- 6 -
land market". The markup could range anywhere from 4 to 6 times
the amount paid for the land. The buyer would make a sizeable
downpayment to EIC and take the property subject to an all-
inclusive deed of trust. An all-inclusive deed of trust includes
the promissory note made by EIC in favor of the original seller.
Under this arrangement, as the buyer made payments on the promis-
sory note to EIC, a part of the payment was used by EIC to make
the payments due on EIC's promissory note given to the original
seller. EIC also used what is termed an "agreement of sale". An
agreement of sale is different than a trust deed because, unlike
a trust deed, the agreement of sale is not recorded. Rather, in
the agreement EIC simply promised to transfer the deed to the
buyer at some future time, presumably after the buyer had made
all the payments due on its promissory note to EIC.
The promissory notes held by EIC were secured by the land.
As outlined supra, typically EIC or petitioner would purchase
large parcels of real estate and then sell undivided interests in
the property to various investors. These fractional interests
were less attractive as security because an owner would have to
receive the consent of the remaining property owners before
making use of the property. However, it appears that people who
purchased land from EIC only held it as an investment, and few
buyers, if any, actually built any structures on, or made any
improvements to the property.
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Last modified: May 25, 2011