San Antonio, TX · Member since 2017 · 11 posts · 3 votes
Hello fellow Real Estate enthusiasts, I am closing on a small multi family 4 plex unit by Dec 7th.
I wanted to check in and see if someone can help or advise on how to go about transferring the title into an llc soon after. Any help or suggestion provided is valuable and appreciated.
Thanks
Umair
Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
7y
@Umair Iqbal I never recommend using quitclaims to transfer title in your type of scenario. I would use a Special Warranty Deed, so that you minimize the risk of losing your title insurance coverage as @Matthew McNeil suggests in the previous post.
Either way (quitclaim deed or special warranty deed), you still run the risk of your lender exercising their due on sale clause and calling your loan.
For these reasons, I never recommend to a client that they transfer the title to their LLC without FIRST obtaining the written consent of their lender. That usually ends the discussion, as the lender isn't interested.
Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
7y
Yes, you can Quitclaim it to the LLC. I've done it many times. However, a few things to consider first.
The lender can exercise the “due on sale” clause if the name(s) of the buyer are not the same name(s) as the members identified as the owners of the LLC. For clarity; as with a trust, lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the SAME individuals in an official capacity (e.g. Joe and Jane Smith as trustees of Smith Trust). Typically, the same applies to LLCs where you and your spouse are sole members (single or multiple member LLC). Regardless, you should first talk to your lender and tell them exactly what you’re planning and get their approval.
Next is to check with the Title Company regarding the Title insurance. Following is the exact wording of my Title insurance;
CONTINUATION OF INSURANCE
The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long as the Insured retains an estate or interest in the Land, or holds an obligation secured by a purchase money Mortgage given by a purchaser from the Insured, or only so long as the Insured shall have liability by reason of warranties in any transfer or conveyance of the Title. This policy shall not continue in force in favor of any purchaser from the Insured of either (i) an estate or interest in the Land, or (ii) an obligation secured by a purchase money Mortgage given to the Insured.
Additionally:
Transferring a real estate title (a SFH or MF bought by you and your spouse to an LLC owned by you and your spouse) doesn't transfer the mortgage.
My assets are in Idaho and its fairly easy to file a Quitclaim. Actually, the Title company records it for a minimal fee. No attorney necessary.
Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes
7y
@Umair Iqbal I never recommend using quitclaims to transfer title in your type of scenario. I would use a Special Warranty Deed, so that you minimize the risk of losing your title insurance coverage as @Matthew McNeil suggests in the previous post.
Either way (quitclaim deed or special warranty deed), you still run the risk of your lender exercising their due on sale clause and calling your loan.
For these reasons, I never recommend to a client that they transfer the title to their LLC without FIRST obtaining the written consent of their lender. That usually ends the discussion, as the lender isn't interested.
San Antonio, TX · Member since 2017 · 11 posts · 3 votes
7y
Thank you both. I have contacted my lender and waiting on a response. When i was choosing the name on the title vesting, a help question in the appendix mentioned that they are not accepting the name of LLCs at this time but it clearly stated on their help answer that i am able to do so after closing. That gives me an indication that they are ok with this sort of activity but i have emailed them to be sure.
Thank you both. I have contacted my lender and waiting on a response. When i was choosing the name on the title vesting, a help question in the appendix mentioned that they are not accepting the name of LLCs at this time but it clearly stated on their help answer that i am able to do so after closing. That gives me an indication that they are ok with this sort of activity but i have emailed them to be sure.
Have your closing attorney submit 2 deeds prepared with the closing package. The first will have your name as grantee for personal guarantee (since most 1-4 family underwriting will require a human borrower), and the second will deed from you (a person) to the LLC. Talk to your closing attorney about it. My company has done this several times and if done at time of origination, there is no DOS issue.
Disclaimer: not legal advice. Talk to your closing attorney.
Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
7y
As discussed above, do not use a quit claim deed, but a warranty deed instead.
Also to avoid the due on sale clause, you can transfer the property into a land trust where you are the initial beneficiary. The Garn St Germain act forbid any acceleration clause in that case. Later on you will assign the beneficial interest to your LLC.
You can maybe try to close directly into the land trust, I have seen some lender accepting it for closing, however I am sure that some won't accept it.
Thank you both. I have contacted my lender and waiting on a response. When i was choosing the name on the title vesting, a help question in the appendix mentioned that they are not accepting the name of LLCs at this time but it clearly stated on their help answer that i am able to do so after closing. That gives me an indication that they are ok with this sort of activity but i have emailed them to be sure.
Umair, I've used the Quitclaim mechanism several times after closing and neither the Lender nor the Title Company (for Title insurance) balked. But, its always best to get their answer in writing. Curious to know what your lender's response is then you find out. Cheers!
San Antonio, TX · Member since 2017 · 11 posts · 3 votes
7y
Just wanted to share what I got back from my lender: Per title- you may transfer vesting name AFTER closing to LLC. You must reach out to Title to have them draft a Deed for you.
San Antonio, TX · Member since 2017 · 11 posts · 3 votes
7y
I also asked if this will pose an issue, and the response was that they won’t be servicing the loan so they can’t comment on that but at the same time they didn’t push back and said a big no to it
after you quit claim the deed into the LLC( I own the property so I’m not worried about my lender) are there any other steps required to have the asset in the LLC? I have separate bank accounts already.
Flipper/Rehabber · Minerva, OH · Member since 2022 · 5 posts · 3 votes
4y
Kevin,
I think the only difference between you personally having the title in your name vs the LLC name is how you file taxes. The bank account you use doesn't matter personal or business. However a business bank account setup with a EIN number does have many benefits that could help show profit for your business after two years of owning it so you can get loans under the business name instead of against your name/credit. My debt to credit ratio is maxed out so I am working this stratigy now.
I think the only difference between you personally having the title in your name vs the LLC name is how you file taxes. The bank account you use doesn't matter personal or business. However a business bank account setup with a EIN number does have many benefits that could help show profit for your business after two years of owning it so you can get loans under the business name instead of against your name/credit. My debt to credit ratio is maxed out so I am working this stratigy now.