Due On Sale Clause
I plan on buying a SFR in my personal name. After the 6 month seasoning period with the bank, I plan to cash out refinance into a traditional loan. Do you guys have any issues transferring your title to an LLC? I know there is the notorious due on sale clause. From what I have read, it is extremely rare they enforce it. I would just like a little feedback on this issue.
Most Popular Reply
@Michael Bertsch, you are spot on in that they rarely enforce it. I have properties that I transferred 10 years ago that have never had an issue. I would still be prepared to deal with it, though, because it can and does happen. I also have properties that I didn't transfer because I didn't trust the lender not to exercise the clause or I couldn't afford to bail myself out if they did.
I have also heard of cases where they just made the borrower put the title back in their name. Problem is, it is out of your hands and you are relying on banks to be reasonable. I have not found that to be a good strategy for the long term.