Deed In Lieu of Foreclosure - Simply deeding the property to the lender instead of going through foreclosure. The borrower/owner deeds the property to the lender and the debt is forgiven. There is no foreclosure on the owner's credit record. The debt is forgiven. This is why it is called a Deed in Lieu of Foreclosure.
Lender's Statement - When a new buyer is going to assume the debt of the seller, the lender will send a statement of the amount owing on a loan. If the new buyer is going to assume the loan they obviously want to know the amount of the debt outstanding. This is called a lender's statement.
Mortgage on Property - If the assumable property is financed with a mortgage, the lender's statement is called a Mortgagee's Statement.
Trust Deed on the Property - If the assumable property is financed with a trust deed, it is called a Beneficiary's Statement.
Estoppel Certificate or Certificate of No Defense - A lender's statement is also called an Estoppel Certificate or a Certificate of No Defense. It is called this because the new borrower/buyer has the right to rely on its accuracy.
Land Sales Contract - The third security device we will look at in detail is the land sales contract. Rather than using a mortgage or a trust deed , the buyer can request a land sales contract from the seller.
A land sales contract is also known as a "Contract for Deed," "An Installment Land Contract," "Real Estate Contract," "Conditional Sales Contract," or "Land Contract."
Land Contract (Real Estate Contract) - A contract between the buyer and seller. There is no lending institution involved in the real estate transaction. The seller simply agrees to be paid in cash OR to be paid over time. It is quite common for the buyer to put money down and then make monthly payments to the owner direct. Since there is no lender involved we do not use the words mortgagee and mortgagor. We use the following:
The time period for the interlocutory decree will vary depending on circumstances and the judge that is utilized in this court action. NOTE, there are no State time rules involved with a land sales contract.
Judge Discretion - The judge determines the amount that is due the vendor AND the time limit that the vendee has to come up with the money.
Judgment Options - The judge/court can make a final judgment for a breach of contract; breach of the land sales/real estate contract. The options available to the court include the following:
Example: The seller has moved to Hawaii and doesn't want title of the property. Now, the seller will only receive the net proceeds from the sheriff's sale.
Injured Vendee/Buyer - If the buyer wants to keep the property and wants the vendor/seller to live up to the contract, ruling #c or #d is best for them.
Purchase Money Mortgage/Trust Deed
These are similar to a mortgage or a trust deed as previously discussed, but there is no lender between the buyer and the seller. These are agreements that are strictly between the buyer and the seller themselves.
Strictly the Buyer and Seller - This basically is the same arrangement as we discussed under the land sales/real estate contract.
No Institution - There is no financial institution involved. The seller agrees to carry a part or all of the loan under a mortgage or trust deed. The buyer is not going to issue a land sales/real estate contract as a security device. The seller issues a:
Mortgage on the property - Known as a Purchase Money Mortgage (PMM)
Trust Deed/Deed of Trust on the property - Known as a Purchase Money Trust Deed (PMTD)
Legal Title - The buyer will receive legal title at closing in lien theory state. Basically the seller is becoming a lending institution.
Normally a 2nd or Junior Mortgage or Trust Deed - The utilization of a purchase money mortgage or a purchase money trust deed is to provide for a shortage of funds by the buyer for a down payment.
In a land sales contract, the deed conveying legal title is delivered to the buyer when the contract is:
A) fully paid and performed
B) acknowledged and recorded
C) agreed upon and signed
D) recorded and adjudicated
A land sales contract transfers:
A) ostensible title
B) legal title
C) fee title
D) equitable title
Which of the following is true about the land sales contract method of financing the sale of real property?
A) it is used when the seller wants to convey title immediately without using a trustee
B) it is similar to a lease; the buyer has the right of possession, but no right in the title
C) the buyer has assurance of receiving; title prior to specific performance
D) the seller retains the title, and the buyer is the equitable owner
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