Quit Claims and Due on Sale clause

[Andrew Vincent]

Has anyone ever had trouble with transferring a homes title via quit claim and had the bank try to collect the total left on the loan? I have spoke with a lawyer and they said that clients of theirs have done quit claims to move a property into an LLC and they have not had an issue with the banks. The lawyer basically said it was a risk that he has seen people take and be fine. We are doing it this way as we want to move any properties we purchase for REI to an LLC to provide ourselves extra protection. Please let me know your personal experience with doing quit claims and if there is anything we can do to lessen our risk with the due on sale clause.

[Jason Marino]

I do not believe that there would be any substantive difference between a Quit Claim Deed and a Warranty Deed in this instance, and the risk of a due on sale clause violation would exist in both scenarios. Using a Quit Claim Deed can invalidate your title insurance though. There are very limited exceptions to due on sale clause violations, and none of them would turn on this distinction of a Quit Claim Deed versus a Warranty Deed. As you stated in your post, the risk of a due on sale clause violation is fairly low ( but I have seen it occur) if the note is being paid.