AVOIDING THE DUE ON SALE CLAUSE - Part 2 of 2

When proposing that a seller remain on the existing loan for you: if you really want to be assured of 'getting the deal,' its important that you make it sound so good for the seller that he can't refuse. To do that, you’d suggest that for his own safety and peace of mind, you'll pay to put the property into a neutral trust (if he prefers), and that he needn't ever transfer the property’s title to you at all…until you've proven yourself, by eventually refinancing or selling the property and paying off his loan. Explain that you'll consent to merely becoming a co-beneficiary in HIS trust until his loan is retired in, say, 6 months (or 3, 4, 5 or 20 years…or more).

Note that this arrangement (i.e., a "NARS PAC Trust™") gives you, as the buyer, 100% of the tax write-off (See IRC § 163(h)4(D)); 100% of the use, occupancy, possession; 100% of the equity build-up (from principal reduction); full rights to all rents; and other profits upon the sale or other disposition of the property. As well, you also have any and all of the other rights ordinarily only available under the so-called "Bundle of Rights" in any form of Fee-Simple Real Estate ownership.
In a NARS PACTrust™, the seller needn’t ever take any chances with you; and you don't have to take any chances with the seller either. By virtue of the structure of the NARS PACTrust™, the trust property is protected from liens, suits judgments, divorce actions or claims, bankruptcies or anything else you can think of…on both sides…including state and/or IRS tax liens. Moreover, the due-on-sale clause becomes pretty much a non-issue in that the property has not been sold; the title has not been transferred (other than to the borrower’s authorized trust); and there is no consideration for a ‘purchase of real estate’ per se. Furthermore, the commodity being transferred (beneficiary interest in a trust) is characterized as Personalty (personal property), and not Realty (real estate), and is therefore not subject to the same creditor rights as would be real estate. And…the transaction has not infringed upon the lender’s foreclosure rights, or compromised its security interest).

In closing, do note that for maximum safety, it recommended that at least 10% of the trust's Beneficiary Interest and 50% of the beneficiary’s Power of Direction should be retained by the seller, with an agreement to forfeit that interest to you upon disposition of the property at the trust's termination. However, also note that the Settlor Beneficiary’s fifty percent Power of Direction can be given to you by means of either an Assignment of Power of Direction, or by a Revocable, Limited, Power of Attorney. The reason for the seller’s retaining a percentage of beneficiary interest is to satisfy the requirement that if the seller places his property into a revocable trust, he must be and remain a beneficiary of that trust. The reason for keeping the 50% Power of Direction intact, is that most county jurisdictions will not re-assess the property for property taxes, or require transfer fees, when transferring the property to a living trust, so long as no more than 50% of the “voting rights” are conveyed.


This article was written by my good friend and associate Bill Gatten, who will be featured as a special live guest Aug 10-12 in Roanoke, VA as well as on a bonus teleconference Thursday night, Aug 9th at 8:30pm EST at www.reimostwanted.com/liveevent.html