Quit claiming Deed to LLC

13 Replies

Closing on another duplex soon and would like to know how long you guys wait after closing to quit-claim the deed to an LLC?

Also, do you guys have the mortgage company ACH the mortgage payment from the LLC's bank account?

And if so, won't they see that is an LLC on the account and not the person they lent to?

Or do you guys just have a personal bank that you transfers the rent payments to as a deduction? 

The mortgage companies I spoke to say your not allowed to transfer title but most attorneys tell me just to do it. So I am trying to figure out the specifics now.  

why are you deeding to your LLC and not putting it in the LLC's name to begin with? I believe the bank can call the note if they find you've deeded it to another entity.

Once you have the LLC set up just buy it in the LLC name to begin with. With that said, I just transferred all of my single family into an LLC. My lawyer said that he personally has never seen a loan called as long as the mortgage is paid every month. Technically, the bank can do it so it is a risk. But I think it's rare. Since you're in my area I can give you my attorney's name if you'd like. He's really good and answers questions like this for me all the time.

@Justin Witt I'm assuming you can't put it directly under the LLC at closing because you're not putting 20% , so your lender won't let you ? I'm going through the exact same situation, and my CPA & Attorney advised me to transfer the deed a couple weeks after closing.

As far as where the mortgage payment is coming from, that is an interesting so I’ll definitely like to know the answer to it as well . But my assumption is that the bank wouldn’t care long as they’re getting their mortgage payments.

Originally posted by @Keith A. :

why are you deeding to your LLC and not putting it in the LLC's name to begin with? I believe the bank can call the note if they find you've deeded it to another entity.

Yes they can call it due, that's what I was referring to when the attorneys advised me to do it anyway because the chances are slim. I am not putting in an LLC to begin with because residential lenders aren't lending to LLC's just commercial lenders.

 

Originally posted by @Ley Nezifort :

@Justin Witt I'm assuming you can't put it directly under the LLC at closing because you're not putting 20% , so your lender won't let you ? I'm going through the exact same situation, and my CPA & Attorney advised me to transfer the deed a couple weeks after closing.

As far as where the mortgage payment is coming from, that is an interesting so I’ll definitely like to know the answer to it as well . But my assumption is that the bank wouldn’t care long as they’re getting their mortgage payments.

I'm actually putting 25% down. They wont lend to an LLC because its residential and not commercial.

 

Originally posted by @Anthony Vann :

Once you have the LLC set up just buy it in the LLC name to begin with. With that said, I just transferred all of my single family into an LLC. My lawyer said that he personally has never seen a loan called as long as the mortgage is paid every month. Technically, the bank can do it so it is a risk. But I think it's rare. Since you're in my area I can give you my attorney's name if you'd like. He's really good and answers questions like this for me all the time.


Now that you transferred all the SFH's to the LLC are you switching your ACH transfers to the LLC bank account? Or how are you going about making those mortgage payments now that the ownership has changed and presumably the bank account will change too right?

 

@Justin Witt , typically your first loan gets sold to another/larger lender.  I would probably wait until that has been sold, which you'll receive a letter anywhere from 3-6 months after close.  That's typically the last involvement you have with the lender per say.

Banks won't do it now because rates are so low. Although I always wonder what happens on these 30y notes when rates reach 10%+. If I'm the banks, I drop all my low interest loans and start by pre-payment penalties for people who transferred to an LLC. Breach of contract, easy to terminate.

If the mortgage is in your name, but the property is in an LLC.....that seems like to me it would be a pretty easy to pierce LLC.

@Brit F.

Glad to see you prevailed!

@Justin Witt

As soon as we are done financing, we do it. ACH's come directly from our business checking account. Statements get emailed to email address with LLC in the title. Have even paid other peoples mortgages out of our LLC account. No one has cared as long as the payments are made.

We are not worried about @Russell Brazil 's concern because we are the only decision makers involved in the operation of the LLC so we have personal liability exposure anyways. But definitely a good question for your attorney regarding your individual instance.

@Justin Witt , the discussion shows there are many things to consider, so I don't want to say this is the total answer.  A strategy that helps to transfer property from an individual to a LLC using a land trust works, and is often paired with other asset protection strategies to cover the risks you are concerned with. The St. Germain act of 1982 was set up to protect transfers to trusts from the due on sale clause that has been recently incorporated into Fannie Mae also.

@Justin Witt - A transfer most likely will trigger the Due on Sale clause (DOS) - and while in the past, in an environment of falling interest rates and prices might been a rare occurrence, like they say, past performance might not apply to future results, and with rates increasing and "aged" loans (where the bulk of the interest was already collected, since you pay most at the beginning part of the amortization schedule) the banks might be more interested in collecting on the DOS clause and redeploying the money at higher interest (especially if the valuation of property makes for an easy sale in case of foreclosure).

A detailed resource on Due on Sale you might want to read is: the-truth-about-getting-around-due-on-sale-clauses (https://johntreed.com/blogs/john-t-reed-s-real-estate-investment-blog/66000067-the-truth-about-getting-around-due-on-sale-clauses).

Also, these threads might be worth reading: 386043-bank-called-my-due-on-sale-clause () 183825-due-on-sale-clause-was-called-by-bank () 232247-due-on-sale-clause ()

Also, FYI - The Fannie servicing guide, for about a year now, explicitly excludes a transfer into an LLC you own from the due on sale clause. You still have to close in your personal name, however. Link: oh-yeah-the-due-on-sale-clause-is-now-llc-friendly-sometimes

Then, if you choose to proceed, at least you'll know what you getting into.

But...it takes two to tango, and this can be a two-way game: if the bank hits you with the DOS letter, you can transfer the property back in your name to cure the problem and play that game, back and forth, if you want/can/afford. Or you can refinance, if your position is solid. So there are ways to deal with it.

Be careful when/if choosing to use a Quit Claim Deed:

A person receiving a purported real estate interest via a quitclaim deed may receive no legal right to the property whatsoever. If the person seeking to transfer real estate with a quitclaim deed has no legal interest, nothing legally is conveyed. In the absence of title insurance--which is not available for a quitclaim deed--the person receiving the quitclaim deed has no legal recourse because the deed itself states that only the interest of the grantor, if any interest exists, is conveyed.

Whether title insurance terminates by transferring real property depends on the type of policy, and how “insured” is defined in the policy. You take a risk which could result in cancellation of your title insurance and complete loss of your real property without compensation in the event that a title issue regarding your real property arises.

Contact your title insurance company to determine coverage and if your policy does cover transfers , and when or how.