Financing - Taking Out of Revocable Trust
Q. I have my house in a revocable living trust and just refinanced it. After I did the financing, I found out escrow took the property out of my trust to record the loan documents. Is this normal? Is there anything that could go wrong as a result of this? Thank you. Bridget R., Napa, Calif.
A. This is normal and there is no need to worry, but you do need to confirm that the property was deeded back into your trust.
When a bank finances property, it wants to do the financing in your personal name, not in the name of the trust. The reason is that because it is a revocable trust, you could effectively revoke or terminate the trust (hence it’s a “revocable trust”) and then there isn’t anyone who has personally guaranteed the loan. They require you to put it into your name for financing purposes.
By the way, escrow didn’t actually take it out of the trust. They prepared the paperwork that you signed when you took it out of the trust. They should have explained this to you. There should be a quitclaim deed that is one or two pages that you signed deeding the property from your trust to you.
This is no big deal and this happens on most trust financings, so there is no need to be concerned. However, you need to ensure that escrow prepared the paperwork to deed the property back into your revocable trust, that you signed it and it was recorded.
Look for the quitclaim deeds in the paperwork from when the notary had you sign the loan documents. It is absolutely vital to make sure it is retitled into that trust. Otherwise there could be big tax ramifications down the road when your revocable trust becomes irrevocable. Thanks!
Solar Panels Financial Analysis
Q. I keep seeing advertisements and flyers for solar power panels and am wondering if these make financial sense. Any insights? Enrique S., Tempe, Ariz.
A. There are a lot of factors, including long-term projections on the cost of power, any new technological improvements that may reduce power use, the size of your house, the actual, useful life of the equipment (which no one knows at this point), the property location and daily sunlight, as well as how much energy you currently use.
You also need to read the fine print on any solar contract lease agreements because they may have some “sticky” provisions that are not favorable to a homeowner. And the agreement could have a multi-decade term, which should always be a big concern to any individual.
Also, your local utility is going to charge you to set up the solar service with a new power meter that can handle “net” metering. And while most power providers are required to buy any excess power your solar array produces, I’ve heard many people find these payments to be non-existent or very small amounts. Remember your local service provider has a profit incentive to keep you on their power, not solar.
Onto the finances. While the solar company salesperson will work to convince you that it makes sense to go solar, you need to think through and consider the inputs and methodologies they are pitching to you. You can’t just accept their assumptions and methods to calculate the benefits. You need to think it through, use your common sense, do some Internet research, and come up with your conclusion on the financial payback and implications of going solar.
It may make total sense to go solar, but make sure you convince yourself that the financial picture looks good. Good luck!
Leonard Baron, MBA, is America’s Real Estate Professor® - his unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University Lecturer, blogs at Zillow.com, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Email your questions to: Leonard@ProfessorBaron.com
First Published July 10, 2013 8:45 AM