How to transfer title to LLC without triggering due-on-sale

5 Replies

So I know that I need to put my properties under my LLC instead of my personal name. And I hear that when you quitclaim the deed, the mortgage company rarely calls the due on sale clause as long as they are receiving their check. However, I would also have to change the insurance to reflect the LLC as the insured. Since I pay escrow money to the mortgage company and they pay the insurance. Wouldn't they find out the property is under an LLC since they are paying the insurance for an LLC instead of my personal name?

I know they could find out regardless by just looking at the public records, but this way would pretty much serve it on a platter for them wouldn't you think?

I'm not a lawyer and this is in no way legal advice. Take it as you will...

I had the same issue recently and my lender did not allow me to close in my LLC. In fact, they made me sign a letter saying the property will never go into an LLC through the duration of the loan.

I read through an entire discussion thread yesterday that someone on here started about an LLC being better than your own name. Specifically instances when an LLC protected you more than having a property in your own name. Read through 20 posts not a single person was able to give an example of when the LLC protected them MORE than having a property in their own name.

In addition, insurance is less expensive (in my experience) when not putting properties in your own name.

The decision is entirely yours, all i would advise is to be honest and upfront.

Again, this isn't legal advice. Take it as you will.

Correction on above post: insurance is less expensive when in your name vs LLC (In my experience)

We transferred one prop into the LLCs and have yet get a call from the bank.  Not much you can do to avoid the issue of a possible due on sale if the bank wants to do it .  I've been told by a cpa that LLCs is not necessary if you have good insurance (umbrella policy and high levels of liability coverage for each building). The reason is that many LLCs can be pierced in court so they are worthless for most small investors but you would need to talk to a lawyer on that.   

They can technically call the loan, but after a decade in mortgage finance, I never heard of a bank or mortgage servicer calling one for that reason (not a lawyer, don't take that as legal advice, etc, etc). Credit Unions are a different story, as they are restricted when it comes to commercial lending (which holding a mortgage for an LLC would be)

Well, I listened to the podcast show 109 twice now, and I believe that the LLC or trust is the best way to go about asset protection, as long as it gets done right which is why a lawyer would need to do it.

I just did not know how it would affect it because the lender pays the insurance. And if the insurance is under the LLC, then they would definitely know title was transferred.

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