How do we change title on a property located in Travis County from our own names to a LLC?

Asked by MK, Austin, TX Sat Oct 18, 2008

My business partner and I bought an investment property in South Austin. It is currently titled in our names but we would like to change the title to our LLC. We would have avoided this if we had gotten a commercial loan but the rate we got was a lot less than what we were quoted from our commercial lender, so we went this route. Our loan officer said that many of her clients change title to their investment properties after closing and that it shouldn't be a problem for us to do that too. I've checked the Travis County website but there is no information on what the process is for us to change the title information. Can anyone give me any information on what the process is and what required paperwork we need to provide to the county?

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10
Lisa Cannata, Agent, Falmouth, MA
Thu Sep 9, 2010
A Real Estate attorney is your best route. The LLC must be first created in order to transfer then recorded.
0 votes
Kevin, Agent, Austin, TX
Thu Sep 9, 2010
Contact a "Real Estate" Attorney or your local Title Company...
0 votes
Jason Peebles, Agent, Austin, TX
Fri Oct 31, 2008
Mel...as many of the other posts have mentioned you really should consult an attorney prior to doing this. It can be done in the form of a quitclaim deed and I have done it before (moved from myself into an LLC). However, if you've never done it, I would not suggest going out and doing it without consulting your attorney and the lender. You would hate to do it and then get a nice letter from the lender calling the entire loan due immediately, because "ownership" has changed.
Web Reference:  http://www.JasonPeebles.com
0 votes
Scott Godzyk, Agent, Manchester, NH
Wed Oct 29, 2008
Check with a real estate attorney or title company, they can assit you in writing a new deed and getting it recorded. good luck
Web Reference:  http://www.ScottSellsNH.com
0 votes
Betina Forem…, Agent, Austin, TX
Wed Oct 29, 2008
Dea Mel,
Personally I woul d contact a good real estate attorney to have this question answered fully. I recommend Laura Fowler of the Fowler Group of Austin Texas. This firm has been practicing over 100 years and is exceptional when it comes to real estate law. Good Luck!
Betina Foreman, Realtor Austin Texas
Web Reference:  http://www.Betinaforeman.com
0 votes
Dallas Texas, Agent, Dallas, TN
Tue Oct 21, 2008
You need to confirm with a title company and approval from your lender.

http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference:  http://www.lynn911.com
0 votes
Other/Just L…, , Fleming Fitch Grant, Holly Hill, FL
Sat Oct 18, 2008
Arrgh!! I left off a key clause in my post below:

"I have never heard of any lender - private, portfolio, conforming, or commercial - permitting a change in title vesting from natural person(s) to a corporation (missing part: WITHOUT OBTAINING PERMISSION FROM THE INVESTOR). A corporation is a separate legal entity from the natural person(s) who own the corporation."

The missing clause makes a big difference. If the lender who originated the loan holds it in portfolio, it may be relatively simple to change vesting as Mott points out below, as long as you do not chnage the membership in your LLC.

If the loan was sold to Fannie Mae or Freddie Mac, changing the vesting from natural person(s) to an LLC violates Fannie/Freddie's purchasing policy, and once discovered, the originating lender will be forced to repurchase the note.

How would the lender discover the change in vesting?

1.) Your property tax bill and home owner's insurance policy will reflect the new ownership. If you have escrowed for property taxes and insurance, the county/municipality will mail the property tax bill to your lender and your insurance carrier will provide an updated binder as well as mail the bill to the lender when due.

2.) If you have not escrowed for property taxes, your lender will find out eventually when they conduct the annual audit for unpaid property taxes.

3.) If the title insurance carrier discovers the change, they will void your title insurance lender policy and inform the lender that it is no longer insured.

Check with your lender first.
0 votes
Mott Marvin…, Agent, Sunny Isles Beach, FL
Sat Oct 18, 2008
Best to contact an attorney that specializes is real estate. I can offer some "ideas" about your transfer- but the safest most secure and best method is to do the right thing!

I'm sure that the lender would agree to the transfer, as long as the initial borrowers remain as guarantors of the debt. Here in Florida, we use a "Quit-Claim Deed" to transfer ownership. Naturally, the underlying loan would be modified to reflect the new form of ownership or the due-on-sale clause may possibly be enforced.

Check with the issuing title company, your lender and/or an attorney.
0 votes
Other/Just L…, , Fleming Fitch Grant, Holly Hill, FL
Sat Oct 18, 2008
Lending answer:

Mel,

I am sorry to say that there is a significant risk to the title transaction question you pose.

You need to check with your lender before changing the vesting on title to your property. Transfering title from individuals to a corporation will very likely trigger your Due on Sale clause and require the lender to demand full repayment of the note.

The reason you recieved a better rate is that title is vested in individuals not an LLC. Title vested in an LLC creates greater risk for the lender since members of an LLC may add new members, subtract old members, of transfer ownership. Natural persons cannot do so.

Further, if your lender has sold your loan to Fannie Mae or Freddie Mac, you CANNOT change your title vesting from natural person(s) to a corporation. Neither Fannie Mae nor Freddie Mac purchase loans made to corporations... if you hold a mortgage backed by Fannie or Freddie, your lender will be required to demand repayment of the note in full or sik being forced to repurchase the loan from Fannie/Freddie.

"Our loan officer said that many of her clients change title to their investment properties after closing and that it shouldn't be a problem for us to do that too."

I have never heard of any lender - private, portfolio, conforming, or commercial - permitting a change in title vesting from natural person(s) to a corporation. A corporation is a separate legal entity from the natural person(s) who own the corporation.

If you wish to hold title in an LLC, you need a non-conforming loan or a commercial loan, and the loan should have been originated with title vested in the LLC. You also need to pay the lender a higher rate to offset the greater risk borne by the lender for corporation vesting.

I'll wager that your "loan officer" is not an employee of a bank or retail lender but is a mortgage broker.
0 votes
Bruce Lynn, Agent, Coppell, TX
Sat Oct 18, 2008
You can have a title company do it for you, but read your loan documents closely and you might also want to check with your attorney. If you have a loan and there is a change in control of the asset, for example moving it to an LLC, you could potentially trigger the "due on sale" clause. Now lots of people in the RE investment groups and the RE guru books you read will tell you that as long as you are current and making payments no one will be the wiser and they will never call the loan. Do you want there to be even a remote chance that to happen? I'm sure this happenned a lot in the past and probably not that many loans were called. However, they are checking up on these types of issues now.....checking for owner occupancy....and I'm sure this will be an increasing cause of concern for banks and investors as the loans get bought up and creditworthiness investigated. You might check with your attorney to see if this isn't even fraudulent. If it is, there could be prosecutions in the future perhaps pivoting on if the taxpayers get the loan or not. Lots of the backend changes you won't have control over.....like who owns the loan. You might could solve the problem by talking to your insurance agent and getting different coverage as a risk reduction tool, verusus doing something potentially more risky. Best advice is to read your loan documents and check with your attorney.
0 votes
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