Financial institutions began using the due-on-sale clause in their real estate loans in the early to mid 1970’s when interest rates began climbing drastically. When the rates began to rise, home buyers found it much cheaper to just assume the existing loans rather than taking out new loans because the existing loans were generally at a much lower rate. Banks used the due-on-sale clause as a way to prevent buyers from assuming loans with a lower than market interest rate.

The thing most people do not understand regarding the due-on-sale clause is that it is a purely contractual issue. It is not illegal to violate the due-on-sale clause and transfer a property without paying the loan in full. It merely gives the bank the right to accelerate the loan if they do find out that the owner transferred the property and begin foreclosure proceedings if the loan is then not paid in full. That is the risk of taking a property subject to a loan that contains a due-on-sale clause and both the seller and the buyer have to be fully aware of the possible consequences.

The Garn-St. Germain Depository Institutions Act of 1982 provides an exception to the lender’s ability to enforce the due-on-sale clause. This exception is “a transfer into an inter vivos trust in which the borrower is and remains a Beneficiary and which does not relate to a transfer of rights of occupancy in the property.” It pays to bear in mind that the Garn-St. Germain Act only applies to residential properties containing 4 dwelling units or less.

With the current condition of the mortgage industry it is becoming increasingly more common to find Buyers who can not qualify for conventional loans. There are several ways for those Buyers to acquire property. Lease Options, Land Contracts, and AITD’s are some of the other more popular ways to accomplish this. Each has their own benefits and risks. In my opinion, transferring the property to a trust is one of the best ways to do this for everyone involved.

The general idea plan goes like this: The Seller sets up a trust as the Beneficiary of the trust and the Buyer as the Trustee. The Seller then will transfer title of the property to the Trustee. This is completely acceptable because of the Garn-St. Germain Act and does not trigger the due-on-sale clause. The Seller would then assign his interest in the trust to the Buyer and the Buyer would then become the Beneficiary. This assignment would trigger the due-on-sale clause but since the assignment is not recorded in any public record, the lender has virtually no chance of discovering the change.

(Please understand that this is a very basic description of the mechanics of the deal. If you or your client wants to sell a property in this manner, please consult an attorney with experience in these type of contracts.)

The Seller is still responsible for the mortgage after the transfer. In a land contract or AITD, the Seller would be forced to initiate foreclosure proceedings in the event of a default on the part of the Buyer. One of the huge benefits for the Seller in transferring the property to the Buyer via a land trust is that the agreement between the Seller and Buyer can be structured in such a way as to allow the Seller to merely evict the Buyer in the case of non-payment. The laws in each state differ in this aspect, but it can put the Seller in a much better position in the event of a default since specific provisions can be written in to the agreement.

There are many benefits for the Buyer as well. First, it can allow them to take advantage of interest rates that may be lower than what they could get on a standard or investor loan. Second, they have no personal liability for the note and it does not show up on their credit report. Third, they can avoid loan costs and possibly get away with a much lower down payment.

The reality of the situation is that in this current market, the banks would most likely be very lenient if they did find out about a transfer of property as long as they are receiving the payments on time. The actual risk of them trying to accelerate the loan and foreclose on the property is virtually nonexistent - what bank wants another REO on the books? Of course, this may change in the future if interest rates go up.

With so many properties on the market, finding a Seller who would be willing to let somebody assume their mortgage is relatively easy. It gives Seller another option in a Buyer’s market. Unfortunately, some Sellers may owe too much on their property these days to make this a viable alternative and might have to look to other methods such as a short sale to get their property sold.

This method gives you, as the real estate agent, another tool in your belt to assist certain Buyers and Sellers and create a win-win situation that benefits everybody involved. As a real estate professional, it is your duty to educate yourself in all aspects of the business. Helping people is the name of the game and extra knowledge will go a long way in winning you life-long clients and the referrals that come from doing a great job.

Steve Didier

There are two specific ways that incorrect lead follow up can kill your business. The first way is the obvious one that involves not being diligent and doing the follow up that you need to do to nail down the appointment. The second is the complete opposite of that - too much time and effort wasted on leads that are garbage and should be thrown away. This often overlooked pattern is what I really want to focus on in this post.

Remember that selling is a numbers game - you will go through a lot of leads. Your objective should be to turn those leads in to appointments or disqualify them as soon as possible. One or the other. Keeping poor leads around hides the good leads and clutters up your whole system. Poor leads waste your valuable time that you could have spent following up on the quality leads or time that you could have used to generate new, high quality leads.

Poor leads will do more than that. They will ruin your attitude and kill your desire to prospect for new leads. The sooner that you get rid of them, the sooner you can free up your mind to go after your good leads. The bottom line is that leads themselves have little or no value.

Agents cling onto their “leads” like they are gold and that couldn’t be further from the truth. Most of the precious leads that they are hording are crap, and they only hang on to them because it gives them the illusion that they have something going on. The highest quality leads will require the least amount of follow up, the least amount of time, and ultimately will give you the least headache.

A great guideline for you to use when following up on your leads is is the rule of threes. If you leave three messages for the person and get no response - throw it away. If you have three conversations with the person and can’t get the appointment, throw the lead away. Unless they set an appointment with you for a specific date in the future, get rid of them immediately.

Be militant about following this strategy and you will clean up your pile of leads quickly. The ones that you have left will be quality leads and worth the time you have to spend on them. It will also free up a bunch of your time that you can then spend on new real estate lead generation. Implementing this one suggestion and spending your time only with qualified leads could boost your productivity by 50% or more.

Steve Didier

Your Sphere of Influence consists of your family, friend, neighbors, co-workers, everybody on your Christmas card list, everyone in your cell phone or contact management system, and most importantly, your past clients. The first thing that you need to do if you have not done so, is to put everybody in to a contact management system of some sort that allows to to track when and how you contact them and that lets you take notes on each. Microsoft Outlook works fine, as do Top Producer and ACT for Real Estate.

Sorting out your database is easy. There are two kinds of people on your list: ones that presently give you business or would if you asked and the ones that wouldn’t. Take all the ones that wouldn’t, all the ones you don’t like or who don’t like you and throw them away. Get rid of them immediately. They are a waste of your time and resources that would be much better spent working with or finding people who would.

You will need complete information on person - phone #, cell #, home and work addresses, spouse’s name, kid’s names, birthdays and e-mail addresses. Chances are real good that you do not have all this information for everybody on your list. This is a wonderful opportunity for you to contact each individual on your list and start the process on staying in regular contact with them - especially the ones you haven’t talked to in a while.

This is an absolutely vital step in building your business. It is the base from which everything will build. Each person you add is like money in the bank. The reality is that people like to do business with people they know, and the people you know will give you business if you ask. Let me reiterate the last part - you have to ask people if you want them to give you business. Stop being a “secret agent” and let them know you are in the business of real estate and would like their business.

Remember that if you work your SOI correctly, 10% of the people in your database will do business with you or refer you business in any given year. That means if you have 400 quality people, it will mean roughly 40 deals a year strictly from your Sphere of Influence. It can take some time to build your database but if done correctly, you will reap the benefits for years to come. Make a plan to add two people a week to your database - it may not seem like much, but in 5 years you would have 500 people in addition to everyone that you knew prior to getting in to the real estate business.

We will talk about how to properly work your sphere in a future post. It is critical that you correctly build the foundation from which to work prior to anything else. Whether you are new to the business or have been in for a while and just haven’t put a system in place, you need to make it a priority. Once you have your base, it will be easy to manage and easy to integrate new people as you grow.

Steve Didier

One thing that seems to get overlooked these days that is fundamental to your success in real estate and will close more deals for you than any of the other techniques put together is simply this: Sell to others the way you would want to be sold to. Your clients are real people with real problems. If you are genuine in your desire to help them and sell with honesty, integrity and understanding while truly caring about their individual situation, your clients will sense that and develop a deep trust in you as their real estate agent.

The only way you will truly understand their situation is by asking questions and really listening to their answers. Put yourself in their shoes. Remember that your customers and clients do not care about you - they only care what you can do for THEM. They could not care less about you, your family, your company or anything else about you except how it pertains to how you can help them achieve their objective.

So take yourself out of the equation. Leave all of your own views, prejudices, opinions, and context behind and focus on your client’s needs. One critical mistake that many agents make is going on and on about themselves, telling the client all about their company, their track record, their experience, or their accomplishments. Doing this will only bore the client and convince them that you only care about YOU. Remember, the less you say the better off you will be. The more they get to talk about themselves, the more interesting you will seem to them. So ask questions that will allow you to learn about their wants and needs - the better you understand their wants and needs, the better you will be able to assist them.

As Napoleon Hill said, “The compensation we receive is in direct proportion to the service we provide.”

Steve Didier

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Here’s to your continued success!

Steve Didier