Twitter Debate on "Due on Sale" for LLC Transfer
Hey Team,
I've been watching a heck of a debate on Twitter with a TON of bad advice and thought I'd ask the question here and let the actual pros answer it. Although I am a very experienced investor I am NOT an expert in due on and transfers.
The question was "Long term debt in personal name, quitclaim the property to the LLC... I've heard the quitclaim can trigger a balloon payment. ...has any actually experienced this or is it an urban legend?" End quote.
The answers are everything from yes the bank will call in the loan all the way to it NEVER happens in real life.
What do you think?
For newbies... essentially you bought a rental in your personal name with a mortgage. Then later transfer title to an LLC which is not on the mortgage.
Most Popular Reply
I have seen mortgage companies threaten to foreclose because of a due on sale clause violation from an internal property transfer. This is very rare if the mortgage is actively being paid, but it does happen. It can sometimes be explained to the bank after the fact (for instance with a single member LLC owned by the borrower), and the bank will drop the issue, but I have seen a bank push the issue and force the transfer of the property back into the borrower's name.