Does transferring title trigger sales and recordation tax?

7 Replies

Hello BP

My parents are retired, have a few rentals that we are trying to do a refinance on, but their debt to income is too high. I am planning to either add my name to the title or transfer the property to myself and then refinance. We both live in Maryland. Does this transferring trigger any transfer and recordation tax or any other fee or taxes? After the refinance, planning to feed the house to an LLC. Thanks a bunch

@YiBing T. I worked in the world of county records and recording for many years and I can tell you that you would at least have to pay recording fees for the quit claim deed (which would transfer title) but taxes are depended on the consideration which you could list for $0-$10 depending on the rules of your county recorder. But I have other questions. Do these properties currently have mortgages? If yes then transferring title could trigger a due on sale clause depending on the loan fine print. what is the ultimate goal? so far it sounds like too many moving parts to be effective. Transfer, refinance, transfer again to accomplish what? A little more detail about the current state of things and what the end goal is would help people answer you question better. 

@Tyler Gibson Thanks, all of their properties currently have mortgage on them. The ultimate goal is to lower their interest rate on the existing mortgage.

Transfering to me so that I can use my income to help them with refinance the existing loan and possibly get a HELOC for future investment opportunity.

Transfering to an LLC for asset protection. The LLC will be owned by me and my parents.

Originally posted by @Tyler Gibson :

@YiBing T. I worked in the world of county records and recording for many years and I can tell you that you would at least have to pay recording fees for the quit claim deed (which would transfer title) but taxes are depended on the consideration which you could list for $0-$10 depending on the rules of your county recorder. But I have other questions. Do these properties currently have mortgages? If yes then transferring title could trigger a due on sale clause depending on the loan fine print. what is the ultimate goal? so far it sounds like too many moving parts to be effective. Transfer, refinance, transfer again to accomplish what? A little more detail about the current state of things and what the end goal is would help people answer you question better. 

Thanks for your feedback. All of their properties currently have mortgage on them. The ultimate goal is to lower their interest rate on the existing mortgage.

Transfering to me so that I can use my income to help them with refinance the existing loan and possibly get a HELOC for future investment opportunity.

Transfering to an LLC for asset protection. The LLC will be owned by me and my parents.

 

@YiBing T. I don't see this working out the way you are thinking. Mortgages typically have legal language that state if the title is transferred the entire balance of the loan is due(due on sale clause). This means that transferring them to your name would cause this action. I would think it would be easier for you to outright purchase them from your parents that way you are qualifying for the loan. However when you try and put them in the LLC it could trigger the due on sale clause. Have you asked the lender about you being a co-borrower on the loans to try and refinance?

This may not be exactly what you're asking, but I just called my bank to ask about this and they told me the only way they would allow a title transfer to my LLC would be to refinance it into a new loan, under that LLC.

@Tyler Gibson

Thank you for the feedback. I have heard many successful investors done that and never triggered the due on sale clause. Like Brandon Turner, I guess that's the risk I am willing to take because we are going to continue the payment.

I heard people do transfer property in and out of an LLC, it sounded very easy and didn't cost much.