Today in sales meeting we had our local representative from First American Title come in and teach us a little more about mortgage wraps or All Inclusive Deeds of Trust. This is an instrument that is getting more and more usage in our market. What is an All Inclusive Deed of Trust? It happens when a seller sells their home that they still have a mortgage on using seller financing.
This and many other markets around the country have people who would love to buy, have the ability to pay, but are not credit worthy to take out a mortgage. We also have many sellers who are slightly upside down, or don’t want to take a loss on their home. These sellers may or may not be in a position that they “have” to sell. These may be income properties or second homes, in some cases they are primary residences.
The All Inclusive Trust Deed is an instrument that wraps the existing mortgage, and the terms to the seller into a new mortgage that the buyer agrees to pay. There are a couple of warning flags to be aware of: one is the Due on Sale Clause in the seller’s original mortgage. This is a clause that may require the seller to pay off the original mortgage if they sell the property as stated in their Deed of Trust. The other thing to make sure of, at least in my humble opinion, is to use an escrow company to service the payments of the All Inclusive Deed of Trust.
The new buyer would make their payment directly to an escrow company. The escrow company then makes the mortgage payment to the original mortgage holder then it forwards what is left to the seller. Example, A seller is selling his home with a mortgage payment of $900 a month. The buyer is paying the escrow company a payment of $1,400 a month. The escrow company forwards the $900 to the original mortgage holder then pays the seller $500 minus any fees.
Some escrow companies will even report to the credit bureaus thus helping the new buyer rebuild their credit, they may even set up so taxes and insurance are paid in the new buyers name. In certain cases the use of the All Inclusive Deed of Trust could really benefit both the buyer and the seller. The buyer enjoys the benefits of home ownership, while the seller may be able to make a little money each month from the sale of their home while retaining the right to foreclose should the buyer default on the All Inclusive Deed of Trust.
If this is something that would benefit you, please contact a realtor with the knowledge to put a deal together using the All Inclusive Deed of Trust.
If you’re interested in a property in the Cedar City Real Estate Market, contact us. Our email address is: firstname.lastname@example.org or you can call 435-701-1812. If you want to search the listings in the Cedar City Real Estate Market here is our website: www.livingincedarcity.com One other thing we are taking listings now to get them on the market for the hot Spring and Summer Real Estate Market. We would love to help you sell your house!