What I think you will find is no one can actually cite a specific example that happen to them. Everyone talks about how it might happen and legally that is correct. I have never seen anyone post here (or on other forums) an example where it did happen.
It is a risk. It can be managed if the DOS was triggered (sell, refinance, argue with the bank about how it is still you, offer a personal guarantee, pay a higher rate to make it go away). You can avoid it by not moving the property to an LLC. Move it to a trust and then change the beneficial owner of the trust to the LLC (more or less the same but even harder for the lender to learn about if they wanted to look).
BTW - LLC is not an automatic 'get out of jail free' card if there is a lawsuit. It is another layer that should provide liability protection. It can be pierced.
You decide if it is material to how you will decide to hold title.
It was my understanding that it is ILLEGAL for the bank to call the loan due if you transfer the property into a trust. I am referring to Garn-St Germain Depository Institutions Act of 1982. Please correct me if I am misunderstanding this law! Thanks!
It is not illegal to deed a property from someone to someone else, nor is it illegal to transfer (by way of deed) to an entity. This act COULD possibly invoke the DOS clause, but if payments are kept up to date - it most likely will not.
Personal Experience - I bought a 2 family property to buy and hold. I transferred it to my LLC immediately and called the mortgage company to tell them that they would be receiving checks form my LLC and changed my address to my LLC's mailing address... This was done 2 years ago. No DOS, and there are many more instances where this is true, too!
Thanks all this has been great information! Just to make sure I understand...
buy the prop in my name....open a trust w/myself as the beneficiary.....transfer deed to the property to the trust.....then transfer from the trust to LLC???
it is not illegal. the dos is the banks way of controlling interest. in the '80 banks were losing if rates were higher and loan comms. when other people were assuming loans. they came up with the dos. it is more a fear tatic than anything else. i have never heard of it being called due, it may have been but i am unaware of it. the ponit is if you are called on the dos you have committed no crime........km
Has it ever? Probably. Will it? Not likely.
What I think you will find is no one can actually cite a specific example that happen to them. Everyone talks about how it might happen and legally that is correct. I have never seen anyone post here (or on other forums) an example where it did happen.
It is a risk. It can be managed if the DOS was triggered (sell, refinance, argue with the bank about how it is still you, offer a personal guarantee, pay a higher rate to make it go away). You can avoid it by not moving the property to an LLC. Move it to a trust and then change the beneficial owner of the trust to the LLC (more or less the same but even harder for the lender to learn about if they wanted to look).
BTW - LLC is not an automatic 'get out of jail free' card if there is a lawsuit. It is another layer that should provide liability protection. It can be pierced.
You decide if it is material to how you will decide to hold title.
John
[addsig]
Active Re-Investor,
It was my understanding that it is ILLEGAL for the bank to call the loan due if you transfer the property into a trust. I am referring to Garn-St Germain Depository Institutions Act of 1982. Please correct me if I am misunderstanding this law! Thanks!
Mark.
I am so glad someone brought up the Trust. This is actually what I am ultimately doing.
It IS illegal to call the DOS for deeding into the estate planning Trust, as I understand the law.
So I can buy in my name, then deed into a Trust. Initially, the beneficiary of the Trust is me - an individual.
How is the beneficiary changed to my LLC?
It is not illegal to deed a property from someone to someone else, nor is it illegal to transfer (by way of deed) to an entity. This act COULD possibly invoke the DOS clause, but if payments are kept up to date - it most likely will not.
Personal Experience - I bought a 2 family property to buy and hold. I transferred it to my LLC immediately and called the mortgage company to tell them that they would be receiving checks form my LLC and changed my address to my LLC's mailing address... This was done 2 years ago. No DOS, and there are many more instances where this is true, too!
Good Luck!
[addsig]
Thanks all this has been great information! Just to make sure I understand...
buy the prop in my name....open a trust w/myself as the beneficiary.....transfer deed to the property to the trust.....then transfer from the trust to LLC???
it is not illegal. the dos is the banks way of controlling interest. in the '80 banks were losing if rates were higher and loan comms. when other people were assuming loans. they came up with the dos. it is more a fear tatic than anything else. i have never heard of it being called due, it may have been but i am unaware of it. the ponit is if you are called on the dos you have committed no crime........km