Home Equity Saver™

 Palm Springs Desert Area Homes, Condos & Real Estate  

This article focuses on helping homeowners in foreclosure preserve their equity. We can’t keep you in the home but we can help you keep your equity intact. All you have to do, while disposing of your home, is stay on the loan for 2-3 years or so.

Let’s take the simple sale of your property. If you were to sell now, in the conventional way, you can burn a lot of your equity just in the process. Say you have a $100k home:

1. You give up, let’s say, a 7% discount just to get the house sold. This is the "price drop" your Realtor will likely ask for. It could be more. In fact it will be a lot more if you are forced to deal with a foreclosure speculator.
2. You give up 6% in real estate commissions (standard in California).
3. You pay, say, 4% in closing costs.
4. You wait, say, 3 months for a purchase contract and another 1 month waiting for the close of escrow. Let’s say your house payments are $750 per month. That’s 4 months at $750, which totals $3,000, or another 3%.

Do the math. On a simple sale of your property, you have just dropped a whopping 20% of your equity! This is $20,000 on a $100,000 home. It could easily be a lot more.

But, if you will stay on the loan for a few years under our Home Equity Saverä program, you can reduce this loss of equity to expenses only, that is any necessary repair costs and your share of closing costs.

1. The avoidance of the total loss of your equity in the property
2. Retrieval of your equity in cash in a very reasonable period of time
3. Time for you to regroup and make a financial recovery.
4. A real solution to a serious problem.
5. Preservation of your credit
6. And, dare we say, a boost to your morale.

Our purpose here is to give you the knowledge you need to make the fast decisions you must make. When faced with foreclosure, you must make a plan. To develop a plan, you must be informed.

Our Home Equity Saverä approach to the foreclosure segment of the real estate market is different. It is the opposite of what others do. Rather than take advantage of the misfortunes of Owners in Foreclosure, we solve their problems in a fair and constructive way.

If you are in this position, Home Equity Saverä will work to stabilize and improve your financial circumstances. We will partner with you to achieve a result that will preserve your equity and allow us to make a fair profit too.

Unlike the "Foreclosure Speculator" (see below), who looks to make a killing at the expense of your equity, we look down the road for our reward. Our profit comes from the future occupancy of the property and its ultimate sale. We feel good about this and the Owner in Foreclosure gets treated fairly, with his or her equity protected. The word spreads, and our business flourishes.

Thousands of foreclosures are filed every year. They have any number of causes. And it’s less about an up, down or sideways real estate market than it is about the ups, downs, and circumstances of life.

Here are some of them: Lower Personal Income Due To Employment Trends; Money Management; Bad Business Decisions; Bad Economic Market Trend; Sudden Relocation; Employment Displacement Causing Lower Income; Medical Bills; Death, Divorce; College Costs; Accidents; Over-Easy Credit; 125% equity loans. And there’s more...!

While every foreclosure has a different set of causes, here is what all California Owners in Foreclosure face in common:

1. An inexorable and speedy foreclosure process;
2. Denial of their own situation;
3. Roadblocks thrown up by the system; and
4. Foreclosure Speculators.

In California the foreclosure process is very short and very mechanical. Once your lender decides that your back payments are too far in arrears, he instructs the Trustee to send to you and publish a "Notice of Default." Failing a "cure" within 90 days, the Trustee sends to you and publishes a "Notice of Sale." Twenty-one days after that your property is sold.

Time is not on your side. In fact, time is your enemy!  If your house payments are more than a month or two behind, your lender has probably already started foreclosure proceedings.  Plus, as time goes by, thousands of dollars in penalties and legal fees can be added to the balance you owe. To say nothing of additional interest accrued on a daily basis. 

The longer you wait, the harder it is for us to help you. To avoid this you must act quickly

It is so natural to think, "This can’t be happening to me!" or "Hey, this is America. They can’t take my home away!" or "Something will show up to fix the problem." But wishful thinking is the most dangerous thinking you can do. Because - as time goes by - your room to maneuver disappears. In fact denial of your situation is more dangerous to you than the situation itself. The longer you wait to take action, the harder it gets to resolve the situation to your advantage, let alone salvage any of your equity or credit from inevitable disaster.

On top of the time-crunch, here are some more hazards of the California foreclosure process:

1. In California the Broker must disclose a foreclosure in process to any interested buyer. This makes it practically impossible to achieve a fair price for the Owner in Foreclosure.

2. Many institutional lenders, such as savings banks or commercial banks, will not lend money on a property that has a "Notice of Default" recorded against it.

3. Private investors (equity lenders) will make very expensive loans, called "equity loans," on a property with a "Notice of Default" recorded against it. The Owner’s personal credit is not taken into account. They just look at the amount of equity remaining. However, you will have to show the equity lender that you have sufficient income to support the payments on the loan.

If this isn’t bad enough, the California State Legislature, in an effort to prevent foreclosure speculators from taking "unconscionable advantage" of foreclosure victims, has actually made it worse for the victim. For example, it has made it virtually impossible for the owner in foreclosure to obtain professional help.

The California "foreclosure consultant" legislation requires brokers to obtain a bond for three (3) times the market value of the property in foreclosure. The cost of the bond, attendant risks of litigation, and risks to their licensed status deter real estate brokers from representing Owners in Foreclosure. They would rather attend to their regular, more profitable, and uncomplicated clients.

So Owners in Foreclosure are left on their own, without broker representation, and pretty much at the mercy of the foreclosure speculators, who continue to operate freely. This is a classic case of a well-intentioned legislature creating law that hurts the people it was designed to protect.

With money to make up arrears in short supply and time rapidly running out, what are your options? We have listed the basics below.

This is an agreement between you and your lender that reinstates the loan through payment of a lump sum, a "catch-up" payment schedule, or a temporarily reduced monthly payment. Your lender will probably put a 12-month (or so) time limit on the duration of this arrangement.

This is a change in the terms of the original note. It could be a reduction in the interest rate, or an extension of the term aimed at reducing your monthly obligation until your financial situation improves.

This is where the existing lender or a new lender lets you refinance your existing loan and wrap in any late payments and fees, and even let you take some cash out. All this is aimed at helping you get back on your feet.

This would typically be from a "hard money" lender. But beware of hefty loan fees and high interest rates. This could put you even further behind.

If you have established credit, this could be available from your own bank.

This is where you voluntarily give up your title to the lender. It can be beneficial. The lender is saved the expense and delay of the foreclosure process. In return, you may be released from personal responsibility for the loan. The downside is that you are also surrendering any equity you have in the home.

This will certainly stall the foreclosure process, but only temporarily. In the meantime you will have put a 10-year smear on your credit. Don’t do it. Plus, with a bankruptcy in your credit file, you may find it impossible to rent another home after the foreclosure has gone through.

You can list your home with a Realtor. Unfortunately, listings take time to sell. By the time you have explored your financing options, time will have just about run out and you will be forced to accept a "fire sale" price from a Foreclosure Speculator.

This could be part of the listing sale process. Where the proceeds of the sale are not enough to pay off the loan and commissions, you or your Realtor may be able to negotiate a "short sale" with your lender, such that the lender accepts a lesser sum than the outstanding principal as payoff. There may be tax consequences to this. You may have to pay taxes on the amount that the lender writes off. Consult your tax professional.

The Not So Tender Mercies of a Foreclosure Speculator

The foreclosure speculator keeps an eye out for the publication of the Notices of Default. S/he is out to make as big a profit as possible and will normally offer no more than moving expenses to the financially troubled owner – just pennies on the dollar! This is a good deal for the speculator, but not for the owner. However, it is a much better choice than losing your credit, as well as your house, at the trustee auction.

This is the "do nothing" approach. It is not so much an option as the inexorable conclusion of the non-judicial foreclosure process. It usually nets the owner none of the owner's equity. The lowest bid at the auction usually gets the property. The lender simply bids the amount owing on the loan plus expenses. This leaves the owner with nothing and the lender with the property. If someone puts in a bid higher above the first lender’s bid, it is seldom sufficient to cover other outstanding loans, and the owner still gets nothing. And after the auction – eviction!

Finally - a viable option for Owners in Foreclosure. We will help you preserve your equity, less only some expenses of the process. You have a new and better option that will:

• End your economic duress.
• End your roller coaster emotional panic.
• Minimize your credit problems.
• Cure the foreclosure.
• Allow you time to make a full financial recovery
• Facilitate your return to the real estate market in a reasonable time with funds preserved to start over.

Why is this last point so important? Because, when your entire equity is lost on the auction block or to a foreclosure speculator, it will take you many years to save it back again.

Considering all the problems and consequences that a California Owner in Foreclosure faces, insulating your equity and protecting your credit with our Home Equity Saverä Program is very attractive.

Your old school Foreclosure Speculator preys on the equity of homeowners facing foreclosure. It was to help keep these sharks at bay that California introduced its well-intentioned Equity Purchase law.

Now enter North American Realty Services’ Equity Holding Trustä . We have learned how to use this derivation of the well-known Illinois Land Trust to turn the tables on the Foreclosure Speculators. We are able to profit in the foreclosure marketplace, not from the hard earned equity of homeowner foreclosure victims, but rather from the efforts of grateful would-be homebuyers who are just thrilled to get the opportunity to become homeowners.

The Home Equity Saverä Program is a "creative financing" option and operates to achieve the same basic purpose as a "subject to" or "lease option" arrangement. Arrearages on the loan are brought current, you remain on the loan and someone else becomes responsible for loan payments and maintenance. However, to achieve this purpose, we use the NARS Equity Holding Trustä . This is (among other benefits) for the maximum protection of all the parties involved in the transaction.

The NARS Equity Holding Trustä is a variation upon the revocable, inter vivos (living) nominee trust that is used throughout the United States for the purpose of holding title to real estate with maximum privacy and to prevent problems with probate. This trust structure is viable in all states and commonly referred to as the Illinois Land Trust. It originated in Illinois.

With title to the property held by an independent, third party trustee, and the transaction carried out within the trust, your equity in the property and the rights of any other party involved are protected against the possible consequences of, say, bankruptcy, divorce, job transfer, judgments, or unapproved loans of other parties.

As a side note, for your own protection (and also to protect us against any possible future accusation that we have been unfair to you), we strongly recommend that you obtain your own legal counsel to review the transaction. We will be glad to discuss any issues with your attorney.

Here is a brief overview:

First we will obtain from you all relevant details of the circumstances. This includes: specifics of the property, arrearages owed, the lender(s), the terms of the loan(s), other encumbrances, the value of the property, its current condition, need for repairs, etc.

Most important of all, we will ask you what it is you want to see happen. This includes whether you want to stay on in the house, if this can be arranged, or whether you would rather move.

At this point we will also tell you that you must obtain your own legal advise for this transaction. While it is not our intention to take advantage of you, neither do we ever want to be accused of doing so.

When we have done our homework, we will make you an offer based on a non-exclusive option to acquire your property at a Mutually Agreed Value for 30 to 45 days. "Non-exclusive" means that you have the right in the meantime to market and sell your property any way you like to anyone who might give you a better price or terms.

We need the 30 to 45 days in order to find and qualify a new resident and future owner of the property. See the "Tenant-Beneficiary" below.

The Mutually Agreed Value will be the Fair Market Value indicated by the comps less any expenses, such as bringing arrearages current, making needed repairs, and closing costs. We deal strictly at Fair Market Value. We take none of your equity.

At this point, assuming our offer is acceptable to you, we also get your authorization to talk to the lender(s), to see if we can get them to provide forbearances. Oftentimes, the lender is quite willing to do this. Here’s why.

You should know that, when a foreclosure goes through, not only do you lose your home. The lender also loses its anticipated yield and stream of income. Also the lender is forced to spend thousands on "flooring" (holding the non-producing asset, while it is being re-marketed, and foregoing other lending opportunities because it has to reserve against the non-performing asset). So the lender is just as motivated as you are to stop the foreclosure process, by any reasonable means.

So at this point, the arrearages are forborne or are covered by a cashier’s check that we provide, and escrow is opened.

Once escrow is opened, you place the property into an inter vivos title holding land trust. This utilizes a neutral third party corporate trustee, which will hold 100% of the legal and equitable title to the property. The trustee takes direction from the beneficiaries of the trust. Beneficiary Agreements bind the actions of the beneficiaries.

This is not the place to get into all the ins and outs of trusts. And this is one of the reasons we insist that you receive proper legal advice on the transaction. However, we will cover the basic functions and effects of this trust arrangement.

Here’s how it works:

1. The Trustee holds legal and equitable title to the property and takes direction from the beneficiaries of the trust.
   
2. You, as the "Settlor of the Trust" are one of the co-beneficiaries of the trust (the "Settlor-Beneficiary"). We, the investor, are a co-beneficiary of the trust (the "Investor-Beneficiary").
   
3. The prospective ultimate purchaser that we find during the period of our non-exclusive option will be the "Tenant-Beneficiary," who will rent the property from the trust with the additional obligation of maintaining it. Think "rent to-own. On termination of the trust, the Tenant-Beneficiary has the right to finance and buy the property at the then Fair Market Value. At this point, you get your equity in the property paid to you in cash.
   
4. The respective interests of the beneficiaries in the trust (which can range from 10% to 90%) govern the final disposition of the property upon termination of the trust and will reflect the underlying intention of the transaction. These interests are formed by the Beneficiary Agreements. At termination of the trust, you get a cash payment of your equity in the property.
   
5. So how do we make a profit? In several possible ways, depending on the transaction: 1) Because the Tenant-Beneficiary is getting a good deal, we are able to charge him/her a premium on the value of the home; 2) We profit from a small "spread" between the Tenant-Beneficiary’s payments and the loan/tax/insurance payments; 3) We share with the Tenant-Beneficiary in the appreciation upon the ultimate sale of the house. Why are we telling you all this? It’s to show that we derive our profit from the benefits we confer on the Tenant-Beneficiary. None of our profit is at the expense of your equity.

4. Other Benefits of the Title Holding Land Trust

1. It accomplishes the goal of a lease-option without violating the Due on Sale clause in your loan document. This is a provision that allows the lender to call the loan due, should you agree to sell with any interest in the property. However, the Garn-St. Germain Act specifically prohibits such action when the borrower transfers his/her property into an inter vivos trust.
   
2. Should the "Tenant-Beneficiary" default on rent, it allows for a simple eviction, rather than a protracted judicial foreclosure action. Such an action is necessary should a defaulting tenant in possession claim equity in the property, which can happen in the lease-option scenario.
   
3. The "Tenant-Beneficiary" can claim income tax relief because the "triple net lease" s/he signs obligates the tenant to assume all the "burdens of ownership" (See IRC 163(h)4(D). This fact allows us to charge a "spread" between the carrying expenses of the property and the payments made by the Tenant-Beneficiary.
   
4. Added bonuses for you: As the Settlor-Beneficiary, you are now in the position of a landlord. As for qualifying for a loan on another property, you can claim rental income. Your credit will also benefit because payments against your loan are being made on time. PLUS you can claim depreciation. Talk to your CPA.

In fact, in addition to taking legal counsel, we urge you to seek the advice of a financial planner and a knowledgeable mortgage lender. Get informed. Explore all the avenues that seem open to you. Above all, take action now! Learn about the NARS Equity Holding Trustä at www.landtrust.net. North American Realty Services will be both consultant and facilitator for our transaction.

If you are already in foreclosure, the Notice of Default has been published and you are probably "besieged" by people trying to "steal" your house. We do not work that way. We encourage you to let us buy your property for Fair Market Value on terms utilizing our Home Equity Saverä system. This will preserve your equity and reestablish your credit.

Give us authorization to talk to your lender and grant us a non-exclusive purchase option that will allow us to do our due diligence homework. Upon verification of the information we need, we will come to a Mutually Agreed Value for the property, and make the arrangements to relieve you of 100% of your responsibilities for the property.

From the time of our non-exclusive option agreement to opening escrow, there will be no time that you cannot change your mind, should you come across a better alternative to Home Equity Saverä . So you risk nothing and have everything to gain. Main thing - You can get on with your life.

You can contact me, Tony Brunner, right away on (760) 329-3650. Or via email at tony@deserthomebuyer.com, or through our web site www.deserthomebuyer.com

My background is in law and real estate. I am an attorney, admitted in New York, although I do not currently practice law. I have been a licensed California real estate broker since 1985 and have been involved in real estate sales, leasing, development, and property management almost all my working life. I am also a licensed California General Contractor. I tell you this to let you know:

1. I know my stuff.
2. I am bound by stringent professional ethical standards of conduct.
3. I have reason to be confident in my Home Equity Saverä concept, which is made possible by the NARS Equity Holding Trustä .

I operate this company in partnership with my wife, Barbara, whose background is in banking.

We have given you a lot to think about. But the bottom line is that we can help you get out of your foreclosure predicament fast! Contact us. You have everything to gain and nothing to lose!

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