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Can a "Deed of Trust with Assignment of Rents" be used to purchase a property that will later be transferred to the Beneficiary.

Los Angeles, CA |

I'm a Wholesaler and I flip properties. I got a property under contract from a lender with a Letter of Approval. I will put a small profit on it and sell it to an end buyer (no deed restrictions, etc.). This buyer wants to loan me the money to close escrow with the lender and then in 30 days or so, the buyer will close escrow with me using the "Deed of Trust with Assignment of Rents" and a "Purchase Agreement" signed at the beginning of the transaction. Is this safe for me? Any place I can find out more about this "Deed of Trust with Assignment of Rents"???

Attorney Answers 3


If I understand correctly, you have entered into a binding purchase agreement to acquire an REO property from a lender, and you had intended to assign your interest in that agreement to the end buyer for a small premium/profit, but this buyer wants to give you the money to buy the property, secure the money with a deed of trust, and then have you "sell" the property to him a for a little more than what you had purchased it for. This is doable, although it's not clear why the end buyer wants you to do it this way. Of course, you are taking the risk of acquiring the property with the end buyer as your lender and then having that buyer/lender decide not to purchase the property, in which case you are stuck paying a mortgage on the property until you find a another. Assuming everything goes as planned, the second escrow will entail a transfer of the property to the end buyer, thereby extinguishing the deed of trust by way of merger. Upon transfer of title, the mortgage is paid off and you receive from the buyer an amount of money equal to your profit on the transaction.

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You need to pay an attorney to assist you. Deeds of Trust secure loans. Deed of Trust with Assignment of Rents just provides the lender with full security in the event you default on your loan obligation.

The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.

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I agree that you need an attorney to assist you in these transactions. The transactions could easily be messed us without the proper documentation.

I am not your lawyer, and I am giving you this information to help you find a lawyer. Do not rely on this information. Consult a lawyer.

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