Wraparound Templates
Explanation and Engagement Letter
Explanation of Wraps. In a wraparound transaction, the buyer takes title “subject to” the existing indebtedness on the Property (the “Wrapped Indebtedness”), meaning that the buyer gets a deed but makes no promise to pay the original loan. Under a wraparound arrangement the buyer instead makes payments to the seller on a separate Wraparound Note; the seller in turn makes payments to the existing lender. The buyer does not formally assume the Wrapped Indebtedness. The seller continues to be obligated to pay the Wrapped Indebtedness every month and promises to continue to do so. This wraparound arrangement continues until the maturity date of the Wraparound Note.
Major Legal Changes in 2022. The statutes governing wraparounds (the Finance Code and Property Code) were significantly amended in 2022. There are now more requirements than existed previously. These extensive new requirements make the process much more challenging. A consequence of this increased governmental regulation is that legal fees for wrap transactions have increased.
Wraparound Templates in Word. The list of wrap-related templates we offer (excluding the basic TREC 1-4 contract) is as follows:
1. Wrap Letter of Intent (LOI). Beginning with a letter of intent is an excellent idea for wraparounds. It is an easy way to make sure you actually have an agreement on the main terms of the wrap.
2. Custom Wrap Addendum to TREC 1-4 Contract. This addendum is important because neither TREC nor TR promulgate a standard contract addendum that is sufficient to do a wrap properly.
3. General Wrap Notices and Disclosures to All Parties
4. 7 Day Notice to Lienholder of proposed sale of security property pursuant to Prop. Code Sec. 5.016
5. 7 Day Notice to Buyer/Borrower of the Existence of Prior Liens pursuant to Prop. Code Sec. 5.016 (not applicable if there is title insurance issued to the Buyer)
6. 7 Day Notice to Buyer/Borrower (before closing) pursuant to Finance Code Sec. 159.101 as to potential property insurance coverage issues that are involved in a wraparound
7. General Warranty Deed with Vendor’s Lien designed for wraparounds
8. Wraparound Agreement covering miscellaneous details of the wrap
9. Wraparound Note (new note payable to the seller which is subordinate to the existing wrapped note)
10. Wrap Deed of Trust securing payment of the Wraparound Note
11. Special Power of Attorney enabling Buyer/Borrower to Contact Wrapped Lender
12. Dodd-Frank Compliance Sheet (indicating Seller/Lender’s compliance with the Dodd-Frank Ability-to-Pay Rule for the Seller’s file)
Fees for Templates. Wrap templates may be purchased for $175 each or $950 for all.
Single-Wrap Templates. These templates contemplate the wrap of a single note. We do not offer templates for double wraps or mirror wraps.
Online Process. Templates are delivered in Word by email. Office visits are not included in our online fees.
Advance Payment is Required. We do not send bills after the fact for online services. Payment options are on the payment tab of the website.
Initial Consultation Recommended. A template purchase does not include a consultation in how to use it. In a flat-fee system, a document order is a separate item from a consultation. Our initial consultations are $250 for up to one hour. Proceeding without an initial consultation is at your own risk.
Template Customization is Required. Although our templates are in plain English and largely self-guiding, with choices offered between different provisions depending (for example) on whether the client is the buyer or seller, all of our templates require a certain measure of customization to the specific circumstances.
Minimum Expertise and Experience is Required. These templates are lawyer-level documents, not simplistic fill-in-the-blank forms. If you do not have at least a basic level of expertise and experience in real estate, business, and word processing, these templates are not for you. Request custom documents prepared by an attorney instead.
No Assurances. No assurance is made that any of our templates will be suitable for any particular transaction unless this office is consulted in advance on that transaction.
Template Purchase is Not a Retainer. A template purchase is a one-time event. It does not include ongoing Q&A or engage our firm as your attorney for any particular purpose or transaction.
LEGAL FEES AND COSTS
Complete Fee Schedule. Our complete fee schedule is available at “Fees & Policies” on the website. We strive for full transparency when it comes to legal fees.
Advance Payment is Required. We do not send bills after the fact for online services. If you require a statement before proceeding, please let us know.
Costs and Recording Fees Excluded. Legal fees quoted always excluded any costs and recording fees that may be associated with or arise from a transaction. These are separate and additional.
Fee for Custom Special Provisions. If the client wants special provisions or custom clauses included in a document, please let us know in advance. We may, at our discretion, require an initial paid consultation to discuss these provisions.
No Hourly Accounting for Flat Fees. The flat fees quoted above are not held in trust or escrow. They are earned when paid. No hourly accounting is ever kept or made in flat-fee matters and the client has no right to demand one.
Fees Paid are Not Credited to Future Services. In a flat-fee system, all fees stand alone. Payment of one flat fee (including a template purchase) does not result in a credit toward future legal services.
Legal Fees are Guidelines. We reserve the right to vary quoted fees based on specific circumstances and to decline any case at our sole discretion.
Expiration of Flat Fees Paid. All payments, retainers, overpayments, or credits to a client´s account must be used within six months or they automatically expire fully and in their entirety, without exception.
RECORDING AND REPORTING
Recording with County Clerk Excluded from Legal Fees. Our legal fees exclude both recording fees and the act of recording the document with the county clerk. Online clients record their own documents since they have the original in hand (we do not) and only executed and notarized originals can be recorded in the county clerk’s real property records. We do not collect for recording fees, only document preparation.
Recording of Executed Originals with County Clerk. Recording of the executed and notarized original warranty deed or deed of trust is easily done by the client by U.S. Mail. All 254 Texas counties post their per-page recording fees on their websites. Recording fees for deeds average $30. The longer the document, the larger the fee.
Federal FinCEN Reporting Not Included in Legal Fee. Federal reports disclosing beneficial ownership (FinCEN Residential Rule) are now required (not optional) for non-financed (cash or no consideration) deed transfers to LLCs and trusts. Any required FinCEN reporting is the obligation of the client, not our law firm.
LIMITATIONS ON SERVICES
No Pre-Conditions. Other than stating that the matter is within our area of practice and expertise, we do not agree to any client-imposed pre-conditions on the consultation. No exceptions.
No Guarantees. Lawyers never make guarantees as to the outcome of a consultation, transaction, case, or other matter. This includes contract negotiations and real estate closings.
No Contingent Fees. Payment of fees for documents is never contingent upon loan approval, a successful closing, or any other event. There is no refund if such events do not occur as anticipated by the client.
No Escrow Available. We do not offer escrow services. We do not receive, hold, or distribute client funds.
No In-Office Closings. We do not offer free in-office closings. This firm prepares documents only. We recommend a title company for closings.
No Texting Please. We do not offer consultations or any other legal services by text. While texting may be suitable for casual communications, texting of sentence fragments and one-liners is not suitable for a nuanced legal case. Please use a keyboard device and take your time.
No Tax Advice. We are not tax advisors and do not give tax, accounting, or bookkeeping advice. Please consult your CPA in conjunction with our legal advice.
No Representation in the Full Transaction. Preparation of document(s) or providing a consultation is a limited, closed-end service that begins and ends. It does not include or encompass ongoing legal advice or representation in the broader transaction. We have no obligations to the client beyond the consultation or the document preparation. Engaging our firm for either limited purpose does not mean that we become your attorney for the whole transaction unless we expressly agree to do so in writing.
No Representation of “Both Sides.” We only ever advise and represent one side of a case or transaction. We never attempt to “represent both sides.” Absent instructions to the contrary, we strive to give legal counsel and prepare documents that are aggressively in the best interests of our client.
No Total Re-Write. An introductory consult fee or a review/comment fee is not a flat fee for the total re-write of an existing legal document. Re-writing a legal document inevitably takes longer than one hour, so either our posted flat fee or the hourly rate applies, as may be appropriate.
No Bundling of Topics. Attempting to bundle multiple diverse legal topics or questions about multiple property transactions may into a one hour consultation is not permitted. This never works because it is too scattered. If multiple legal topics need to be discussed, an hourly arrangement will apply instead.
No Involvement with DIY, Internet, or Junk Documents. We do not advise upon or get involved with homegrown or amateur documents, forms from the Internet, forms prepared by non-attorneys or non-brokers, or guru forms from real estate seminars.
No Investor Training. This firm supplies legal advice and documents in our capacity as a law firm. We are not a real estate school or investor training seminar. We do not offer training for real estate investors.
No Carry-Over. Documents prepared for one transaction do not “carry over” to other properties or transactions. Our fees are per transaction and per property. Each transaction bears its own stand-alone legal fees and costs.
No Assurance of Future Services. A consultation or document preparation task is not an advance commitment on our part to handle the matter going forward. Smaller law firms must limit the cases they accept. We may, at our discretion, decline to further participate after initial services are rendered.
No Liability Beyond Specific Task. Our firm has no liability whatsoever for any part of any case or transaction that we do not directly handle, directly advise upon, or directly prepare documents for.
No Litigation. We are not accepting litigation, lawsuits, or disputed matters at this time due to a full schedule in that area. Documents, transactions, and entity formations only.
LEGAL VS. BROKERAGE SERVICES
Our Attorney Also has a Real Estate Broker’s License. Our attorney is a licensed Texas real estate broker. However, this office is primarily a law firm and the services we provide are primarily legal in nature. Any brokerage representation by us requires a signed written brokerage agreement in advance.
A Lawyer Does NOT Replace a Realtor. Although this law firm offers consultations, document preparation, contract review, and other legal services, it is important to understand that a lawyer does not substitute for an agent or broker and all the various services and ongoing support that Realtors provide. Requesting advice from a lawyer does not substitute for the broader services of a real estate agent or broker.
Information on Brokerage Services (IABS). TREC rules require us to direct you to TREC’s Information about Brokerage Services at https://lonestarlandlaw.com/wp-content/uploads/2020/04/IABS-1-0.pdf.
MISCELLANEOUS POLICIES
Initial Consultation. An initial consultation is not normally needed in the preparation of routine documents, at least so long as we are given clear instructions. However, in complex situations and at our option, we may require that the process begin with a paid consultation ($250) in order to gather facts and discuss the details of the transaction.
Title Policy or Title Report. If our client is the buyer or lender, you are advised to obtain a title policy or at least a title report on the property prior to closing in order to determine if the seller has good title and/or if there are existing liens, judgments, easements, or restrictions affecting the property. This is not our responsibility. We are not a title company and do not check title.
Finality of Documents. Documents we prepare or review are considered final 3 business days after delivery to you. Please get back to us with any needed corrections or changes before then. Beyond that timeframe, a revision fee will apply.
Documents are Proprietary and Supplied in PDF Format. Documents are supplied in pdf format only. These are proprietary documents subject to copyright and are licensed (not sold) to the client for single use in a specific transaction. They may not be copied, disseminated, or re-used.
Business Hours, Weekends, and Holidays. We take business hours seriously. Traditional business hours apply (Monday through Friday, 8-5 CST) subject to our posted vacation schedule. After-hours emails are viewed as being received on the next regular traditional business day.
Client ID. The requirement of government-issued photo ID is now common at law firms, medical offices, and other professional firms everywhere. Fraud is rampant. We do not work with anyone who declines to provide ID and any identifying information that may be required for federal reporting (FinCEN).
Engagement Letter. This document is our engagement letter setting out the terms and conditions of this particular engagement. If you wish to proceed, your signature is required below.
Terms of Service. All of our firm’s general terms of service (found at the “Fees & Policies” tab on the website) apply without exception to all persons receiving legal services in addition to the specific terms of service set forth in this engagement letter. No exceptions.
___________________________________________ _______________
SIGNATURE DATE
___________________________________________ _______________
SIGNATURE DATE