Love Austin Homes Investing Blog

I was told by a title company that if you close in your own name then deed it to the LLC that you lose your title insurance. I’m not sure exactly what they meant, so please consult your RE attorney or favorite closer about closing in your own name, then later deeding to an LLC.

It might mean that the LLC won’t have title insurance…I suppose you could fix that by buying another policy or that there is no title insurance coverage between the time you purchased and the time you deeded…again I’m not sure, so check with your advisors.

Also, on a side note, I mentioned a few lenders we are working with in a previous email (for our own portfolio), so far Paul Duhamel has been very responsive and Tim Booth’s company has not been. I’m not saying just yet that Tim’s company cannot deliver, but hold off on calling them until I can give a report to the group about our situation.

Thanx,
Angelique

ANSWER

There are several problems I know about transferring a deed to an LLC

1) I too was told by my title company that any existing title policy is void upon any sale of the property. Indeed, only the very last title policy obtained on a property is active at any one time. When you deed the property to an LLC (or anyone else), you are effectively selling the property to the LLC, even if no money is exchanged. Therefore, the title policy is void, and the property is uninsured against title issues – unless you buy another policy – yikes! UPDATE: This is not as bad as it sounds, the old policy still insures up until the title was transferred.

2) Also, because the property has essentially been sold, any loans on the property are at risk of being called because of the due-on-sales clause is virtually every loan agreement. While it’s true that lenders virtually never call loans, it’s still a risk.

3) Finally, when you buy property insurance for a property held by an LLC, you now have to buy a corporate policy rather than an individual policy. These typically run about one and a half times the cost of normal insurance.

Phill

Do you know anyone that can work a short sell on these types of homes?

i have a friend in PFL in a double wide in eagle point that they will let go to foreclosure if no one can assist…..and another customer whose palm harbor hm is 3mos behind on land & hm payments.

any suggestions? thank you.

Cordially,
Chris

ANSWER

Chris,
I have asked this question repeatedly over the last year, and generally found that NOBODY wants doublewides. The only partial exceptions are if they come with some really nice land, the land may have value, and/or if they can be purchased for about $.30 on the dollar. There is some market for used singlewides.

I have encountered about 20 people that bought home/land doublewide packages for $100-140K. That’s what they can cost new. In most cases, these are only worth $45-75K retail, and $30-50K wholesale – and that’s for the nice ones with nice land! Because everyone these days finances 100% of everything, when these people need to sell, they discover that they need to come up with a check for $50K+… Needless to say that most people in doublewides don’t have an extra $50K, so they either give them up to foreclosure, sell them with owner financing to some other less-than-fully-informed person, or just continue to live in them for 30 years until the loan is paid off.

My personal opinion is that they should provide you with a bankruptcy application at closing when you buy a doublewide, and just say ‘hold onto this, you’ll need it when you sell’…

All that said, if anyone else out there knows someone interested in doublewides, please let me know…

Phill