BUY FARM OR HOME WITH A LAND CONTRACT -
Look what the Bankers did to America and look at what they continue to do refusing to help struggling homeowners refinance. Let's cut them loose. Vote with your feet. Do not use the bank -- any bank ---for a home loan. With banks, you Own NOTHING And lose everything. The Bankers Are Bilking Us All. For those who are unfortunate enough to be bound to the bankers by a mortgage read this page from the MANUAL for Civil Servants, prepared by oligarch bankers.
"Capital must protect itself in every way, through combination and
through legislation. Debts must be collected and loans and mortgages
foreclosed as soon as possible. When though a process of LAW, the common
people have lost their homes, they will be more tractable and more
easily governed by the strong arm of the law, applied by the central
power of wealth, under control of leading financers. People without
homes will not quarrl with their leaders" from- Bankers Manifest - for
private circulation among leading bankers taken from Civil Servants'
Year Book ''The Organizer 1934'
Don't believe it? Let's break out the numbers.
Assume you want to buy a home that cost $115,000. And perhaps you are
prepared to put $5000 down, secure a thirty year mortgage for $110,000
and pay $4000 in closing costs. After which, let's presume your mortgage
payment is $1000 a month, and examine your real cost after only 3 years.
Your entire mortgage payment for these 3 years ( $36,000) is mostly
interest income for the BANK.
Least you forget,: add in your down payment, closing costs, maintenance,
improvements, and roughly $5000 in property taxes. All toll, you have
spent $52,000 (or more) in only 3 years! That's nearly HALF of the
original loan amount. Yet, you still have 27 years worth of payments
Worse still, the only thing you OWN is the debt on the home, your
savings are probably depleted, and, most likely, you live from paycheck
Moreover, if you remain in your residence, as agreed, you will pay the
bank $270,000 to $305,000. Otherwise, if you sell early, assuming any
appreciation, you must get another home and incarcerate yourself in
debtor's prison or split half of your profits with the IRS.
This is the great American Dream: If perchance you fall on hard times -
and cannot afford your taxes - an added burden of 12%-18% interest will
be added to your unpaid balance (same as a credit card company or the
IRS) or higher, depending on whims of bankers.
The only persons to receive special considerations (legislation) in tax
exemptions - tax breaks - un-collateralized loans - grants - lower
assessments etc / are those (wealthy - business interests -
corporations) who shift the burden to unsuspecting taxpayers - made to
shoulder not only their own taxes etc, but those of corporate hucksters
- and wheelers and dealers.
For the most part, banks don't even traffic in paper. Wealth is simply
ones and zeros in the computers of the international banking system.
When we borrow money to buy a house (or whatever) the bank gives us
permission to pretend that they gave us money to give to the seller. The
bank in fact created the money out of nothing, altered their computer
records accordingly, and printed out some hard-copy evidence to support
the notion that real money is now being dealt with.
Then there are taxes that go on forever. If perchance war is draining
the national coffers at $200,000 a minute & billions, trillions need to
be coughed up to make good on the high rollers ( banks - hedge funds -
derivatives - rating agencies - AIG insurance) great heist - - cuts will
just have to be made in domestic spending - with programs, grants,
unemployment, food stamps, heating vouchers, medical care, etc, being
cut from the states. Someone's gotta tighten their belts and sacrifice
and it's NOT gonna be the filthy rich.
Roads and bridges will not repaired, nor levees - damns - upgrades on
schools, funding for Medicaid, Medicare, organ transplants costs, all
social programs etc. Local/state taxes will be raised higher and higher
to keep up with inflation and to make up for missing local - state -
federal funds. Called robbing Peter to pay Paul - cooking the books.
Then there's the public pension liabilities (trillions) of teachers,
fire, police, state, federal workers and the obscene pensions (yearly
cost of living increases) and life long Mercedes health care for our
They've opted out of the Medicaid on steroids, that they've indentured
the multitudes with. Gosh - doctors aren't too thrilled (years of
education) to be paid a pittance, thanks to Washington puppets, giving
over the writing of health reform laws - policies - regulations -
oversight to corporate (insurance - big pharma - medical devices -
hospitals ) lobbyists.
Citizens who are not engaged in local/state/administrative jobs, which
see yearly raises; medical benefits (paid by taxpayers) - are hard
pressed to pick up the slack - subsidize various corporate interests -
pay rising fuel - home heating - prescriptions - insurance - food - car
maintenance, (insurance - upkeep - inspections - registration) and
needed home repairs on fixed incomes - or incomes that have stagnated
over these past years (no raises - benefits cut etc).
In the end, unless you've had the good fortune of being born into
wealth, which spends a great deal of its time protecting it with off
shore accounts, investments, tax write offs, trusts, etc, you end up
owning nothing. So basically, whether you rent or buy - there's not much
difference - your sweat and labor goes to pay bankers interest.
In other words - no matter what happens in the market (or the economy)
you swear to pay the bank - whatever ridiculous price you agreed to pay
for your home when you initially bought it.
Million dollar homes in Detroit are being auctioned off for a pittance
---------If you really want to understand, (since you deal with it every
day) in a simple way, how money really works [ not taught in schools]
you should educate yourself
Or stay ignorant - the bankers will love you.
The only way out of this mire is to RENT homes /properties/ farms or buy with a Land Contract, a method that was very popular in the late 1970s and early 1980s. Back then, installment sale contracts, sometimes called contracts for deed, offered more attractive financing terms over the higher rates and rigid qualification standards of institutional lenders.
Land contracts began to disappear when loan requirements softened and rates dropped below 8%. But they have not vanished all together and, in fact, tiptoed back into the market since 2006.
What is an Installment Sale Land Contract?
* Land contracts or contracts for deed are a security agreement between a seller, called a Vendor, and a buyer, called a Vendee.
* The Vendor agrees to sell a property by financing the purchase for the Vendee.
* The Vendor retains legal title and the Vendee receives equitable title.
* The owner-carried financing can include an existing mortgage balance or the property can be free and clear.
* Upon payment in full, the Vendor hands the Vendee a deed to the property.
All-Inclusive (Wrap-Around) Land Contracts
* Wrap-around contracts contain an existing mortgage.
* The Vendee makes one payment to the Vendor.
* Upon receipt of the payment, the Vendor pays the underlying lender's payment and keeps the rest.
* If the existing mortgage has a lower interest rate than the rate on the contract, the Vendor earns extra interest on money that does not belong to the Vendor.
This is how it works.
1. Say the sales price is $100,000.
2. The Vendee puts down $10,000.
3. The Vendee agrees to make payments on $90,000, bearing interest at 6.5%, payable $567.
4. The existing underlying loan is $50,000, payable at 5% interest with a payment of $268.
5. The Vendor earns 6.5% interest on $40,000 of equity, PLUS 1.5% interest on the existing mortgage of $50,000 and pockets $299 a month.
There is no override of interest in a straight contract. The Vendee can agree to pay the existing lender directly and make another payment to the Vendor, or the Vendee can send one payment to the Vendor, and the Vendor will disburse payment to the underlying lender. Let's look at the previous example on a straight contract:
1. Sales price of $100,000.
2. Vendee puts down $10,000.
3. Vendee makes one payment of $268 on the existing loan balance of $50,000, bearing interest at 5%.
4. Vendee makes a second payment to Vendor on $40,000 owner-carried financing, bearing interest at 6.5% and payable at $253 per month.
5. Total of both payments is $521, which saves the Vendee $46 per month over the wrap-around.
Power of Sale
* Some title companies draft and insure land contracts that contain a Vendor, a Vendee and a Trustee.
* Like a trustor in a trust deed, the Vendor and Vendee assign right, title and interest to the trustee for the purpose of securing the Vendor's and Vendee's obligations.
* In the event the Vendee stops making payments, the Trustee has the power to foreclose under the power of sale.
* The process of filing a notice of default varies from state to state.
Acceleration Clauses in Underlying Loans
All loans today contain acceleration and alienation clauses. Lenders have had a long history of calling loans immediately due and payable if buyers took title "subject to" to the existing loans. That's because lenders wanted the buyers to qualify, pay loan points and higher interest rates.
Sue Heimbichner, an escrow officer at Chicago Title in Sacramento, has been in the business since 1976 and has watched the popularity of land contracts come and go. One of the biggest lawsuits from that period evolved from buyers taking title subject to existing mortgages held by federal savings and loan associations. Congress passed the Depository Institutions Act of 1982, effectively wiping out the ability to take over existing loans.
Heimbichner says lenders today tend to look the other way. "Some lenders are glad to have their payments made," she said. But don't try to take over government-backed loans. "You don't want to mess with the government," Heimbichner warns, "because you're going to get slapped." If your land contract contains an existing mortgage, you should seek the advice of a real estate lawyer.
Vendee's Bundle of Rights
For all practical purposes, the Vendee owns the property and has the right of:
* Quiet enjoyment and use of the property.
* Exclusion, forcing others to leave the premises.
Benefits to the Vendee
* No qualifying, although the Vendor could ask for a copy of the buyer's credit report.
* Down payment flexibility. The amount is negotiable.
* Length of land contract term, interest rate and payments are negotiable.
* Low closing costs. There are no lender fees to pay.
* Fast closing. Transactions can close in 7 days or less.
Benefits to the Vendor
* Typically higher sales price and no appraisal. Although buyers are advised to obtain an appraisal.
* If taxable, possibly can qualify for deferred gain.
* Monthly income.
* Often a better rate of return than money market accounts.
* If property is non-conforming, it's an easy way to sell.
* Fast closing.
* Get an appraisal.
* Obtain title insurance.
* Engage the services of a holding company to retain possession of an executed deed and the original documents.
* Talk to a real estate lawyer.
* Pull the buyer's credit report.
* Include both Vendor and Vendee names on the existing insurance policy.
* Hire a disbursement company to handle contract collection.
* Talk to a real estate lawyer.
This article is not to be misconstrued as giving legal advice. Only lawyers can offer legal advice.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
REAL ESTATE AGENT/ WRITER / RESEARCHER EMILY BAEHR just sent me this note: anita, The SAFE Act now prohibits any sale of a house with owner financing unless arranged by a licensed mortgage broker. (so you need to find one who is willing to help you) She has the most magnificent website detailing all kinds of money making information, see http://pennypincherpersonalfinance.blogspot.com/
She goes on. If you buy a house on land contract, there may be an underlying mortgage. This is important to know, and the seller of a house may not disclose this to you, so you should order a title exam. For similar reasons, you should also order a whole house inspection and a termite inspection.
If the seller has a mortgage, the execution of a land contract may constitute a breach of the seller's mortgage contract, triggering the "due on sale" clause, and if the bank finds out and wants its money, they could foreclose.
The only way to keep the bank from knowing is to not record the land contract, but that doesn't protect you, the buyer. Also, if you're going through a loan broker to meet the requirements of the SAFE Act, they're probably going to require the recordation of the land contract.
If someone is selling you a house on land contract, especially if they have an underlying mortgage, they are probably going to structure it so you are paying interest to them, and your payment will cover their principal, interest, tax and insurance, and probably a little more. So you're not going to save much over renting in the beginning.
There is one more consideration. The person selling you the house might incur tax liens or other liens, which could attach to the house. So even if you pay off your land contract and get the deed, you might get a nasty surprise after. That's another reason to get a title exam, but also a reason not to have multiple parties with interest in a property.
Also, if you have interest in a property with another person, and they declare personal bankruptcy, it might appear on your credit report, in the section where it mentions court cases. It happened to a woman I know.
If you can, be patient until you save enough to buy a house for cash, just buy a junker you know you can fix up, for cash, and then move in and fix it up. That way, you don't pay any interest, unless you borrow the money to fix it up. Also, because you're an owner occupant, you can pull your own permits and you won't have to get an EPA lead certificate. (unless you start collecting rent on the place)
Then if you sell your house you'll make a profit. If you lived in it for (I think) 2 years (unless they bumped it up to 3), then you don't pay capital gains tax when you sell it. So you could do this repeatedly every few years. That is, if you can stand to live in your own construction zone.
Another man wrote me: "Anita, love the article and as an architect, I think about this often. One point many don't realize is this: at a closing, the bank doesn't yet have the money in the bank that they are going to lend you. If you've ever been to one, you first are asked to sign a lot of documents. These basically are saying that you are promising or transferring to the bank, your earnings for the next 30 years. After you sign the document, it becomes an asset on the balance sheet - a receivable upon which they can increase their capital reserve. They can then lend out that capital 10 times. In other words, the borrower is the one handing the asset to the bank to make the loan possible. Only after the mortgage note value is added to the books, can they enter a credit in their own cash account - all on computer as if someone had just handed them a gift. Then when the seller of the house at the closing, cashes the check issued by the bank, they simply transfer that newly created money into their account or their bank. So it begs the question, if the banks ability to loan the mortgage money relied on the promise by a worker to be productive and pay each month, then how, in a foreclosure is the bank harmed. Yes they do lose interest, but it was only made possible by the voluntary gift of the borrower - the note. So why can't a borrower --who is in trouble,-- simply ask for the note back, - change his mind? The bank would just erase that entry in the ledger, and no harm done. Well it does hurt them because of Fractional Reserve Lending which allows them to lend your newly created money (debt) out to 9 other borrowers. By writing off that capital, they lower their lending power by 10 times that amount, but again, it was created in the first place by the industriousness of the borrower." I get it, Geoff. They live in the cream, high and safe, we live down at the bottom of the jug in the skim milk.
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