I’m not comfortable with something that’s going to violate the clause.”. Is there anything else to say on that, or are we good? 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. There’s a little door in the brick wall, you just have to shuffle down to the right, a little bit. 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. A due-on-sale clause is a clause in a loan or promissory note that stipulates that the full balance of the loan may be called due (repaid in full) upon sale or transfer of ownership of the property used to secure the note. I like it! But, until then, you have Tim Berry! 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! 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. Tim: No! You may need to download version 2.0 now from the Chrome Web Store. 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? A due-on-sale clause allows the existing lender to call the entire loan due and payable if the homeowner transfers title to the home without paying the loan in full. It’s going fantastic. It’s just the contract. That means the buyer of your property cannot take over your current mortgage. How are you doing? Look at the epic notebook!” It’s fun. They’re terrified of it, and it paralyzes people from taking actions that they could otherwise take. The “due on sale clause” is probably the most talked about, feared and misunderstood topic in real estate. You got to have the secret door knock. Right? He’s an uber engineer. You’re not in violation, civilly, or criminally, or anything like that. I can pronounce it. Matt: We call that our 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. What are you being told? That, right there, will raise no red flags with your bank, and they won’t even pay it any mind. I said, well, tell you what. I know. • Tim: Most of the time. So, he’s reading through all the terms and clauses on his mortgage, and he’s saying, “Hey, look, Tim. A due on sale clause stipulates that a mortgage must be paid in full upon the sale of the property. Right. Well, super! 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? Please subscribe to the podcast so that you will get instant access to our new episodes. Taxhacker.com. Those people are freaking out on the due-on-sale clause. Matt: When you say the word “get around it,” that probably sparks some questions in people. We were talking, earlier, and you had something that you wanted to talk about, the due-on-sale clause, and the LLCs. I like it! They have stupid rules and laws, but boy they always seem to survive, when everything goes wrong, so they know what they’re doing, right? Thank you so much for joining us on this episode of The Epic Real Estate Investing Show! Due-on-sale clauses protect lenders from interest rates that are below market. Interesting. Matt: Is there anything else to say on that, or are we good? I think we’re good. Matt: Tell your engineer he’s already in violation. Go with that. Mortgagor shall not sell, convey or otherwise transfer any interest in the Premises (whether voluntarily or by operation of law), or agree to do so, without Mortgagee’s prior written consent, including (a) any sale, conveyance, encumbrance, assignment, or other transfer of (including installment land sale contracts), or the grant of a security interest in, all or any part of the legal or equitable title to … It’s just the contract. It puts them right out. You’re becoming famous and you’re making me look good! Additionally, it is equally clear that the death of a borrower will not trigger a due-on-sale clause provided the death of the borrower results in a transfer to a relative of the borrower. We also look at the asset protection. The due on sale clause allows a mortgage company to call a note due in full should you sell or transfer your property so there is some risk to doing this. 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. 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. We see it in the airport, we see it at restaurants, and now my son, he’s seven, goes, “Look, Daddy! Due-on-sale clauses are also known as acceleration clauses. There’s a thing, and it’s for a Fannie Mae servicing guide that says you can do it. Just basic stuff. There are a variety of contractual and statutory factors that need to be considered. It’s not so much what are you being told, but what’s reality. Most due-on-sale clauses require you to obtain prior written consent from your lender before you transfer any interest in your property.Mortgages with due-on-sale clauses are not assumable. 591.2) says the due-on-sale clause is triggered by: “...transfers of real property subject to a real property loan by assumptions, installment land sales contracts, wraparound loans, contracts for deed, transfers subject to the mortgage or similar lien, and other like transfers.”. Is that pretty accurate? People can’t sleep on Tuesday nights, so they play this as sort of the fan and bam! 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. 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. Have an epic day! Matt: Mm-hmm (affirmative). Matt: I know. The weasel word there is “could.” The bank has the right to call it if they want to. I can’t move them into an LLC, like what you’re talking about. 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. You got to have the secret door knock. Matt: Nice. These clauses are commonly referred to as due on sale clauses. Matt: Right. Because everyone’s always interested in the due-on-sale. Tim “Self-Deprecating” Berry. The lender has the right, but not the obligation, to call the note due in such a circumstance. There’s no real estate due-on-sale jail. Isn’t it about time you play on a level playing field with the wealthiest 1%? We believe you deserve to be “the best of the best”… someone others look up to. 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. I totally agree with them. 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. It’s just a contract issue. This is important to real estate investors who desire asset protection or freedom of contract. Yeah. Tim: Reticular activator? Epic beers! It is Tack Hacker Tuesday, with my attorney and friend, Mr. Tim Berry! Right? There’s a little door in the brick wall, you just have to shuffle down to the right, a little bit. What’s the actual roles for that particular loan, because 99.9% of the time, any time someone tells you something can’t be done, there’s probably some legal exemption or loophole where, if you look long and hard enough, you’re going to find it, where it can, in fact, be done. 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. The reason investors fear the due on sale clause is that transferring a property into an LLC may trigger it. That, right there, will raise no red flags with your bank, and they won’t even pay it any mind. It’s funny how my family when we go out, we see “epic” everywhere. 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. There you go. We do the asset protection, and that’s going require moving real estate over to a trust or to an LLC. Matt, once again, you just boil it all down to the essentials. You get the new car and you think you’re the only person who’s driving that new car. It just breaches the contract. My interest rate is 6.625% 30 yr fixed for both properties. Epic this! Protect your assets and keep what’s rightfully yours. Speaker 1: That’s it, for today, as we dream of a tax system that works just for you. Reticular activator? This is called an acceleration clause. But, until then, you have Tim Berry! 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. Your reviews help to improve our search rankings so that we can spread the love. Your IP: 212.114.93.18 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. That brick wall is about ten feet. You’re probably right. There is a fear that lenders may force you to pay the full loan balance. You’ve really got to dig down and see, why are you worried about it? Now, Mr. See the epic t-shirt? Tim Berry: I am doing epic, Matt! 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. Banks aren’t stupid. 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. 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. Let’s talk about the basics of the due-on-sale clause. See you, next Tuesday, for another episode of Tax Hacker Tuesday. It puts them right out. All it says is, once again, the bank has the right to call that if they want to. If you have any more questions about asset protection or the due on sale clause, I’d be happy to answer them for you in the comments below. You get the new car and you think you’re the only person who’s driving that new car. Importantly, the Act does not prohibit the “due on sale” clause if the property is transferred to an LLC. Call up your lender and see if there’s anything we can do. I appreciate all the good work that you’re doing, over there, for the Epic audience. Now, Matt, how many real estate deals have you been involved in, or heard of, or what have you? 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