Quit-claiming deed into an LLC? My mortgage broker says NOPE!

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Quit-claiming deed into an LLC? My mortgage broker says NOPE!

John G.
New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes

Hi all,

Posted this in the conventional lending forum but thought it be appropriate here as well. I'm purchasing my first property (Milwaukee) and asked my mortgage broker (Chemical Bank) about transferring the deed after the loan is secured. He said I can't do that. And that I'll need commercial lending. Is this something he HAS to say because I emailed him? And I can likely do it and he'll turn the other cheek? Or should I not have asked that?

What do I do???

It's a $90 investment. Putting 20% down.

Thanks!

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Paul Bowers
Real Estate Investor · Macedon, NY · Member since 2016 · 251 posts · 290 votes
9y

@John G., not trying to sound like a jerk but you seem hell bent on getting someone to tell you it's okay and just go ahead and do it.  You got a dozen answers in this thread https://www.biggerpockets.com/forums/49/topics/468...

There is only one answer.  If you do it the bank has the right to call the loan based on the due on sale clause, period.  There is no way to know whether they will or not, you just have to decide if you're willing to take that risk.

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  • Paul Bowers
    Real Estate Investor · Macedon, NY · Member since 2016 · 251 posts · 290 votes
    9y

    @John G., not trying to sound like a jerk but you seem hell bent on getting someone to tell you it's okay and just go ahead and do it.  You got a dozen answers in this thread https://www.biggerpockets.com/forums/49/topics/468...

    There is only one answer.  If you do it the bank has the right to call the loan based on the due on sale clause, period.  There is no way to know whether they will or not, you just have to decide if you're willing to take that risk.

    4Reply
  • John G.
    OP
    New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
    9y

    Yeah, no. I'm not looking for validation to "just go ahead and do it" @Paul Bowers. I'm looking for advice based on people's experience. What other's have done/currently do. Posted here because of the "legal issues" part. Thought I'd get different sets of eyes here.

    0Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    9y

    @John G. there are plenty of lenders that will allow you to put the property in the name of an LLC but you will not be looking at a conventional loan

    C2 Financial
    WebsiteView Page
    0Reply
  • John G.
    OP
    New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
    9y

    @Melvin List This is my understanding. Has your bank triggered the due-on-sale clause from investors as they try deeding to their LLC after obtaining conventional financing?

    0Reply
  • Addam Driver
    Investor · Atlanta, GA · Member since 2017 · 69 posts · 54 votes
    9y

    I'm using BB&T to do that exact same thing. They made it clear to me that I could quit claim a property I'm buying to my LLC but ONLY at closing. This would not trigger the "due on sale" clause.

    By doing this, I can take advantage of lower mortgage rates and not a much higher rate as my LLC is fairly new.

    Hope this helps.

    0Reply
  • John G.
    OP
    New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
    9y

    @Addam Driver That's a TRE-MENDOUS help. Thank you so much. I will ask my current lender if this is an option. Otherwise, I will contact BB&T!

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    9y
    If you ask, they'll say "no" If you just do it, there is little chance anyone will ever care. And if they do they'll give you time to correct. Of course there is still a risk. I've done it many times. But not to move traditionally financed properties out of my personal name. Rather I did it to get my properties out from all being in one LLC into their own.
    1Reply
  • Addam Driver
    Investor · Atlanta, GA · Member since 2017 · 69 posts · 54 votes
    9y

    @John G. you got it!

    0Reply
  • John G.
    OP
    New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
    9y

    @Cody L. By "time to correct", do you mean I can deed it back into my personal name and all could be forgiven?

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I don't put little houses with debt on them into LLCs for a few reasons.  

    1st- insurance. Both title insurance and hazard insurance are in your name. Need to file a claim? The LLC owner isn't insured. Good luck with that. Insurance co's invented loopholes.

    2nd- title chain.  Taking a warranty deed and chumping it down to a quitclaim deed?  

    3rd- DOS risk and difficulty refinancing it later.

    In the name of 'asset protection' you'll have a completely uninsured property with title chain issues that may get called by the mortgage co and is difficult to refinance later.  Do the math @John G..

    4Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    9y
    John Galang yes. I believe the term is "time to cure". Similar to if you missed a few payments they give you time to cure versus just foreclosing right away. But honestly, I don't know how it happened but everyone on this site seems to have this big hard on for putting their properties into an LLC. The advantages are totally overblown. There are zero tax advantages and quite frankly little to no liability protection. Just get good insurance and call it done
    1Reply
  • John G.
    OP
    New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
    9y

    Ha. I don't know man. My attorney says the same. I guess most people's do. Still figuring it out...

    0Reply
  • John G.
    OP
    New to Real Estate · the US of A · Member since 2017 · 107 posts · 14 votes
    9y

    @Addam Driver Was your BB&T financing a portfolio loan?

    My lender is saying that's probably why they're okay with the deed transfer. My loan officer ad Chemical Banks sayd that loans sold to Fannie or Freddie are the ones that have the due-on-sale clause.

    0Reply
  • Addam Driver
    Investor · Atlanta, GA · Member since 2017 · 69 posts · 54 votes
    9y

    @John G. I am on my 3rd mortgage under my personal.  BB&T allows 5 before they automatically switch you to portfolio lending.

    0Reply
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