How Do You Title The Trust, The Trustee And The Beneficiary? By Bryan Benson At Isnare.com Ezine Articles

If you’re thinking about making the seller the trustee, you don't want to do that. Why you ask? Because the seller is out of this, their business is none of your business and vise versa. We know what you might be thinking, what if I can avoid the due on sale clause by making them the trustee and then the next document they sign is their resignation as trustee and I’ll become the trustee.

The problem with this is it doesn't avoid the due on sale clause. It hides it. If you are putting the seller on there as trustee-what do you intend to accomplish? Are you trying to convince the bank that the seller doesn't still own the property? What you really should say is that you want to use the seller's last name to name the trust. Make sense?

When you take title to this property into a land trust somebody has to be the trustee. Now that trust is selling it to some end user later on down the line. The bank does not see that you've taken title already (regardless of how you got it or what name you put in it). As far as they are concerned, the seller still owns it until they get it paid off.

Another reason you might want to use the seller's name some place as the trustee is if the lenders are not going to lend money to your end buyer. It's a different situation if you are talking about the length of time of ownership. (They have the impression that the original seller still owns it, because you haven't owned it for six months or a year). There are several ways to solve this length of ownership issue.

First you hold it more than 3 months if you need too. Let me tell you how we’d do it; we would leave the lender and go to one that wants to make the loan. Do not be under the impression that all of them have that chain of ownership or length of title issue.

When you have a short sale involved with the seller, the bank is getting paid off. Think about it. It’s a different animal when you walk into a seller’s house, get a deed and then you cash out of it in a not to distant future. In that case the land trust that owns it could have the seller's name in it.

Frankly, it's not even an issue if you're cashing out in the near future. It's only an issue if you want to hold it, put a lease option tenant in there and try to make the bank believe the seller still has an interest in the property.

If you are going to cash out of it, the only reason to use the seller’s name in the title of the land trust is to try to convince the bank that the seller has maintained control of the property from the get go.

What does it really boil down to? Only deal with lenders who want to deal with you. You don’t need to deal with lenders who care about how long you’ve owned the property.

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