Due on sale clause insurance

[Dominic Inglese]

Hello, I am looking to do a seller finance subject too combo deal. We are looking for an insurance company that would provide us with a due on sale clause protection policy. Any referrals would really help us secure this deal! Thanks so much!

[Cecil L. Russell]

The simplest method to circumnavigate the due on sale clause is have the seller put the property into a land trust before you buy, and then transfer the trust to you. This means if you transfer ownership from the seller's name and into a trust, the lender will not be able to demand payment of the entire note. This falls under the Garn/St. Germain Act.

The Garn–St Germain Act is a federal law that allows lenders to enter into or enforce contracts, including mortgage agreements, that contain due-on-sale clauses even if a state’s constitution or laws, including their judicial decisions, prohibit them. However, the Garn–St Germain Act lists nine situations in which due-on-sale clauses are not enforceable, including some transfers that may be relevant to your estate plan. In the nine situations specified, lenders may not enforce due-on-sale provisions in real property loans “secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home.”

If you are interested and want to know exactly what the law says, as applicable to you, you can read it here,
https://www.law.cornell.edu/us...