Rental Property Investor · Grass Valley, CA · Member since 2019 · 29 posts · 10 votes
Of course many states have slightly different regulations but in your city does a quit claim activate the due on sales clause. I'm doing a deal now in California that we are wanting to do a quit claim than a refinance in about 2 years. Anyone have experience with this.
What states are you all from, and how does this affect your state? :)
The due-on-sale clause has nothing to do with your city or state. It is a clause inserted by the lender, and most (if not all) agency loans will have that clause.
@Keenan Patton As Greg mentioned it has to do with the lender and they all have a due on sale clause. We handle this situation frequently. A transfer to an LLC will trigger the clause and should therefore be avoided, even though banks are hesitant to ever foreclose as long as the note is being paid. Even with the note being paid, the banks will still send threatening letters. This issue can be avoided completely by transferring the property into a land trust.
While a transfer to an LLC will cause alarms at the bank and prompt them to send you a letter, a transfer to a trust will not. A transfer to a trust is exempt from due on sale violations since banks will view transfers to a trust as an estate planning tool. You should not even receive a letter from the bank.
This article can explain the general process of taking a property into your own name and transferring it into the Land Trust before assigning it to the LLC. The added benefit of this process is that you can also have your attorney sign the public records as "Nominee Trustee" before assigning yourself as the "Trustee" once the Trust has been established. It means your name does not appear on public record for that property, your attorney and their address is the only thing that appears. All the while, you always have control and nobody else, not even your attorney, can manage or sell your property except for you.
If you need to prove ownership for financing or any other reason, you simple produce your company documents as well as your banking and accounting records. Since these disclosures are private, and not part of the public record, it does not violate the anonymity you’re seeking.
Feel free to connect with me if you'd like to know more!