Pages

Friday 13 December 2013

Basic Facts Regarding Trust Deed Investments

By Cornelia White


Trust deed investments have become one of the most preferred ways of investing in the real estate sector. There is, however, considerable confusion that needs to be addressed urgently and to help potential investors avoid making costly mistakes. A trust deed is a legally binding document that represents ownership of some real estate properties. It is also referred to as an annuity or a mortgage note.

When buying annuities, buyers and sellers must agree on terms. Among the agreements is the stipulated time within which all payments have to be completed. The method that will be used for repayment must be agreed upon beforehand. The notes are usually sold through auctions where the highest bidder gets a chance to negotiate terms. The seller advertises the note in electronic or print media so as to attract the highest bid possible.

The marked price of an annuity is determined by many factors. Some of them include the physical condition of the property, the prevailing interest rates in the market, anticipated changes in the real estate industry and the likelihood of buyer default among others. Buyers that have difficulty financing the investment fully may seek either full or partial support from the seller. This is popularly known as owner (seller) financing.

Property appraisal is a prerequisite. The seller needs to consult with real estate experts to ensure that the property in question is properly valued. The buyer will be well advised to conduct their own valuation and to make sure that the value is as current as possible. This is because the property is the collateral for the money that is given out and one must be sure that the note can be sold out or used as collateral for other financial products of the same value. It is also very important to conduct a proper credit check on the seller and the property.

It is the responsibility of the buyer to ensure that they are provided with all the important documents related to the property. There should be documents showing how the property was acquired and any transfer of ownership. Any legal rulings that have been made in the past must be made clear and copies of such rulings made available. Agreements are to be made in presence of real estate attorneys and copies deposited with a court of law.

It is a good idea to be well conversant with the property whose note you are buying. If possible, try and visit the place in person and inspect the property. Some of the important things to have in mind when carrying out the excursion include the geographical location and the physical condition of property. Ensure that you like the property yourself because you may have to take it over if the note seller fails in their repayment.

Many people confuse between trust deeds and mortgages. It is important to understand that the two are different. Three parties take part in trust deed transactions. They include the trustor, the trustee and the lender. The trustee is absent in mortgage transactions.

If one is not careful, trust deed investments may be a very dangerous business venture. Losses are not uncommon especially to the inexperienced. Just like any other business in real estate proper analysis of markets is required. Having a real estate agent on board may turn out to be very helpful.




About the Author:



No comments:

Post a Comment