Real Estate Agent · Cheyenne, WY · Member since 2009 · 205 posts · 51 votes
I sent in a quit claim deed to the county to transfer two properties from my LLC to my personal name so that I can refinance with conventional financing. The county took a month to send it back because they didn't like where the notary put the stamp. I corrected it and sent it back in, and they'll probably take another month to finally record it. When I complained, they said the "date of instrument" will still be the date that the document was originally notarized. Does anyone know if the lender, for the purpose of the 6-month seasoning period, will go by the "date of instrument" or the date when the deed was finally recorded? There will be a difference of about 2 months in my case. TIA.
Fannie/Freddie do not have title seasoning requirements for purchase money or rate & term refinance transactions. Further continuity of obligation is met if the LLC is owned by you. That said, some lenders may have an overlay on top of those guidelines, which if you encounter on just shop some more.
You can read Q&A updates around the same issue here: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/pdf/0822faqs.pdf
Fannie/Freddie do not have title seasoning requirements for purchase money or rate & term refinance transactions. Further continuity of obligation is met if the LLC is owned by you. That said, some lenders may have an overlay on top of those guidelines, which if you encounter on just shop some more.
You can read Q&A updates around the same issue here: https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/pdf/0822faqs.pdf
I should have mentioned that this is a cash-out refi. One property was purchased in cash and another has a small loan on it.
Thanks for the responses!
Won't matter as far as the deed is concerned or for the loan.
But now Mariah I have a question, was the house with an existing loan in your name or the LLC...or someone else?
That makes a difference on how the LLC acquired the property, if it was a sale with a mortgage made, a sub-2, a loan obtained by the LLC after it was acquired, or who is on that small loan.
It could be that this will be underwritten as a refi and closed as a purchase or all as a purchase, depending on title and your quit claim could be a problem depending on that existing financing.
Changing titleto a property with an existing loan should be done with a Special Warranty Deed excepting out the existing financing.
While QCDs were the norm years ago, there have been issues where the interest of the grantor is questioned in the chain of title as they only convey that interest that the grantor may have. A SWD is a conveyance with a warranty to good title except as to other existing interests. If the transaction is not a court ordered divorce or partition of property, bankruptcy situation or to another already in title (where QCDs are used) the transfer should be with a SWD.
"But now Mariah I have a question, was the house with an existing loan in your name or the LLC...or someone else?"
The house with in an existing loan was titled in the LLC's name.
There is only $33K left on the loan. Would it be easier if I simply pay it off before refinancing? I was thinking about doing that anyway.
I'm not sure what I may have screwed up by using a quit claim deed instead of special warranty, but it's done now so I guess I know better for next time.
More often, the problem is with title insurance. Your LLC purchased the property with financing that probably required a title policy. If your LLC also purchased an owner's title policy, your LLC was the named insured.
When you used the QCD to transfer ownership from the LLC to you personally, you broke the warranty insurance chain. If you sell the property and sometime later a defect in the title is discovered that would be grounds for a claim against a title insurance policy, you essentially became self-insured.
Get specific details from your favorite real estate attorney or title company.
Mariah: In the future, consider going in to record when you are concerned about time. My county records every day up until 2:00 pm. If I mail it in, it sits on someone's desk for 3 or more weeks...every time. When recording in person, if they refuse the doc, they give you the feedback you need to change it.
That being said, it can often be a mistake to prepare and record your own docs. For your purposes, I would have let escrow and the refi lender prepare the docs they require to transfer title. I'm not sure I understand your seasoning concern.
To add to what K. Marie Poe posted, some counties have electronic recording, so you can see if the closing agent has access to that (saves you the trip if things are hectic).
More often, the problem is with title insurance. Your LLC purchased the property with financing that probably required a title policy. If your LLC also purchased an owner's title policy, your LLC was the named insured.
When you used the QCD to transfer ownership from the LLC to you personally, you broke the warranty insurance chain. If you sell the property and sometime later a defect in the title is discovered that would be grounds for a claim against a title insurance policy, you essentially became self-insured.
Get specific details from your favorite real estate attorney or title company.
Would I have avoided this problem if I had used a special warranty deed?
Mariah: In the future, consider going in to record when you are concerned about time. My county records every day up until 2:00 pm. If I mail it in, it sits on someone's desk for 3 or more weeks...every time. When recording in person, if they refuse the doc, they give you the feedback you need to change it.
That being said, it can often be a mistake to prepare and record your own docs. For your purposes, I would have let escrow and the refi lender prepare the docs they require to transfer title. I'm not sure I understand your seasoning concern.
That would definitely be the preferred method, but I like in Oregon and these properties are in South Dakota. :-)
Should you pay off the existing mortgages for the $33k prior to refinance?
There is no real need to do this. The presence of those mortgages is not causing you any issues.
Would I have avoided this problem if I had used a special warranty deed?
No, where you asked this question was in regards to time frame for the clerk's office to record your deed. Regardless of what type of deed it was, its logical to assume they would run at the same snail pace for all of them. No deed gets special attention at the clerk's office.
Nothing is really that messed up. No big deal on anything you have done or needs to be done. At this juncture just contact your mortgage provider and start your loan process. Just as K. Marie said through that process they will help you resolve any title issues if they are not already cured with the help of the title company used to close your loans.
As Dave T. pointed out your transfer to you was barefoot, not title coverage to you, and some states use the continued title insurance chain to establish marketable title. Sine you property went to you, if you had a problem you could always sue your LLC and that title policy would kick in...see your attorney if you are a one member LLC. LOL
But it also broke the chain of warranty from one owner to the next, this is not an issue for those exceptions (divorce etc.) pointed out above, but your LLC could have clouded or encumberd title and passed it to you as far as the next buyer knows or next title company knows. If there had been a warranty that simply excepted out the existing mortgage meaning the warranty did not include that mortgage, there would be a full warranty when that mortgage was paid off and the warranty continues to the next buyer.
The proper use of deeds is very important and unless an investor understands the different types of tenancy and ownership rights as well as title issues and insurability, they should always have a title company provide the deed for the situation.
But as Dion points out, it's nothing that can't be corrected, with more fees, just don't die yet!