Taking over a property & trust?

Question

Good Morning,

has anyone had any experience with buying a property that is currently held in a trust. A realtor presented me an opportunity to put 10% down on a multi unit home in DC which is currently rented out and bringing in about $1,000 on cashflow. The stipulation seems to be to buy them out of their down-payment and pay the transfer fee and realtor fees. What are your thoughts? Should I run? Do you know anyone who had done something like this before? Is there a way yo avoid transfer tax? How do I keep FHA happy?

Bill B. · Answer

If the loan is called due is your plan to just flush the 10% downpayment you give them? If not, then you might as well just get a new loan today. Any chance you’re buying in to a lawsuit? Someone was hurt a month ago and they sue the trust that owns the property which is now you> are you paying less than market price to put up with the extra effort purchase?

Good luck. But if it wouldn’t work as a regular purchase, just in case. Then I’d float on by to the next deal.

Marc Winter · Answer

Buying and selling a property in an inter-vivos, revocable trust is fine, so long as you have the trust reviewed by a competent attorney, and you understand exactly what you are getting.

Here's a very basic explanation of the mechanics: when ready to close, the current trustee would resign.  The beneficiary/ies could then assign a new trustee of your choice, and the beneficiary would then assign their interest to the 'buyer'.

It is common practice to put a property into trust for estate planning purposes.  Mortgagees may not interfere in any way with that process, as per Garn-St Germain.

However, re-assigning the trust to what would amount to a third-party, i.e. the 'buyer', might run afoul of some legal issues, such as mortgage fraud or transfer tax evasion.

This is not legal advice; I'm just commenting on my own experience and knowledge.  You need to speak with your legal counsel before proceeding.

Russell Brazil · Answer

No there is no way to avoid transfer taxes in DC

Denise Supplee · Answer

Hi @Franklyn Benjamin, the key is understanding exactly how the trust is structured and ensuring clear title can be transferred. The deal you're describing sounds like a form of seller financing or creative deal structure. It's not inherently bad, but you need to verify the numbers, legal standing, and whether the financing structure aligns with FHA rules, which typically require owner occupancy and specific underwriting. Transfer taxes usually apply unless it qualifies for an exemption, which varies by jurisdiction, so a local real estate attorney can help clarify that. Make sure you're not overpaying or taking on undisclosed liabilities.

Tom Gimer · Answer

@Franklyn Benjamin Listen to @Russell Brazil... the transaction will be fully taxable under DC's "controlling interest" transfer law which can be found here:

https://code.dccouncil.gov/us/dc/council/code/sections/42-11...

Then consider the due on sale implications and this sounds like a giant loser.

James McGovern · Answer

You won't pay a transfer fee if the trust is transferred to you

Nicholas L. · Answer

@Franklyn Benjamin

there's no way for anyone on here to advise on this without more information - i would consult an attorney

good luck

Taking over a property & trust?

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