All Inclusive Trust Deeds (AITD) & how they work.
What is an AITD?
An AITD means “All Inclusive Trust Deed“, or “All Inclusive Deed of Trust“. They both mean the same thing. This is a very simple definition. For a more detailed Definition, refer to the law and legal wording supplied in this website. An AITD is usually a large loan combined with a small loan, creating one larger loan. An example would be: A seller owes $400,000 at 5% interest on his home (loan). He has $50,000 in equity in his home. He sells his home for $450,000 at 6% interest by combining his old loan and his equity, creating an All Inclusive Trust Deed or AITD.
Advantages of an AITD
The greatest advantage to both Seller and Buyer, and one of the most successful situations for the Seller and Buyer is when there is little to no equity in the property, and the AITD is written for $1.00 more than the loan amount.
HERE IS AN EXAMPLE IF YOU OWE $400,000 @ 5% INT. & SELL ON AN AITD FOR $450,000 @ 6% INT.
For this example we chose a three year term for the AITD. This means that the Buyer must refinance, sell or renegotiate with the Seller within a Three year period.
The following shows how we do almost all of our AITD’s. It works best when the Seller has no money or equity to sell the property. The Buyer pays $1.00 more than the existing loan amount and therefore has the same monthly payment as the Seller.
The advantages to the Seller are exactly the same, only he makes no money. The advantages to the Buyer, since he is not assuming the loan, (most loans are not assumable) he does not need to qualify for that assumption nor pay all the costs which could be as much as a new loan. He also now owns the property as the AITD is a full sale.
I have been facilitating AITD sales for over 25 years. The Buyers pays $10,000.00 which covers all the Buyer’s and Seller’s closing costs. I am compensated for whatever is left over. Remember, this is a legal and binding contract that secures a full sale. This is not a seller carry back or a land contract, subject to, or any other.
Under the heading, “Real Estate Law Advantages and Disadvantages to the Seller” Miller and Starr California Real Estate 2d reads:
“There are no apparent disadvantages to the seller, but the overriding deed of the trust does offer two advantages to him: better control and higher yield. If properly drafted the overriding deed of trust can achieve these advantages to the seller better than any other security device.” (p. 56 9:20) See: Law
“Advantages and disadvantages to the buyer: When the documents are properly drafted, the All Inclusive Deed of Trust does not produce any real disadvantages to the buyer, of course, it would be better for him to assume the existing obligation secured by the senior lien at the lower interest rate and only pay the higher interest rate to the seller on his equity.” (p. 58 9:21)