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Watch out for LLC ownership.

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Tudor

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Joined
Aug 15, 2006
Professional Status
Certified Residential Appraiser
State
Arizona
Hmmm?? Too many LLC's went under after refinancing maybe?
 

Terrel L. Shields

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May 2, 2002
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Certified General Appraiser
State
Arkansas
That' s why they call them "limited liability" corps.

They have a place in managing risk for people exposed to default by shielding creditors from other assets the person may own. Fannie wants to take a crack at anything you have.
 

Elliott

Elite Member
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Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Wow, a Freddie Mac attorney stayed awake long enough to
figure that one out. They probably got a ton of speculator
LLCs foreclosures in Las Vegas and found they had no recourse.

Remember the real estate radio ads where the woman
boast, "In just 4 months using Jess Jardon methods (?) I have 6 LLCs,
4 S-Corps," yada yada....wonder how her investments are doing today?
 

ghrousseau

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Joined
May 5, 2006
Professional Status
Licensed Appraiser
State
Virginia
Wow, a Freddie Mac attorney stayed awake long enough to
figure that one out. They probably got a ton of speculator
LLCs foreclosures in Las Vegas and found they had no recourse.

Remember the real estate radio ads where the woman
boast, "In just 4 months using Jess Jardon methods (?) I have 6 LLCs,
4 S-Corps," yada yada....wonder how her investments are doing today?

Elliott,

Fannie, Freddie, and the secondary market has long had a policy to not allow investment properties or second homes to be held in trusts, corporations, or LLC's at the time of closing. The way the investors get around it is to deed the properties out of individual title after closing to the LLC. This is an interesting step by Fannie/Freddie, as they are trying to keep people from refinancing investment properties as owner occupied. Regarding LLC's and recourse: the original person obligated on the note is still liable for the debt. Deeding the property to an LLC does nothing to remove that original obligation to the individual debtor. It may complicate the foreclosure proceedings, but they still take the property.
 

hglenbetts

Senior Member
Joined
Dec 3, 2007
Professional Status
Certified Residential Appraiser
State
Michigan
Elliott,

...........The way the investors get around it is to deed the properties out of individual title after closing to the LLC. This is an interesting step by Fannie/Freddie, as they are trying to keep people from refinancing investment properties as owner occupied. Regarding LLC's and recourse: the original person obligated on the note is still liable for the debt. Deeding the property to an LLC does nothing to remove that original obligation to the individual debtor. It may complicate the foreclosure proceedings, but they still take the property.

Transfering ownership, even to a family trust, can void the title insurance. :nono:
Most title companies now offer (for a price, of course) a premium policy that will bridge an ownership move into a shelter.
 

Marcia Langley

Senior Member
Joined
Aug 26, 2005
Professional Status
Certified Residential Appraiser
State
Missouri
Aside from the important issues mentioned above, I've noticed an increase of MLS listings where the LLC had "owner financed" on a previous sale and the new sale is actually an REO.

Quirks in the market just aren't as easy to spot as they used to be. Extreme diligence is required.
 
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