Here’s a youtube tour of a few more Encinitas houses on the foreclosure rolls.
The first clip looks like it was an A.I.T.D., an all-inclusive trust deed – also known as a wrap-around mortgage. It was advertised on the MLS as a no money down deal, where the seller’s mortgage stays in place, but not assumed. The seller collects payments higher than what he owes, skimming a little interest for the remaining $400,000 extra owed on top of the loan balance, in this case.
But when the buyer quits making payments, he still has possession and occupancy, but the seller is responsible for the loan. These are a glorified lease-option, with more burden on the sellers. Here is an example of the math: Example of a Wrap
The Maravu AITD example is a good illustration of why a seller needs to include an assignment of rents clause in the wrap deed of trust and be prepared to enforce it.
I remember the sellers trying to get about 2.5 mil for that place several years ago, but they belatedly followed the market down only to get hosed on the no money down wrap deal they did. Feel sorry for them.
Geez… come down to SD for a few days and you have an earthquake. Makes an LA guy feel right at home!
Good advice Kingside! I sold a house on a wrap one time and it worked out fine in my case. I think you are going to see alot more of AITD’s if/when interest rates increase (buyer’s with down payments, but bad credit that want good 5% rates). One recommendation is to use an “Escrow” Company to manage the payments–these companies will collect the entire payment from the new owner and distribute the payment for the original mortgage, taxes, insurance and for the seller’s loan payment. In addition, they keep an impound account and provide the seller with monthly statements, ensuring things are kept current.
Re: that Tyvek jobbie… $500Ks in coastal Encinitas?
Would that count as a comp? If so, more like this, please…
“I’m going to talk to them.”
“Dad!”
LOL! Love it.
the post didn’t insert the important ~disgusted sigh by protege~ annotation because I used html
The first house on the video, the one with the $1.9 wrap, is on the steps today for $1,147,500.
I’d never heard of an AITD/wrap deal before. Sounds cheesy at first glance. Under what circumstances would it be advantageous for a buyer to get in to such a deal?
Yes, but then you’d have to physically dislodge the first- and second-layer “owners,” wouldn’t you? Sounds like a colossal mess.