How to use a land trust to protect yourself

HomeReal Estate

  • Author Alan Cowgill
  • Published January 30, 2011
  • Word count 576

We have a land trust that we fill out in the office. We don't have our attorney do it and it's a step-by-step system that we use. The trust discourages frivolous lawsuits because it keeps my name off of the county records. My goal is to keep my name out of documents that would land me in court for frivolous reasons.

Kevin also signs it. His signature is designated as "trustee," so he doesn't sign it as "Kevin Derr," He always signs as "Kevin Derr, Trustee."

He is legally allowed to sign for me as long as he is following my orders.

Now there is a problem here. It is not an issue of trust, because I trust Kevin a great deal.

The concern I have is what happens if Kevin, my trustee, becomes incapacitated? Well, you have to find another trustee and make it legal that they can take over your duties. You can also just take over the duties and sign for yourself.

Now you have to have a legal document that says the new trustee is your trustee. Now we have to be very careful with this because if there is something wrong with the trustee, he or she could go to jail.

First thing that happens is Kevin will inform one of my dream teamers that the property's ready to go. The dream teamer will pick up the phone and order a title check. Yes, it's on the check sheet.

We fax the insurance form to the insurance and the closing agent.

We've come up with a one page form that we use. It’s the same form for both. She puts it in the machine. She faxes it to one. It comes out and she turns it around and faxes it to the other one. The reason being is we didn't want to rewrite the lender's name twice and I’m trying to save time.

Also, you need to know that sometimes, when you are flipping houses for profit, closings to buy will be delayed. If the closing is delayed for more than a few days, we offer the lender four percent for the interim. Mostly this is only a few days, but worse case it could be six weeks or more.

So let's say for an example you're getting ready to go to closing on bank repossessed houses for sale. You call up your lender. You order up money and you don’t close. Now they have taken their money off an interest-bearing instrument and shot it to you in good faith that they're going to start getting this high rate of return that you promised.

The money will sit in the escrow account of your closing agent and earn zero. I came up with an "Alan's Rule of Thumb" that said I want to make sure that this is a win-win. I don’t want anyone to feel cheated here.

So if the money is sitting there and we don't close, at some point I'm going to make it right by you and pay you four percent.

Now, where did I come up with four percent? I made it up.

So if you don't like my four percent, use something else. I just wanted to treat them the way I want to be treated me. It’s a lot like the good old fashioned golden rule.

E. Alan Cowgill is the owner of Colby Properties, LLC. and President of Integrity Home Buyers, Inc. Since 1995, Alan has bought and sold hundreds of single family and small multi-family investment properties. His home study system, 'Private Lending Made Easy', shows others how to find private lenders for their very own real estate business.

His website is http://www.supercoolsystems.com

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