Should a trust be used in a wholesale transaction

Question

So, Will Barnard suggests using a trust for wholesale transactions in the BP summit audio. He mentioned that he would be the trustee and the end buyer would be the beneficiary. This is the only place I have heard of this. Everywhere else I have read mentions using an LLC and assigning the contract or doing a double close.

What are the advantages and disadvantages of each?

Will Barnard · Answer

Many reasons.
1. No double closing costs (second escrow fees, title, etc)
2. No need for transactional funding.
3. No need for third party POF's, or third party deposit forms signed.
4. No additional transfer taxes incurred (in areas where this is applicable)
5. No need for additional grant deed transfers, quit claim transfers, etc.
6. Wholesale buyer can be comfortable and confident in the transaction as they are the buyer all along, no deed transfers, no entity transfers, no non refundable EMD needed.

A trustee needs to be a person.

Sean Brennan · Answer

Will Barnard  Tell me if I have this straight:

1. Typically you put it under contract in an llc and assign the contract
2. If the wholesale fee is especially large and you do not want to disclose you do a double closing
3. Use a trust when you are unable to assign, like if its an REO

Also, if you use a trust you need to know who the end buyer is before you make the offer, right?

Are there liability issues if you are a trustee (as opposed to putting it in your LLC name)?

Finally, whats a POF?

haha, thanks in advance for your patience :)

Will Barnard · Answer

My pleasure, if you ave more questions, feel free to post them.

Will

Sean Brennan · Answer

Thanks Will Barnard.  I appreciate you taking the time to explain that.  I am slowly getting.

Will Barnard · Answer

You do not have to do it this way either and with some sellers, it may not be possible. Cases where they want to see the trust docs and POF match, you will need to form the trust, create the bank account, and name your own entity r a newly formed entity as beneficiary. Then, find your buyer and at close, transfer beneficial interest in the trust. This can trigger transfer taxes where applicable, and can be less comfortable with your buyer. It also would require that you place the EMD into escrow.

Ned Carey · Answer

POF = Proof of Funds.

Many sellers like banks want to be sure yo will be able to close the deal so they want "Proof of Funds" This could be bank statements showing cash on hand, lines of credit or letters from Hard Money Lenders.

Sean Brennan · Answer

Can an LLC be a trustee or does it have to be a person?

Wayne Brooks · Answer

Using a trust vehicle eliminates any non assignability issues, and avoids additional costs with a double close.

Should a trust be used in a wholesale transaction

Most Popular Reply