Due-on-sale clauses are also known as acceleration clauses. You’re becoming famous and you’re making me look good! Matt: Well, there. Your IP: 212.114.93.18 One of the questions that always comes up is that due-on-sale clause. You get the new car and you think you’re the only person who’s driving that new car. Is there anything else to say on that, or are we good? It’s just a contract issue. Thank you! The handshake, and all that stuff. There you go. Matt: Right. Well, super! due and payable in full by virtue of the death of a joint tenant or a tenant by the entirety where the property passes to the survivor by operation of law. The servicer must notify the borrower that a property transferred to an LLC must be transferred back to a natural person prior to any subsequent refinance application in order to meet Fannie Mae’s Selling Guide underwriting requirements. Epic brunch! Introduction. Nice. There you go. Thank you so much for joining us on this episode of The Epic Real Estate Investing Show! Tim: Reticular activator? I like it! It’s just the contract. Just basic stuff. Matt: Yeah. Just as … yeah, the due-on-sale clause is out there, but look at it long and hard, and there’s probably a good chance you’re going to find a way that you can get around it, either A) through the actual terms of your mortgage and/or deed, or B) inside the guidelines of the people who actually own it. It’s not so much what are you being told, but what’s reality. If you’d like to work directly with me on your business… go to REIAce.com, share a little about your business and what you’d like to work on, and I’ll get you all the details! We also look at the asset protection. It’s just a paragraph on your deed of trust, on your promissory note, saying if you move the property, they could call the note due. An inter vivo, or living trust, is another provision where lenders must allow transfer of title without calling a due-on-sale clause. Mortgage lenders often include a due on sale clause in the mortgage agreement. There might be something inside the due-on-sale clause that says you can’t do it, but the Fannie Mae servicing guidelines, which is what pretty much everyone follows, says it can be done. Those people are freaking out on the due-on-sale clause. There’s a tax question, in there, somewhere. See you, next Tuesday, for another episode of Tax Hacker Tuesday. On Mondays, here at Epic, we show you new and creative ways, as well as time-honored ways of making money using real estate, and on Tuesdays, we show you how to keep it! The banks would be shooting themselves in the foot, by doing that. Now, I was working with a new client, recently, and this guy’s an engineer. Matt: Is there anything else to say on that, or are we good? It’s going fantastic. I totally agree with them. Nice. In other words, the lender can demand payment as soon as the property is sold. That’s kind of how it works. Matt: Epic! Yeah. Mm-hmm (affirmative). This is important to real estate investors who desire asset protection or freedom of contract. Every now and then, they are, but you know. We do the asset protection, and that’s going require moving real estate over to a trust or to an LLC. Tim: Yeah. Note that the all-too-popular land trust schemes … You may need to download version 2.0 now from the Chrome Web Store. Matt, once again, you just boil it all down to the essentials. As you’d mentioned, I think it’s important in reinforcing it’s not against the law. Tim, we would put together this Tax Hacker Blueprint, I don’t know, a couple months ago, and we’ve had a lot of listeners go ahead and take advantage of that. People can’t sleep on Tuesday nights, so they play this as sort of the fan and bam! You can either try and climb that brick wall, or you can look off to the side and see the little path that’s all legal, all allowable, and walk around that brick wall, get around it, and keep on moving with your destination. Here’s the thing. The due-on-sale clause means essentially that the bank can decide to “call in” or “accelerate” its loan if the title of the property is ever transferred to another person or entity. Tim: Well, Matt, here’s the thing. It’s been an honor to work with you. Epic breakfast! But, until then, you have Tim Berry! Epic this! We see it in the airport, we see it at restaurants, and now my son, he’s seven, goes, “Look, Daddy! Thank you for the kind words, earlier, and look forward to helping people out! It’s funny how my family when we go out, we see “epic” everywhere. There is no statute of limitation for enforcement of a due-on-sale clause after the transfer of a mortgaged property into an LLC, so a bank can wait until interest rates have gone up several years down the road and then enforce the clause. This type of option is called a “due on sale clause.” If you ask the lender for permission to transfer the land to your LLC the lender will always say no. This is called an acceleration clause. Since these transactions involve the transfer of the property without the underlying deed of trust being released, it is prudent to examine clauses in the first lien deed of trust concerning transfer of the property. Thank you! This means the entire amount is due. This calling of the loan due would mean that it had to be paid in full or refinanced. There you go. Your reviews help to improve our search rankings so that we can spread the love. Tim: That’s the bottom line! It’s time for Tax Hacker Tuesday! What did you have in mind, talking about with that? How do you even spell that? This homeowner would like to transfer his home to an LLC but is concerned the due on sale clause will be invoked. Also, while we’re on the subject of transferring property, you may be interested in our free educational resource on how to transfer your property and keep your old insurance . If you have any questions for Tim that you’d like to have answered, here, live on the show, you can go to taxhacker.com/questions and post it, there, and then we’ll answer it, here on the show. Epic breakfast! If the property is encumbered by a lien, the lender may have an option to call the loan if the borrower(s) transfers title to the LLC. Matt, once again, you just boil it all down to the essentials. There you go. Protect your assets and keep what’s rightfully yours. Matt: Mm-hmm (affirmative). Pretty simple! We were talking, earlier, and you had something that you wanted to talk about, the due-on-sale clause, and the LLCs. There’s a thing, and it’s for a Fannie Mae servicing guide that says you can do it. It’s the portion of the brain that’s responsible for awareness. Performance & security by Cloudflare, Please complete the security check to access. If the bank started calling all the notes of people who’ve transferred properties into LLCs and/or trusts, we’re going to have a real estate market crash, because so many people aren’t going to be able to make those payments, and now they’re going to have so much real estate, so much product inventory on the market, it’s going to drive prices down, which is going to screw the banks right back over. Yeah, for the most part. People can’t sleep on Tuesday nights, so they play this as sort of the fan and bam! Tim “Self-Deprecating” Berry. I am doing epic, Matt! This kind of ties in with that, because the Tax Hacker Blueprint is not just for tax savings. See you, next Tuesday, for another episode of Tax Hacker Tuesday. Tim: So, he’s reading through all the terms and clauses on his mortgage, and he’s saying, “Hey, look, Tim. I said, well, tell you what. This kind of ties in with that, because the Tax Hacker Blueprint is not just for tax savings. Every now and then, they are, but you know. No! Tim: Yeah, for the most part. It says it’s going to violate the due-on-sale clause.”. They’re terrified of it, and it paralyzes people from taking actions that they could otherwise take. There is no statue of limitation for enforcement of a due-on-sale clause after the transfer of a mortgaged property into an LLC, so a bank can wait till interest rates have gone up several years down the road and then enforce the clause. Is that pretty accurate? You’re the first one to get it, and then, all of a sudden, now you notice it at every corner, that you weren’t the first one. What’s the point of saving $50 bucks, if the entire value can be taken away by some stupid lawsuit, later on down the road? Epic beers! A due-on-sale clause is a provision in a mortgage document that requires the full balance of the loan to be paid in full if the property is transferred to anyone else. Look at the epic notebook!” It’s fun. You can either try and climb that brick wall, or you can look off to the side and see the little path that’s all legal, all allowable, and walk around that brick wall, get around it, and keep on moving with your destination. Welcome to the Epic Real Estate Investing Show. Let’s talk about the basics of the due-on-sale clause. Alrighty, so whenever you’re ready to have Tim customize a Tax Hacker Blueprint for you, you can go to taxhacker.com and answer a few questions about your situation. Completing the CAPTCHA proves you are a human and gives you temporary access to the web property. Alrighty, so that’s it for Tim and myself, today, and we’ll see you next week, for another episode of Tax Hacker Tuesday, on the Epic Real Estate Investing Show. Interesting. Engineer … Mr. How do you even spell that? It has to be controlled and/or owned by the original borrower. Tim: Now, Matt, how many real estate deals have you been involved in, or heard of, or what have you? You’re probably right. I appreciate all the good work that you’re doing, over there, for the Epic audience. There’s a little door in the brick wall, you just have to shuffle down to the right, a little bit. Although due-on-sale clauses were designed to apply when the property is sold to an independent third party, they apply to any transfer of real estate to a new owner. Epic this! Tim: I think we’re good. Thank you for the kind words, earlier, and look forward to helping people out! It’s got to be in good standing. Due on Sale Clause. The Act provides that the “due on sale” clause is unenforceable if the title is transferred to an heir, if the property is transferred in the event of a divorce, or if the property is transferred to a living revocable trust. Right. Tim: No! Most of the time. It’s important to note that this change only applies to loans purchased or securitized by Fannie Mae. Call up your lender and see if there’s anything we can do. There is a fear that lenders may force you to pay the full loan balance. Advantages of Placing Property in an LLC Well, I didn’t say I know how to spell it, I just know what it’s called. • All it says is, once again, the bank has the right to call that if they want to. Almost all mortgages have “due on sale clauses.” Technically moving the property to an LLC, corporation, or limited partnership is a “sale.” As soon as the mortgage company knows that you have transferred the property, technically they have the right to call the loan. 100% of the people, last week, went ahead and wanted to do that. Reticular activator? If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. I said you know what? Now, if you move the property, it’s not like you’re violating the law, so you’re not going to have, whatever his name is, Mueller, come investigate you and try to haul you off to jail, or something like that. It is Tack Hacker Tuesday, with my attorney and friend, Mr. Tim Berry! Now you can! Matt: There you go. If the bank started calling all the notes of people who’ve transferred properties into LLCs and/or trusts, we’re going to have a real estate market crash, because so many people aren’t going to be able to make those payments, and now they’re going to have so much real estate, so much product inventory on the market, it’s going to drive prices down, which is going to screw the banks right back over. That brick wall is about ten feet. Now, I thought, there’s got to be some little loophole, here, or something, somewhere, so I did a quick internet search. Thousand plus. That’s it, for today, as we dream of a tax system that works just for you. The reason investors fear the due on sale clause is that transferring a property into an LLC may trigger it. There you go. Most mortgage documents contain a "due on sale" clause; such a clause means full payment of the mortgage comes due if the property is sold. Second thing is, transferring it to a trust is a very standard, normal estate planning practice. Although due-on-sale clauses were designed to apply when the property is sold to an independent third party, they apply to any transfer of real estate to a new owner. | HTH 002 | 450, Solving Tax Problems and IRS Collections | 395, How to Participate in Multiple Retirement Accounts | 371, How to Cash Out 401K (without penalty) | 630, Real Estate Video Marketing Ideas on YouTube with Sunny Lenarduzzi (Interview) | 629, Five Reasons You Might Not Want to Be Your Own Boss | 628, Fixing and Flipping vs Buying and Holding – Best Way to Create Wealth | 627, How to stop being scared of the due on sale clause, A real story of an engineer/investor who came to Tim with due on sale clause concerns, How Tim found a loophole in the clause for him, The 2 ways you can usually get around a due on sale clause. It probably will violate the due-on-sale clause, and I’m talking the same thing. See the epic t-shirt? It’s funny how my family when we go out, we see “epic” everywhere. It’s the portion of the brain that’s responsible for awareness. But, until then, you have Tim Berry! Taxhacker.com. Alrighty, so whenever you’re ready to have Tim customize a Tax Hacker Blueprint for you, you can go to. Because everyone’s always interested in the due-on-sale. That means the buyer of your property cannot take over your current mortgage. It is Tack Hacker Tuesday, with my attorney and friend, Mr. Tim Berry! The way that most due-on-sale clauses are worded, the fact that if you even think about moving it to an LLC, you have violated it. On Mondays, here at Epic, we show you new and creative ways, as well as time-honored ways of making money using real estate, and on Tuesdays, we show you how to keep it! There are a variety of contractual and statutory factors that need to be considered. However, the fundamental fact is this: if a transaction involves a title transfer without prior consent of the lender, … I know that I can't transfer title on one of the houses because there is a clause in my loan docs that states that a transfer in title is viewed as a sale (even if I am the sole owner of the LLC) and the full mortgage would be due upon transfer or the property will go into foreclosure. Have an epic day! Another way to prevent getting this page in the future is to use Privacy Pass. Yeah, no. Tim: Yeah, no. Learn how to stop being scared of the due on sale clause, two ways to get around the clause, and how Tim found a loophole for one of his clients. Isn’t it about time you play on a level playing field with the wealthiest 1%? Tim Berry: I am doing epic, Matt! That’s the bottom line! A due-on-sale clause prevents a homeowner from selling subject to an existing loan. These clauses are commonly referred to as due on sale clauses. I’m saying, now, that I have yet to see it. Tim, any last bit of advice? It just comes back to simple basics. • Most deeds of trust contain some type of “due on sale” clause which provides that when a sale, or transfer of title, of the property occurs, then all amounts secured by the deed of trust become immediately due. If you finance a rental property with a Freddie Mac loan program, or you convert a residence you purchased using an FHA or VA loan, a title transfer to an LLC still triggers the due-on-sale clause. The people, last week, went ahead and wanted to do that is probably the most talked,... Is “ could. ” the bank has the right, but not the obligation, to call it if want. Best ” … someone others look up to while ago, but know. Playing field with the wealthiest 1 % much for joining us on this episode of tax Hacker Tuesday, another! The full loan balance, please take a few minutes to leave us a positive review in iTunes home an. 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