, have a separate greeting when people call that other number that are your wholesale buyers, they get a different greeting. It’s absolutely a wonderful system, so you need to be looking at that as a good possibility.
Question:
I’m starting to hear the housing bubble has burst and the property values are falling all over America.
Answer:
This is not really true. If you go on to the internet at OFHEO.gov, that’s Office of Federal Housing Enterprise Oversight, it’s an official government web site; again, OFHEO.gov, and you look at the HPI, the Housing Price Index report which comes out quarterly. It generally takes a couple of months for them to come out. I’ve got one up on my computer here, right now, and this one was dated May 31, and they only do that once every quarter.
The headline on this report, it’s 78 pages long, I’m just going to read the headline to you here, it says: US House Pricing Appreciation Rate Remains Slow but Positive.
Yes, there are pockets that are going down but on average, the prices are still appreciating. The OFHEO house price index shows four quarter declines in only two states. The rate of home price appreciation in US remains slow but positive for the first quarter of 2007.
The house price index, which is based on data from sales ad refinance transactions, was 0.5 percent higher in the first quarter of 2007 than in the fourth quarter of 2006. This is moderately below the revised growth estimate of 1.3 percent from the third to the fourth quarter of 2006, and prices in the first quarter of 2007 were 4.3 percent higher than they were in the same quarter in 2006.
So, first quarter of 2006 to first quarter 2007 the US average price, housing price index, was 4.3 percent higher. Yes, there are pockets. Yes, there are articles in the newspaper all the time that are the sky is falling, Chicken Little type of reporting because it’s sensational. It sells newspapers. It sells magazines.
The bubble has burst in markets like Florida and, I’m not sure, I haven’t looked at the full report here, but I’m sure Florida is one of the two states where the prices have actually, in fact dropped. They have some other issues, in fact, that hurricanes have made all the property, the hazard insurance companies a little bit gun shy. They don’t really want to write insurance in the state of Florida anymore. That is something that goes through cycles. That is something that is going to correct itself.
Question:
What should I say to people who warn me about these dangers in investing right now?
Answer:
You don’t have to say anything. Let them believe what they want to believe. We have ways to sell properties that does not matter that people can’t sell their houses. Right now over 75 sub prime mortgage companies have closed their doors in the last year.
I was talking to a mortgage broker friend of mine just a few days ago, and talking about the sub prime mortgage situation. He said that right now he does not have any sub prime mortgage products out there to offer people with bruised credit. He doesn’t know of any. He said he lost 20 borrowers just this previous week, just last week. I reminded him of our program, and he said I’m sending you about 20 people right now as buyers.
If you have a nice, strong buyers list it doesn’t matter what the perception is. These people want houses. They cannot go through the traditional market, the traditional sub prime market and be able to buy houses. They can’t qualify for the sub prime mortgage because there are no sub prime mortgage products out there. They have to have good enough credit that they have at least a 620 Beacon score to be able to qualify for the little bit higher rate, AA rating, or B+ rating, A- to B+ type of mortgage product. Most of these people can’t do it.
My buyer from earlier story that had IRS liens on his credit report; actually it was an eight page credit report with all, everything, was R1 or I1, but he had this IRS lien, he cannot go to the traditional market, he cannot qualify for a traditional mortgage. Whether it was sub prime or prime, it did not matter. My only complaint about that buyer – he was only late one time in 33 months. I only collected $192 late fee once from him. I generally I to collect at least one a year, but he only was late once and that was the fourth of July weekend fell right there, and they were out of town. He thought his wife had sent it in and she thought he had, and they were off having fun. When I contacted them, they said, oh, yes, we missed this one, and sent in the late fee.
So, we have buyers. If you have a strong buyers list, you will be much more comfortable buying houses that fit what they are looking for. This gives you a lot of inside information on what kind of properties to market for in your particular area. If you have buyers, go out and buy houses that meet their needs. As long as you can make a good spread on a monthly basis with these people, it’s wonderful.
We’re actually doing them a favor because with the sub prime market, the sub prime mortgage market product that has been out there, these people have to come up with at least 10 percent, but generally, 20 percent down payment. They’re also paying like five points in cash, up front. It costs the sub prime people a whole lot of money to get into a property and then they are paying 12 to 14 percent on these mortgages. We’re just offering them a much better deal. We have these people that are having a hard time qualifying because they have bruised credit. We keep them for a long time.
Question:
How can I avoid a deep recession impacting my real estate business?
Answer:
I think I’ve covered that already. Again, if you go to the Office of Federal Housing Enterprise Oversight, you can read the report, make yourself much more comfortable there. That is OFHEO.gov. If you put in a forward slash, upper case HPI.asp, it will take you right to the housing price index page of the web site. They have several different you can download the information. They have records going all the way back to 1975.
Question:
I have a Purchase and Sale Agreement on a pre foreclosure and I recorded the affidavit of Purchase and Sale Agreement. The seller is a transferred civilian Air Force employee and recently sent the keys to me. I am waiting for the deed to arrive via express mail at this time. We have a mortgage broker willing to sponsor an auction on the property and pay all the marketing expenses. The house is worth a minimum of $229,000, and the pay off right now is $175,000.
Answer:
Sounds like a pretty decent deal and you should be able to turn that one fairly rapidly. You didn’t tell me anything about the $175,000 mortgage and it sounds like it isn’t going to cost you anything to get into it. The auction would be one way to do it.
Auctions can be, by the way, Volume 13 is our Auction Profits volume. If you have any interest in doing an auction, that’s the volume you need to have to give you all the tools to do a successful auction. Not only do you need to consider, when you’re doing an auction, doing a cash sale type of auction, but you can also do a down payment auction, or a monthly payment auction, or rent auction if it’s a long term hold property that you are having a hard time moving. Let the market place determine what the value is and what the market rand is, and so on and so forth. We cover that all very thoroughly in Volume 13.
Question:
It only needs minor cosmetic, new lawn, and interior paint. My concern is that the next door neighbor came over to me while I was at the house and showed me a notarized page (Adam, you don’t say what the page is.) signed by my seller, stating that the neighbor was putting $7000 towards the mortgage, and that the seller agreed to sell the house to the neighbor at $175,000. The letter also went on to state that the buyer would reimburse her in the purchase.
Answer:
Well, that sounds like, to me, that your seller has made a side deal, but it doesn’t seem to me like the neighbor has any legal standing here, has just made a personal loan to your seller, the civilian Air Force employee that’s transferred. With your affidavit of Purchase and Sale Agreement being recorded, this puts you in a superior position, so to speak, and it sounds like the neighbor is going to need to go to your seller to try to collect that $7000. It doesn’t really have any legal standing on your deal. The fact that your seller didn’t notify you of this other deal, this side deal, is, as far as I can see, on your seller.
However, I think you need to be talking to the seller and saying, hey, what’s this deal? I do understand that you are waiting for the deed to arrive, so you need to walk on eggshells, so to speak.
For the rest of you, Adam has an affidavit, or Purchase of Sale Agreement, but what we are now teaching, and this is a much stronger document to have recorded on public record, is the notice of Purchase and Sale Agreement, which is the document that is signed by both you and your seller. Many times the problem with that to record that is we can’t get our seller in front of a notary public. Have them sign the notice of Purchase and Sale Agreement anyway. What you do is, you do the affidavit of Purchase and Sale Agreement, reference the attached Notice of Purchase and Sale Agreement, and record both pages together. The affidavit, you need to have it notarized to have it recorded and they are notarizing your signature but you are lending that affidavit much more weight if you have attached Notice of Purchase and Sale Agreement that is signed by the seller, but not necessarily, notarized. As an attachment, it does not need to be notarized. It just needs to be attached and referenced in the affidavit. This will give you a much stronger position with locking up the property and not having an attorney or title company, depending on your state, closing around that Affidavit of Purchase and Sale Agreement. Not many will do around an affidavit, but hardly any will even consider closing over a Notice of Purchase and Sale Agreement.
Question:
I am not the buyer being referred to in the letter, and the neighbor is not a licensed real estate agent. As yet, the neighbor has not recorded the paper; however, if she does will she get in my way?
Answer:
Not really because it’s a race to the courthouse. You are in first position, so to speak. Just think of it like a mortgage, you are in first position and anything that’s recorded after you doesn’t have as much weight. If you are in first position with the mortgage and you foreclose, everything after you gets wiped out, except for the property taxes. In this case, with the affidavit and, if you get your deed recorded, it would wipe anything out between the affidavit and the time of the recording of the deed.
Question:
Does that paper prohibit me from taking full control and selling the house?
Answer:
I don’t see it at all. I haven’t read what it says. I don’t know what it looks like, but I don’t see that as being a problem on this particular deal.
Question:
Should I put the deed into trust to avoid a lien on the house at this point?
Answer:
It’s your seller that signs the deed. You need to wait for the seller to get that deed to you.
Question:
Waiting for the deed to arrive via express mail at this time.
Answer:
As soon as you get that, absolutely as soon as you get that deed from your seller, record it if there is a good clean title report. Always make sure that you, particularly with a seller that has pulled something like this, make sure that there are no other liens on there before you record that deed, and before you spend any real money doing any fix up or anything like that to the property. Make sure you spend just a little bit of money. Generally, you can get a title report done by your title company, or by a real estate closing attorney, generally for not a whole lot of money.
The bare minimum, if you go down to the courthouse, in the records room you’ll notice a number of people running, working feverishly, going from book to book, and looking up titles. If you will just strike up a conversation with these people, we call them the title dogs; they are the people that do all the title work for title companies and closing attorneys. Just, generally, you can get a little bit of an informal title work done, a title pulled, for not a whole lot of money. Generally, under $100. I’ve paid as little as $35 to have a title log, just pull the title. I feel fairly comfortable in pulling titles; however, I will pay that for a professional to do it that does know the courthouse. It doesn’t give me a comfort level it I just do it myself.
Always have the title in your hands so you know what’s going on, on the title before you record the deed that you get from the seller. The seller has to sign that. You cannot just record your own deed.
Question:
I have not done that yet, so it is a little intimidating to know that I’m going to get it correct the first time.
Answer:
It’s a good thing you asked the question, because you cannot record the deed that you sign yourself. You have to have the deed from your seller. The seller’s grantee and your trust is the grantor.
I hope I’ve answered your question fully. For those of you on the call, we can do direct Q and A because many times it will take too long to wait to get the answer on the group Q and A.
Adam, I hope your situation has resolved itself already. This was sent to us on Monday and here it is, by the time you get the call up, it’s Wednesday. The direct Q and A, you can send in your questions, unlimited number of questions on the direct Q and A, and the price for the direct Q and A also covers the group Q and A, so that is included.
Question:
I am at a crossroad. I am working as a full time real estate investor and flipper. I have been at it for two years, and have been in real estate for four-and-a-half years, total. I enjoy residential but want to develop a long-term strategy for commercial strategy, strip malls, office complexes, etc. I make enough money and I can pay my bills, but I am destined to do real estate on a big scale.
Answer:
Congratulations. You’ve got the vision.
Question:
My thought is to take an internship with a real estate developer here in Atlanta to learn the business and gain experience in commercial development. I will continue to invest in single-family homes for wealth building.
Answer:
Very smart idea, Mike, you’ve been in the business long enough that, you don’t say how many properties you have, but you say you’re making good income and you’ve got your bills covered.
The problem with commercial properties, and with development, and this is one of the things we teach in the live events, is you need to build your wealth, build your foundation before you move up to this next level that Mike is attempting to do here. The easiest way to do it is with single-family homes, actually one to five family, because you do it with duplexes and up to a five-plex.
The Garn-St. Germain Depository Institutions Act of 1982, the law that created the due on sales clause, due on sales clause exemption, in placing properties into trust is only valid for valid for properties that are one to five family residential properties. We cannot use the same strategy of buying properties subject to when we step out of that arena. Once we go into the commercial business, we are needing to come up with cash. We are needing to sign on that personally. We are needing to develop private investors that are lending us money so that we have that money. The commercial loans can be called, generally, at any time.
Ted, earlier, was asking what do I do if the economy goes into recession. If you’re in commercial properties, the lender can say, oh, we don’t like the way the economy is going. Your loan is due. You can pay us tomorrow. If you don’t have the cash there, you’re going to lose that property. Many times, in the commercial arena, just think of how many vacant strip malls you’ve seen. How long do they sit vacant? It is much more difficult to fill a commercial strip mall than it is single-family houses. You can spread out in an area. When you buy right, you can buy with other people’s money and so on and so forth. Then you’re fairly safe.
Moving to the next level, you just have to have the where-with-all to keep everything afloat and develop money resources so that if the commercial loans are called you can call on that private money to pay off or be willing to accept some foreclosures.
It’s the big leagues. I’ve done some real estate investment, or development. I’ve developed some small sub-divisions myself. Lou does this even to this day. He has two or three that he’s doing right now. An internship with a real estate developer is probably a pretty decent way to learn the business without a high degree of risk. That is something that, when you can afford to play that game, you can go for it. Don’t jump immediately into the commercial arena. Build your wealth, your income, your cash flow with single family and small multi-family residential properties. Those are easier to rent. They’re easier to get cash flow coming in on, and they’re easier to take subject to.
Question:
I’m searching for a form that my clients would use to eliminate their tax liability after short selling a home, specifically, if they receive a form 1099C.
Answer:
Form 1099C is the IRS form that a lender would send you or your seller in a short sell situation if there was a portion of that debt which needed to be forgiven. So, it’s a forgiveness of debt, and a shortage of income under which they would be liable to pay taxes.
Question:
He’s heard there is some form that can remove that liability.
Answer:
I’m going to refer a lot of this knowledge here is directly from Al Yellow, who has the gold mine tax strategy for real estate investors. You can order that through the office here at 1-800-578-8580. Al is a real estate investor himself, but he is the only man I know that loves to read IRS code sections. It turns him on. I’m glad he’s turned on by it because he does a lot of research for us and we get a lot of information.
Let’s back up here a little bit and explain this. If you look at IRS publication 523, at the bottom of page four and the top of page five, you will find that (publication 523 pertains to the sale of your personal residence) down in the lower right hand corner of page four it says “other dispositions”. This is right from the IRS publication, ” The following rules apply to foreclosures and repossessions, abandonment’s, trades and transfers to a spouse. So, foreclosure, repossession, if your home was foreclosed or reposed you have a sale. So, the IRS looks at a foreclosure as a sale. Your exemptions from IRS code section 121, which is the exemption of sale of a principle residence in the amount of $250,000 of profit, apply here. Utilizing the 121a rule of reporting the capital gain and ordinary income, the seller can end up with no tax liabilities, even on a foreclosure. This also applies to short sale. If it were a foreclosure, and your seller does not have personal liability, there is no personal liability for the debt, they personally signed for it but the property stands as social security, then – this is right from the top of page five of publication 523 – “the full amount of the debt is canceled by the foreclosure or repossession.” However, if you are personally liable on the debt, you have personal liability on the debt where they can come after you for a deficiency judgment, not that they necessarily will, then the amount of the debt cancels up to the homes fair market value. So, if the property sold on the foreclosure steps and didn’t bring fair market value on the foreclosure steps, they’re still covered.
So, here is a situation where we are generally buying a property short sale, and the IRS doesn’t really go into what fair market value is. Fair market value, in my opinion, at least, is fair market value of the property in good condition. If you are doing a short sale, then generally, the short sale is done because the property is not in good condition. If you can possible justify what the fair market value was at the time you did the short sale, the people had no debt obligation even though they have a ordinary income situation when they receive a 1099C, forgiveness of debt form, from their lender.
I hope this has helped a number of you answer that question to your sellers when you’re doing a short sale situation. People that do lose properties to foreclosure have a problem in buying another house in the fact that one of the questions on a loan applications is, have you ever lost a house in foreclosure. If they answer no, and they, in fact, have, they have committed mortgage fraud and they don’t want to do that. Talking them into not letting the property not go into foreclosure and selling it on a short sale is much more profitable for you.
Question:
Agreement for deed insurance, do we have our new buyers, our agreement for deed buyers, bring a homeowner’s policy to closing, or do we keep our landlord policy in affect with the buyers getting a contents policy? Since we are not giving them a deed, insurance companies may not honor our homeowner’s policy.
Answer:
Actually, they will because, if you look at it, they really have an actual interest in the property. When you sold it to them on agreement for deed, they just don’t have title. In many areas of the country one of the norms, and a very common way, for people to buy is on contract for deed or land sales contract; the other terms for agreement for deed. This is very, very common and they should really have a homeowner’s insurance policy. They are, in essence, a homeowner.
You want to maintain a landlord/tenant policy, a rental policy on the property, as well. Yes, you’re double insured. If there is a loss, we want our buyers to claim under their homeowner’s insurance policy, and make that claim and get that claim. That way it does not reflect against us in the insurance database, as making claims. Yes, it’s a little added expense to selling on Agreement for Deed; however, it’s well worth it. Insurance companies want to look for any excuse not to have to pay. If that homeowner’s insurance policy doesn’t pay, then we can fall back to our rental dwelling policy.
Do not double claim on both policies and get double paid. That’s called mortgage insurance fraud. We don’t want to do that.
I hope that has answered your question.
Question:
I used a friend as a trustee for my land trust. However, he is never available when I need him to sign documents and my success_______(10120) lives out of state. How do I get around this dilemma?
Answer:
Number one, I’m trustee for a lot of people. A lot of our students have used me as trustee over the years, and Lou is, as well. Quite frankly, I don’t sign run of the mill, every day documents for the beneficiaries of the trust that I’m trustee of. This is because, and if you follow our system, we have a management agreement; which is in essence, a power of attorney. You’re giving management back to the beneficiary, and the beneficiary, literally, signs all the documents. The only document I’m going to sign, in essence, is when we’re setting up the trust, accepting the position of trustee, and signing the document for the Declaration of Trust and Land Trust Agreement. Those are the only two documents I’m really signing as the property is being put in to trust. I do not want to hear that the beneficiary needs me to sign anything until, well; there is one instance that I would be signing something in between this, and that would be if they are refinancing the property. That would be the only time I’d really be signing any documentation in the ownership period. The next time I’d be signing any documentation as trustee would be when the beneficiary goes to sell, the trust is selling the property. Then I would be signing the deed to the new buyer.
If you are having to have the trustee sign documents in between, then you are not doing it the way we teach you to do it. The trustee shouldn’t be signing everything. You should be signing “as agent” for, or “as manager” for the trust. The management agreement in the trust package has got a lot of power and, in essence, under that management agreement you can sign for literally anything in the life of the ownership of the property. You can even sign for the rental agreements, the Purchase of Sale Agreement when you’re selling out of the property. You just can’t sign the deed.
When I enter into a Purchase/Sale Agreement, selling the property, I’m signing as agent. Agent for who? I don’t say, I just say as agent and the question does not come up.
