The first document you need is called a Warranty Deed. It is very

similar to a Quit Claim Deed. It transfers ownership of real

property from the seller to you or your corporation. I like to use

a Warranty Deed, because a Quit Claim Deed is typically used when

transferring ownership between family members. In every case, it

is so important to get the deed. When you have the deed, you now

control the property. There are many reasons why we get the deed.

The main reason is so the seller doesn't change his mind and sell

it to someone else after you've spent several hours negotiating

with the bank.

I know what some of you are thinking. "What about the due-on-sale

clause?" For those who may not know what this is, let me explain.

Every mortgage has a clause in it which basically states that any

time you transfer title from one person to another, the lender has

the right to call the entire loan due, it's to be paid in full now.

Let me just say this very rarely happens. If the property is

going to auction anyway, they usually don't bother with it. The

lenders are hoping that the homeowners will cure the loan. The

lenders don't want this property back.

I like to handle this a different way. There is a way to get rid

of the due-on-sale clause so it's never an issue. Not only that,

but this other way also protects you as the buyer and you won't

have to deal with chain of title concerns either. What I am

referring to is setting it up in a Land Trust. Land Trusts are a

type of trust that hold title to real property. There are several

advantages by doing this.

#1 - It is a form of asset protection. When I transfer a property

into a land trust, if it's my own property and a judgment comes

against me or my company, it will not attach to my property.

Normally it could. So, it protects both the seller and the buyer

from any judgments that may attach to the property. Land Trusts

not 100% judgment proof, but they set up a line of defense and that

is what you want.

#2 - Privacy. You don't want people to know how many properties

you own. We live in a sue crazy world, people like to sue people

who have money. This makes it look like you own nothing.

#3 Chain of title. This is one of the most important reasons for

setting up a Land Trust. Lenders are becoming more and more

cautious. They don't like people like us because we are the middle

men. They don't like to see real estate investors buy houses cheap

and sell them for lots more where we make huge profits in a short

amount of time. They are ok with little profits because they can

be justified by saying he must have found a good deal, good for

him. But when you start to make more they really start to question

your deals. The reason for this is because there has been a lot of

fraud going on between investors and lenders, and the lenders were

the ones who got stuck with the bad loans.

This becomes challenging for investors because if they start to

question, they will stop lending to your end buyer. They cannot

justify how you bought a house for $90,000 2 months ago and now you

have a buyer for $150,000. The lender does not want to take that

kind of risk, because they think you are scamming them. When you

use a trust, it gets rid of this chain of title issue with the

lender.

#4, Another advantage is the due on sale clause that I talked

about. If the property still looks like homeowners own it, you've

just eliminated the whole due on sale clause. In fact, you can

even prove the sellers still own the property if they ever ask.

This is important for you because you may decide to keep this

property for a while, make up all the back payments, and reinstate

the loan.

The other document you need is an authorization letter. The

authorization letter gives you permission to talk to the lender

about the homeowners loans. You absolutely need this form in order

to do a short sale. You will need the loan numbers from the last

statement that was sent to them by the lenders and a social

security number. Be sure you have this because when you call the

bank they will ask for it and they won't do anything until they

have it.

These two documents get you started. The next set of documents are

the ones the lender requests after you ask them to send a workout

or short sale packet. Usually they will request a purchase and

sale agreement, a HUD-1, hardship, and financial statement. If you

would like to take a look at some of the forms I use, go ahead and

visit.

things you need to know when you call the bank that will save you a

great deal of time and unnecessary headache. In the mean time,

Good Luck and I'll see you again next week.

Next time I will talk about calling the bank. There are a few key