Trust deed investments can create complications when personal problems get in the way. A trust deed involves a borrower called a trustor, who transfers the property trust to a third party, a trustee. The trustee holds the title for the trustor on certain conditions. Here are the 9 most common trust deed problems that may arise.
- Default on Payments
High note rates on private money loans can cause borrowers to default on monthly payments. A trust deed investor may become concerned when the payment starts to be a few weeks late. This situation can create anxiety with real estate investments over $1 million.
- Bankruptcy
Rising interest rates create risks; some borrowers will file for bankruptcy if they cannot meet their loan obligations. A foreclosure can be halted when its investor files for bankruptcy the morning of the auction. It’s particularly complex when the borrower is an investor who flips properties.
- Death / Probate / Non-Probate
If a borrower or trust deed investor dies in the middle of a loan term, a trust must be in place that answers questions about real estate benefits for survivors. Working with an attorney who understands the lender’s perspective can create a clearer agreement for resolving loan issues and when to sell a note.
- Equity Erosion of Trust Deed Investment
Equity erosion in a trust deed property may occur from wear and tear, long-term economic changes, or when new designs are outdated old ones. It leads to a perception of value decline.
- Flattening or Declining Real Estate Market
Changes in mortgage rates can unfold over six to twelve months, impacting home or commercial property values. Trust deed investors should develop a clear exit strategy in case significant shifts occur in the real estate market.
- Litigation
A trust deed investor may sue a general contractor after entering a loan. It can be for numerous reasons, such as delays, leading to loan modifications that must be settled in court.
- Fraud
Sometimes, private money loans attract fraudulent borrowers who prey upon easy access to funds. Beware of borrowers who could be more active at answering basic financial questions.
- Slow Permitting Process
Gaining construction permits and dealing with supply chain bottlenecks can speed up the progress of a real estate development project. Institutional lenders are better positioned than individual investors to prepare for such scenarios.
- Natural Disasters
Fire and flooding can wipe out real estate property quickly. Since the property serves as loan collateral, make sure you have appropriate insurance to cover various potential disasters.
Learn More About Trust Deed Investing with Fidelity Mortgage
Trust deed investors are exposed to risks tied to life’s unpredictability and shifting environmental factors. These uncertainties can significantly impact investments. At Fidelity Mortgage Lenders, we specialize in helping investors navigate and resolve potential trust deed problems. Our expertise and solutions can safeguard your investments and provide the right protection. Contact us today to gain insights into mitigating these risks and ensuring the security of your trust deed investments. Your financial future deserves the protection it needs.
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