A transaction where a Buyer gets all the benefits and responsibilities of ownership but does not get title until he has fulfilled the terms of a California approved installment sale contract drawn in escrow based on the agreed terms and conditions.
The installment sale (aka Land Contract of Sale) is approved in all fifty states. The contract clouds title for the benefit of both.
A “subject to” or AITD transaction has significant risks in the current interest rate environment. Banks would be far happier lending at 6-7% vs. an existing loan (aged) at 3-4%. The “due on sale” clause” has rarely been used over the last decade, but the current environment may not be kind to those attempting “subject to” transactions.
The key – change of title.
The Installment Sale provides an opportunity for a motivated seller to capture the listing price with a significant down payment but without loan qualification. The qualification responsibility falls on the Seller.
The Installment Sale also provides a way for a Buyer that cannot qualify at current rates to purchase a home using existing low interest financing and a short term interest only note from the Seller.
The Buyer and Seller negotiate terms and conditions. It may include many non-standard features. For example, the Buyer may borrow funds, stage the down payment, etc.
Typically, this involves new financing to retire the old Seller debt. The New Buyer is referred to as a “beneficial owner.” When the contract is completed, he obtains full title.
The modification of the installment sale process (escrow, title, etc.) makes the approach superior to other “creative” solutions (lease option, rent-to own, etc.) for a home Buyer with “issues.” While ownership is conditional (new loan) it is immediate as a beneficial owner.
Covest teams with deeply knowledgeable escrow specialists to complete a transaction.
Was developed to assist the student debt crisis using the historical appreciation of real estate as the means to pay off the debt and provide a modicum of capital to a graduate. Through re-structuring, the debt gets converted into a secured loan on the property and combines with fast loan amortization to provide capital to the student after the Investor receives the desired return REGARDLESS of whether the property appreciates or not. Covest has held the solution at bay pending the end of the Covid 19 project.