LLC and the due-on-sale clause

[David Pascual]

I've been reading a lot of debate where people argue about whether one should or shouldn't put their property in an LLC , that isn't what I'm asking, what I would like if to know is if investors who put their properties in an LLC do it without letting their lender know that they have OR if they disclose with the lender that they plan to move the property to an LLC (or maybe you try to get agreements without the due on sale clause?) . I was reading an earlier post about a person who told the lender they were moving the property Into an LLC and they basically told him the bank wouldn't allow that. I would imagine that many banks would tell the same thing to everyone. The clause is there for a reason. I know that the due-on-sale clause is not really enforced in many areas but why don't banks enforce it? Is it because they don't know or they don't care?

[Andrew Postell]

@David Pascual I have been lending for 7 years. I don't know everything but I have not had any of my lenders use this clause. I have had other people say, "I knew someone that had it happen" but as I've tried to inquire about these incidents it always seems that it's never happened. My customers buy in their personal name and switch the deed over after closing. These are customers who use conventional loans. We do it each and every time. Portfolio loans allow you to use the LLC on deed even at closing. So if there is a real concern for you then always go portfolio. Remember, the bank doesn't want your property. They want their interest on the loan. As long as you pay on time I've never heard of a bank caring who's on title.