PITFALLS, DANGERS AND RISKS OF "SUBJECT TO" REAL ESTATE TRANSACTION

WHY USE "SUBJECT TO" TRANSACTIONS? There are a number of reasons why "subject to" real estate transactions are attractive to real estate investors and make economic sense, whether the investor's goal is to acquire rental properties or to rehab and sell fixer upper properties.. These attractions include most significantly:
(1) The purchaser may be required to pay little or no down payment to close the purchase.
(2) Since the purchaser need not go through a loan application and approval process, there is no limit to many properties an investor can buy.
(3) Subject to loans stay in the seller's name are not on the purchaser's credit, and the purchaser is not personally liable on the loan, although record title transfers to the purchaser.

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WHAT ARE THE PITFALLS AND RISKS OF "SUBJECT TO" TRANSACTIONS? There are a number of inherent risks and dangers associated with purchasing real estate pursuant to a "subject to" transaction. Among these risks are the following:
(1) Subject to sellers may be in serious arrears in their mortgage payments and may owe significant unpaid principal payments, large sums of unpaid accrued interest and/or penalties.
(2) Subject to sellers may be in foreclosure or on the brink of the commencement of foreclosure proceedings. Once a property goes into the foreclosure process, it may be either (A) impossible to stop the foreclosure without refinancing the loan or (B) more expensive to bring the loan back into good standing because of advertising and legal costs incurred by the lender.
(3) Subject to sellers may be in bankruptcy or end up in bankruptcy between the date of contract signing and closing. Once a seller is in bankruptcy, NO conveyance of the subject to property can be made without the approval of the U.S. Bankruptcy Court. Unapproved transfer of title may be set aside by the Bankruptcy Court without any assurance of compensation to the investor who may have paid delinquent amounts owed on the existing mortgage.
(4) Subject to sellers may have numerous judgment liens, tax liens, and other liens that attach to the subject to property.
(5) Conventional mortgage loans contain "due on sale" clauses and, if the mortgage lender learns that the seller has transferred title to the property, there is a very real risk that the lender will call the loan and/or commence foreclosure proceedings. Therefore, (A) monies paid by the purchaser to bring the loan current may be lost and (B) the purchaser may be faced with the need to refinance the property on an emergency timeframe.
(6) Subject to sellers with financial problems may have purchased or refinanced the property with less conventional lenders and the loans may have prepayment penalty provisions which may not be discovered except by reviewing the recorded deed of trust or by securing a pay off statement.
(7) If the purchaser acquires the subject to property for less than fair market value, other unpaid creditors of the sellers may attack the transfer if the seller subsequently files for bankruptcy protection.
(8) Many subject to sellers are unsophisticated and may claim that they did not understand (A) that their credit was to remain tied up by the existing mortgage loan and/or (B) that they could be liable for mortgage payments should the purchaser fail to make such payments.

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HOW DOES A "SUBJECT TO" PURCHASER AVOID SUCH RISKS?
(1) Independently Confirm the Mortgage Status. Do NOT rely on the seller's representations as to the status of the existing mortgage on the property. Subject to purchasers or their legal counsel should ALWAYS obtain a written statement from the mortgage lender confirming the payment status of the loan. This can take the form of a payoff statement - which will reflect escrow deficiencies and prepayment penalty amounts - or other written account summary.
(2) Obtain a Title Commitment from an Experienced and Reputable Title Insurance Company. Because many subject to transaction sellers are in precarious financial condition, it is crucial that a title exam be conducted to identify (A) all mortgages that attach to the property, (B) any state or federal tax liens that may attach to the property, and (C) any other judgment liens that may attach to the property. This latter category of judgments can relate to unpaid medical bills, defaulted credit card accounts, unpaid utility bills, or even delinquent child support payments.
(3) Independently Confirm that the Seller Has Not Filed for Bankruptcy Protection. Do NOT rely on the seller's representations that he/she has not filed for Bankruptcy protection, particularly since creditors can put a debtor into involuntary bankruptcy. A purchase should NEVER make payments to bring a mortgage loan current without first verifying that the seller is not in bankruptcy. If such payments are made and the seller is in bankruptcy (or thereafter goes into bankruptcy), the purchaser will be an unsecured lender seeking payment from a seller that may have no ability to make repayment
(4) Have a Contingency Plan to Deal with Due on Sale Clauses. While many "subject to" purchasers use seller transfers to (A) land trusts where the purchaser is the actual beneficiary or (B) limited liability companies ("LLC") where the seller is the only member and then transfer the membership interest to the purchaser to attempt to avoid the mortgage lender's right to call the loan, these precautions are NOT a guaranty against a loan being called should a lender discover the transfer of title. Some lenders apply the prohibition against the transfer of any interest in the mortgaged property VERY, VERY strictly. Therefore, a transfer to a land trust or LLC (which by law constitute a separate legal "person" distinct from the seller) will sometimes trigger the due on sale clause, if discovered by the lender. Similarly, if a more lenient lender inadvertently learns that the real beneficiary of the trust or the ownership of the LLC has changed to someone other than the seller, then a mandatory call of the loan may also occur.
Because of this latent risk, a subject to purchaser should ALWAYS have a contingency plan as to how the property can be refinanced if the mortgage lender learns of the transfer of title and calls the loan. A subject to purchaser should also be mindful that even if he/she is not liable on the mortgage loan, if a foreclosure occurs and a deficiency judgment is entered against the subject to seller, the seller may attempt to recover the amount of the deficiency from the purchaser based on the purchaser's contractual agreement with the seller to pay the balance of the loan.
(5) Utilize a Purchase Contract that Affords the Purchaser Numerous Rights of Termination. Because it is often only after a purchase contract is signed that a purchaser is able to commence his/her due diligence investigation, the purchase contract should afford the purchaser the ability to terminate the contract should the due diligence investigation disclose additional judgments, liens, bankruptcy proceedings, etc. NOTE: Included in the handouts is a sample contract form.
(6) Give the "Subject To" Seller an Opportunity to Consult Legal Counsel. Often subject to purchasers act in haste to secure the seller's signature on the purchase contract in order to "beat out the competition." The danger in this approach is that the seller may later claim he/she was mislead and/or misunderstood the details of the transaction. A court would very possibly defer to the unsophisticated seller as opposed to an experienced investor.
(7) Remember that "Sometimes, No Deal is Better Than a Bad Deal." Too many investors rush to buy a property without adequately verifying delinquent mortgage payments, the existence of other liens, actual rehab costs and/or whether or not the seller has sought bankruptcy protection in a case that is not yet closed or dismissed. Properly investigating ALL relevant facts can avoid monetary loss and headaches.
(8) Purchase Proper Insurance Coverage: Remember that insurance naming the seller as the insured does NOT cover you as the subject to purchaser. Therefore, be sure to obtain hazard insurance naming your as the owner/insured. In situations where the property will be vacant and under significant rehab, a builder's risk policy should be used in stead of a homeowner policy.

BASIC STEPS AND CONSIDERATIONS FOR A SECTION 1031 EXCHANGE

Introduction: A possible tax deferred exchange under §1031 of the Internal Revenue Code of 1986, as amended (“IRC”), is something every seller who has not used the property to be sold as his/her principal residence for two or more of the past five years may wish to consider as a means to avoid capital gains tax. A successful tax deferred exchange under §1031, however, requires some basic pre-planning and coordination as well as the use of a qualified intermediary in order to prevent any deemed or constructive receipt of the sales proceeds from the relinquished property which would destroy the tax deferral of such sale. This summary of the steps involved in a 1031 exchange provides a preliminary overview and does not address all issues involved in a 1031 exchange and is not meant to replace the requirement that a would be exchanger should always review the entire transaction with tax and/or legal advisors. Likewise, it does not address the issues of so-called reverse exchanges and other variations to the typical sale and purchase sequence. This said, the following is an outline of the steps in a 1031 tax deferred exchange of real property.
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1. Basic Requirements: To qualify for a tax deferred exchange, a few basic elements must be satisfied: (a) both the relinquished and replacement properties must be like kind real property - i.e., held for rental/investment; (b) typically, the taxpayer seeking to defer tax is one or more individual taxpayers reporting their real estate transactions on their individual Form 1040 tax returns (although entities such as limited liability companies can utilize 1031 exchange procedures); (c) the relinquished and replacement property are both within the United States of America; and (d) a qualified intermediary and qualified trust accounts are utilized for the proceeds of the relinquished property to ensure that the taxpayer(s) are not in actual or constructive receipt of the sales proceeds of the relinquished property.
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2. Sales Contract for the Relinquished Property: The first step in a tax deferred exchange is to execute an assignable sales contract that describes the seller as the exchanger “or assigns.” In addition, it is also advisable to include a “cooperation clause” in the sales contract. An example of such a clause is as follows:
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Tax Deferred Exchange by Seller. Seller may structure the transfer of the Property as a tax deferred exchange to Seller pursuant to Section 1031 of the Internal Revenue Code, and Purchaser agrees to cooperate with Seller, and to take such action as Seller may reasonably request in order to consummate such transfer. Seller is granted the authority to transfer its rights to this Agreement but not its obligations under an Assignment of Rights Under Contract or similar document to be signed by a qualified intermediary to be selected by the Seller, such assignment to be acknowledged by Purchaser prior to passing title and ownership. At the request of Seller, Purchaser will sign the written Assignment of Rights Under Contract referred to in this paragraph with the clear understanding that all obligations under the Agreement remain with Seller and that Seller shall directly deed the legal title to the Property over to the Purchaser as noted in the agreements between Seller and the qualified intermediary. In connection with the foregoing, Purchaser will have no obligation to (a) acquire or enter into the chain of title to any property other than the Property, or (b) incur any cost, liability or obligations of any nature whatsoever as a result of its limited participation in the exchange for which Purchaser would not be reimbursed by Seller at Closing.

As noted below, in contracting to purchase the replacement property, similar provisions should be utilized.
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3. Exchange documents: Once the sale contract is executed, the Seller must enter into exchange documents for the relinquished property sale pursuant to which among other things (a) the sale contract is assigned by the Seller to the qualified intermediary, (b) the Purchaser acknowledges the assignment of the sales contract to the qualified intermediary, (c) the qualified intermediary agrees to receive the sales proceeds and hold the same pending their application to the purchase price of the replacement property, (d) Seller agrees to deed the relinquished property directly to the Purchaser, and (e) the Seller agrees to indemnify the qualified intermediary from loss, damage or liability except for that arising from the qualified intermediary’s breach of its obligations under the exchange documents.
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4. Relinquished Property Sale Closes: Pursuant to the assignment agreement and exchange documents, the Seller directly deeds the relinquished property to the Purchaser and the sale proceeds for the relinquished property are transferred directly to the qualified intermediary. Note: the settlement statement will be signed by the qualified intermediary, as seller, not the exchanger.
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5. 45-Day Identification Period & 180-Day Exchange Period The timelines for the 45-day identification period and 180-day (or the date the tax return is due, whichever is earlier) period for closing on the purchase of the replacement property begins on the date the sale of the relinquished property closes. The 180-day exchange period establishes a deadline that the purchase of the replacement property MUST be closed not later than 180 days from the closing date of the sale of the relinquished property.
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6. Identification of the Replacement Property (or Properties): The Seller/Exchanger must properly identify replacement property (or properties where replacement properties of lesser values than the relinquished property are to be acquired) by midnight of the 45th day after the closing date of the sale of the relinquished property. This means that the Seller/Exchanger must deliver written identification of the replacement property to the qualified intermediary by midnight of the 45th day after the closing date of the sale of the relinquished property is forwarded to API.
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7. Purchase Contract for the Replacement Property. The Exchanger must execute an assignable purchase sales contract that describes the purchaser as the exchanger “or assigns.” In addition, it is also advisable to include a “cooperation clause” in the purchase contract similar to that described, above, for the sales contract.
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8. Coordinate With Qualified Intermediary: Once the purchase contract for the replacement property (or properties) has been executed, the exchanger must notify the qualified intermediary of the terms of the purchase contract and assign the same to the qualified intermediary. The qualified intermediary will execute the exchange documents for purchase and prepare to apply the funds held from the sale of the relinquished property against the purchase price of the replacement property at settlement on the replacement property.
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9. Conclusion of Exchange: At closing of the purchase of the replacement property, the qualified intermediary will direct the seller of the relinquished property to deed title thereto directly to the exchanger and will apply the funds derived from the sale of the relinquished property against the amount owed from the buyer on the settlement statement. Note: the settlement statement will be signed by the qualified intermediary, as buyer, not the exchanger.
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Conclusion: When properly done, a Section 1031 tax deferred exchange can be a very powerful tool to defer tax consequences. However, to avoid potential pitfalls and to ensure that appropriate exchange documentation is utilized and that a proper qualified intermediary is used, would be exchangers should be sure to consult their with tax and/or legal advisors. Any deemed receipt of sale proceeds, a failure to identify replacement property within the statutory 45-day period, or a failure to consummate the purchase of the replacement property with in the 180-day exchange period can be fatal.

STEPS TO DOING A SHORT SALE

STEPS IN SHORT SALES: A short sale is another twist on a subject to transaction. However, instead of bringing the existing financing current and leaving it in place, the goal is to negotiate a discounted pay off with the lender. A "short sale" involves four basic steps.

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1. Gaining Control of Title; Authorization to Release Information. One of the most important steps in the short sales process is getting the deed. Without the deed, the homeowner can back out of the potential short sale even after you have spent hours working on their property. When the homeowner signs the deed over to you, now you control the property and you can go to work by calling the bank. If you cannot secure a deed, you must have a contract with the seller that specifies the terms of the transaction with a discounted mortgage pay off – e.g., closing is to be as soon as possible, but expressly contingent upon a successful short sale on terms approved by the buyer.

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The other essential document is a signed Authorization to Release Information signed by the sellers. Without one, the lender will NOT talk or otherwise discuss the seller’s loan with you.
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2. Contacting the Lender. When you call the lender, you never want to tell them you are an investor. This is one of the biggest mistakes rookies make and will almost always result in the lender not accepting short sales. Therefore, when you call the lender, to request a "short sales packet" or "workout package," indicate that you are the buyer or that you represent the homeowner. Sometimes they may ask if you are a real estate attorney. Just restate what you told them before. Then you'll want to request the "short sales packet" or "workout packet". When the packet arrives it will explain exactly what you need to make this short sales deal successful. Generally among the things you will need to document are distress concerning:
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(A) The distressed nature of the seller (see paragraph 3 below).
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(B) The property: list out all defects to the property and needed repairs to make it marketable (including price estimates). Photos of any major defects can speak volumes to a lender.
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(C) The neighborhood where the property is located: is there a crime problem? What are the number of days on market for sales that have occurred and are they below assessment and/or past sales? One web site that may help in checking comparables is http://www.zillow.com. The other option is to secure comparables through a realtor who is experienced working with investor properties. Remember that many of your big established real estate companies may NOT be familiar with short sales, so do your homework on any realtor you decide to use.
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(D) Itemize in detail the lender’s cost of not doing the short sale: (1) foreclose costs, (2) bankruptcy costs if the sellers file either a Chapter 7 or 13 under the Federal Bankruptcy Code, and (3) the costs the lender will face if it ends up bidding in the property at foreclosure: (A) repair costs, (B) costs of marketing and selling the property, including realtor commission, and (C) carrying costs, including insurance and real estate taxes.
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Lenders do not like to end up owning property, so the more data provided in 2.(B), (C) and (D), above, the more apprehensive the lender will be of holding out for a full payoff amount.

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3. Hardship Letter. A hardship letter tells the lender why the homeowner is not making their mortgage payments. If a job loss or family illness is the cause, explain it in detail and make the lender feel sympathetic, and seek to secure for the seller a Waiver of Deficiency – i.e., a no-collection agreement where the lender agrees to write off of any discounted balance and not pursue collection against the seller. The letter should suggest that the seller is contemplating filing bankruptcy, but would prefer to avoid doing so, if at all possible. Be prepared to provide documentation: sometimes lenders will request bank statement, pay stubs, income statements, and so on to document the hardship.

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Remember, you must be prepared to send them everything they ask for because if you don't, the short sale will not be accepted. They will almost always ask for a HUD-1 and a real estate purchase and sales agreement. Have your real estate attorney’s office prepare a draft HUD-1 and make sure that you have included all amounts payable by the seller for judgments, delinquent taxes, if any, and any other liens (e.g., homeowner association dues). Send everything the lender asks for back ASAP. It usually takes 3 weeks or more to get an answer back from the lender, so you can't afford to wait. If the foreclosure auction is approaching, you can ask to extend the auction which in most cases they will, if they know it is a legitimate offer.

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4. Broker's Price Opinion. Basically a real estate agent will come out and give their opinion on what the house is worth in the form of a Brokers Price Opinion ("BPO"). The key to short sales is the BPO. A glib letter will not suffice. The BPO needs to be documented and show supporting market time to sale and final sale information as available. You want to try everything you can to influence the BPO to come in as low as you can in order to induce the lender to discount the loan payoff.

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5. Letters of Recommendation. If you have successfully closed short sales previously, obtain a letter from the lenders involved that will help convince the current lender that you can deliver.

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6. How Much to Offer. Part of the answer to this question is a function of what you intend to do with the property. If the intent is to rehab it, then the offer should be calculated to allow for satisfactory rehab costs and a profit margin after sale. If the intent is to wholesale the deal, then the offer should be lower to build in an assignment fee and still leave in factors for rehab costs and a profit margin for the ultimate purchaser under the short sale.

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NOTE: A much more complete article with sample forms is available upon request.

BUILDING YOUR POWER TEAM – HIRING A REAL ESTATE ATTORNEY

Hiring a real estate attorney for your “power team” is one of the most important decisions to consider when first becoming involved in real estate investing. The right attorney will keep you on tract, help you avoid possible pitfalls and lessen your liability in your real estate investments. A knowledgeable attorney can also make sure that all of your paperwork is state-specific, meaning it was not some generic paperwork offered in an office supply store or off of the Internet and based on the laws of a state other than your own. Too often, new investors take course pr go to “boot camps” which offer up forms that do not meet your real needs.

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Through the services of a professional and specialized lawyer, you will not only be assured that everything is in good legal order, but it could even smooth along the process at the same time. Of course, this is of great convenience to any real estate investor, and is one of the core reasons behind the popularity that real estate lawyers enjoy. If you are either unsure of the legalities and process involved in real estate contracts and agreements, or if you wish to simply move things along faster, then hiring a lawyer could be the ideal step to take.

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After you select one, two or three real estate attorneys from a list you can get from www.martindale.com or www.law.com, which shows their qualifications. You should feel free to interview the attorneys to see which one is the best fit for your needs.

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1. Questions to Ask a Prospective Attorney?
My first question would be; what experience do you have in creative real estate investing such as subject to investing? If you get an off-in-the-distance stare as he contemplates what to tell you, be assured he does not have the first clue. The Attorney should be open to and understand creative real estate investing. This is very important in making your final decision. The attorney must be very attentive to your needs; he lets you discuss your method of investing then responds in a forthright manner.

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2. How much of your practice is in real estate?
Depending on your market size it should be at least 30% to 50%. In smaller markets there would be less need for an attorney to devote all their practice to real estate. Five years of real estate law experience would be the minimum acceptable to me.

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3. Do you have other real estate investors as clients? If so, ask if you can contact them for references.

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4. What are your fees? The size of the law firm is not an important factor except larger firms usually charge more because of their overhead and are not as available to you as a smaller firm. The price the attorney charges are not as important as how well he works for you, with you and gets the job done. The old adage you get what you pay for applies here.

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5. Do you work with other real estate professionals? The attorney should be able to recommend and refer you to other professionals such as CPAs, mortgage Brokers, (for refinances), etc.

DESCRIPTION OF REAL ESTATE INVESTOR FORMS AND EDUCATION ARTICLES

35 TITLE PROBLEMS This article summarizes some of the “latent defects” that can exist in the chain of title to property that often cannot be detected, no matter how thorough the title examination. Hence, why purchasing an owners title insurance policy is always a wise investment.
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AGREEMENT OF SALE – Acreage. This form should be used when purchasing undeveloped acreage for development. The form contains an optional provision where the price can be reduced if the actual useable acreage is less than listed, with actual useable acreage being determined via survey.
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ASSET PROTECTION TOOLS FOR THE REAL ESTATE INVESTOR. This article looks at methods that can be employed to protect real estate investment assets as well as limiting one’s personal liability for claims and lawsuits arising out of real estate investment property.
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ASSIGNMENT OF CONTRACT This form should be utilized for a simple assignment of a contract to another party without any assignment fee. For example, if a contract is executed in one’s individual name, this form may be utilized to assign the contract to a related limited liability company.
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AVOIDING BEGINNER INVESTOR PITFALLS. This article describes common issues and problems encountered by first time investors, particularly where properties are located in older neighborhoods – e.g., zoning issues, non-conforming lots and/or uses, and title issues - and explains (1) how the problems can be avoided or (2) once the problem has been encountered, how it can be corrected.
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BASIC STEPS AND CONSIDERATIONS FOR A SECTION 1031 EXCHANGE. This article summarizes of the steps involved in a 1031 exchange and provides a preliminary overview. It does not address all issues involved in a 1031 exchange and is not meant to replace the requirement that a would be exchanger should always review the entire transaction with tax and/or legal advisors
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CHOOSING AN ENTITY TYPE. This article looks at and compares the three types of legal entities most generally utilized to limit real estate investor liability: a Sub-Chapter S corporation, a limited liability company (“LLC”), or a limited partnership (“LP”). Each has certain advantages and disadvantages.
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CONTRACT ASSIGNMENT – WHOLESALE. This form is used when an investor is wholesaling a purchase contract for an assignment fee and does NOT intend to do a double closing. The form allows the assigning investor to be paid and then the assignee completes the contract transaction with the seller of the property.
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CONTRACT TO PURCHASE REAL ESTATE. This is a short, stripped down purchase agreement that may be used by investors looking to acquire property. NOTE: the form contemplates the property being conveyed in “AS IS” condition, but has inspection and financing contingencies for the benefit of the buyer.
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CONTRACT TO SELL REAL ESTATE. This is a short, stripped down sale agreement that may be used by investors looking to sell property. NOTE: the form contemplates the property being conveyed in “AS IS” condition, but has inspection contingencies for the benefit of the buyer.
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DEED OF TRUST NOTE - Hard Money. This form should be utilized for hard money loan transactions where there are no monthly payments and a single balloon payment of principal and interest on the maturity date. The form includes an optional extension provision where the extension fee is added to the balance owed at maturity.
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DEED OF TRUST – Hard Money. This form should be utilized to secure a hard money loan by way of a deed of trust on the property being acquired and/or rehabbed. In the event interest will be charged over and above the points or loan fee, they should be added to the terms of the accompanying Deed of Trust Note.
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EQUITY SHARING AGREEMENT. This form should be used when title to real estate is to be placed in only one partner’s name for whatever reason and the parties wish to establish the basis for the other partner to share in the equity in the property in the event it is sold or the partnership is discontinued.

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ESCROW AGREEMENT. This form should be utilized when funds are to be placed in escrow pending the completion of repairs or delivery of clear reports, etc. The release instructions must be customized to the specifics of the particular situation.
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FIVE DAY PAY OR QUIT LETTER This form is used to give notice to a tenant that they have five days in which to pay delinquent rent or else eviction proceedings will be instituted. Duplicate originals of the letter should be sent by certified and regular mail (some tenants may refuse the certified mailing). A copy of this letter should be retained for presentation to the Court in an eviction proceeding.
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FIVE DAY NOTICE TO QUIT LETTER This form is used to give notice to a tenant that they have defaulted in rent and that the default is NOT being waived by the Landlord. Therefore, the tenant must vacate the premises or else eviction proceedings will be instituted. Duplicate originals of the letter should be sent by certified and regular mail (some tenants may refuse the certified mailing). A copy of this letter should be retained for presentation to the Court in an eviction proceeding.
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FOR SALE BY OWNER PURCHASE AGREEMENT. This form provides a comprehensive contract for the sale of real property when no realtor is involved. The form approximates the local multiple listing contract form and covers items required when the purchaser is a consumer intending to occupy the property.
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INVESTOR ACQUISITION OF REAL PROPERTY – CHECK LIST. This form is a checklist to be used by investors purchasing property in order to make sure all applicable due diligence issues and items are properly examined. Not every transaction will involve all of the listed items.
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LAND SALE AGREEMENT. This form is utilized when the purchase of real estate is to be accomplished via an installment sale transaction, with record title remaining vested in the seller until such time as the total purchase price has been paid. The form includes a form of deed to be held in escrow pending the transfer of title as well as a contract termination form for use if the sale is not completed.
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LEASE WITH OPTION TO PURCHASE This form is similar to the Residential Lease Agreement except it contains an option to purchase in favor of the tenant within the lease itself. In addition, it has an optional provision where a portion of the monthly rental can be placed into an escrow account in order to allow the tenant to build up a down payment to be utilized when the purchase option is exercised.
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LOAN CALCULATION FORM. This form provides a check list of costs to assist in determining (1) the total rehab costs, required loan amounts, and (3) possible profit margin.
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OPTION TO PURCHASE AGREEMENT This form is used in conjunction with a separate, stand alone Lease Agreement when the Landlord desires to give the Tenant an option to purchase the leased premises.
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OVERVIEW OF CLOSING A PURCHASE TRANSACTION. This article provides a brief summary of the steps involved (and timetables involved) in processing and closing a typical residential purchase transaction by the attorney’s office overseeing and coordinating the closing transaction.
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PREPARING A SHORT SALE PACKAGE – This article provides step by step for preparing and negotiating a “short sale” – i.e., a reduced payoff balance – for borrowers who need to sell their home because they can no longer afford to keep the payments current and are experiencing financial hardship. From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process - attorney fee's, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the cash from the property back faster, so it is able to cut its losses. Sample forms and letters are included.
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PROMISSORY NOTE - REVOLVING LINE. This form should be utilized when a private lender is providing a revolving line of credit to an investor engaged in one or more rehab operations where the borrower can borrow, repay and re-borrow against the line of credit
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PROMISSORY NOTE – (Unsecured). This form of note is NOT secured by a deed of trust and provides for a final balloon payment on a specified maturity date or upon the sale of designated property, whichever is the first to occur.
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REAL ESTATE CLOSINGS A-Z – This article provides a step by step overview of closing a residential real estate transaction and includes sample forms.

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REQUIREMENTS FOR DOCUMENTS TO BE IN RECORDABLE FORM. This document sets out the requirements for documents to be in proper recordable form in Virginia as on July, 2007. Documents that do not meet these requirements will be rejected by the Clerk’s Office.
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RESIDENTIAL LEASE AGREEMENT This form is a standard residential lease form that leaves the bulk of maintenance obligations on the Landlord other than yard maintenance and interior cleaning and maintenance of plumbing. It should be used in rental transactions involving single family or condominium rentals.

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RESIDENTIAL SHARED PROPERTY LEASE AGREEMENT (Owner). This form is to be utilized by an owner when leasing a portion of a residential property to tenants. It is NOT intended for use when a tenant is subletting property.
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SUBJECT TO CONTRACT TO PURCHASE. This form is a comprehensive purchase agreement for use where the existing first mortgage lien will remain outstanding. The form also contains an optional repurchase option in favor of the seller. Note: It is the preferred practice to have the seller execute a separate option to repurchase document.
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SUBJECT TO SELLER FORMS. These forms are the minimum that should be required for execution by the seller on a subject to purchase transaction. It is absolutely essential that the seller (1) confirm that they acknowledge that the mortgage loan will continue to be out standing in their name and (2) that the purchaser has no immediate duty to pay off said loan.

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THE POWER OF "SUBJECT TO" REAL ESTATE TRANSACTIONS – An overview of the advantages and pitfalls of a “subject to” transaction where the selling homeowner is still liable for the mortgage, but the investor/purchaser has (A) assisted by curing any delinquencies and reinstating the loan in return for a deed to the property, and (B) agreed to make the mortgage payments for the seller. Depending on the circumstances, the investor may (or may not) renovate the property, and then sell or lease it at a substantial profit.

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UNDERSTANDING THE FORECLOSURE PROCESS. This article explains the foreclosure process in Virginia and states where foreclosures are accomplished without judicial action. The article also discusses certain pit falls that can entangle unwary purchasers at foreclosure sales, including but not limited to title defects and unanticipated property condition.
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WAIVER OF LIENS – VIRGINIA. This form is a lien waiver form that should be required from each subcontractor in order to release potential mechanics’ lien claims for work and labor completed up through the payment date.
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WAIVER OF SERVICEMEMBERS CIVIL RELIEF ACT Landlords should have this form signed by tenants in the military in order to secure the waiver of certain rights under the Service Members Civil Relief Act which can significantly impede attempts to collect delinquent rent and/or possession of the leased premises.
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“WRAP” DEED OF TRUST. This form is utilized where a seller is selling property and leaving the current deed of trust in place and desires to retain control over payments to the first mortgage lienholder. Thus, the form provides for a second deed of trust which “wraps” around the first mortgage and provides for the buyer to make payments to the seller who in turn makes the payments on the first mortgage.
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COMMERCIAL REAL ESTATE FORMS AND ARTICLES

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AGREEMENT OF SALE (Buyer Form) - This form is utilized by a purchaser of commercial property and is focused on providing maximum due diligence investigation, extensive seller representations and warranties, and maximum options for the purchaser to terminate the transaction without liability.
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AGREEMENT OF SALE (Seller Form) - This form is utilized by a seller of commercial property and is focused on providing reduced due diligence investigation, minimum acceptable seller representations and warranties, and reduced options for the purchaser to terminate the transaction without liability.
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APARTMENT FACILITY PURCHASE AGREEMENT This form sets out a straightforward template for preparing a contract to purchase a medium to large multifamily apartment facility and includes provisions for proper due diligence investigations. Additional representations and warranties by the seller can be added on an as needed basis to reflect circumstances particular to property.
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FUNDAMENTALS OF REAL ESTATE DEVELOPMENT – a step by step analysis of how to undertake a commercial real estate transaction/development process. Sample forms are included.
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OPTION AGREEMENT. An option agreement provides (i) a payment by the buyer for the right to elect to purchase the real property on or before the expiration of a specified time period, (ii) sets forth the terms of purchase transaction in the event the buyer exercises the option and elects proceed with the purchase transaction, and (iii) provisions for entry on the property for a range of due diligence inspections, and (iv) a time and place for settlement. Unlike a detailed purchase agreement, an option agreement does not need to set forth the buyer’s due diligence contingencies inasmuch as the buyer can simply elect not to exercise the option if any due diligence inspections prove unsatisfactory.
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NON-CONVENTIONAL FINANCING OPTIONS FOR MULTIFAMILY AND ELDERLY HOUSING PROJECTS – This article reviews tax exempt bond and/or low income housing tax credit financing for multifamily and senior housing facilities which allow developers/investors to (1) secure lower mortgage interest rates and/or (2) obtain a significant equity contribution to the project thereby reducing the amount of equity that must be funded by the developer. These financing options lend themselves to either new construction multifamily or elderly housing projects or acquisition/rehabilitation projects for existing properties that require updating and remodeling.
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SAMPLE LETTER OF INTENT. This form should be used when an offer is being made to lay out the terms of a purchase transaction when the parties will, assuming a meeting of the minds occurs, have a more detailed agreement prepared.
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SMALL CONSTRUCTION PROJECT CONTRACT This contract template provides the basis for an owner oriented construction contract for a small to moderate construction project. For large projects, most lenders will seek to have an AIA form used as the basic template, together with an AIA form Architect Agreement.