Avoiding "Due-on-Sale" Clause - Posted by MikeY

Posted by Mike Schmidt (IL) on July 17, 2001 at 17:16:56:

I stand corrected. Didnt see this mentioned in the DOS in my contract but I read over it pretty quick.

Thanks for the heads up.

Avoiding “Due-on-Sale” Clause - Posted by MikeY

Posted by MikeY on July 17, 2001 at 14:33:41:

I’ve been trying to get involved in buying and selling houses as an investment. One method I’ve learned about is to buy a house “subject to” the existing financing.

I’ve learned some methods of getting around this clause, but I’m feeling like it’s no different than deceiving the lender (by not telling them a sale occured).

Violating this clause isn’t against the law (it’s a right the lender has and they may choose to “call” the loan, or not), and the lender won’t say anything if they don’t find out, but would this be a dishonest practice (way of doing business)?

Your comments and feedback would be greatly appreciated. Thanks!

Re: Avoiding “Due-on-Sale” Clause - Posted by richard

Posted by richard on July 18, 2001 at 14:56:24:


This might help a bit: “Dealing With The Due On Sale Clause”. It is under the “Articles” section of Bronchick’s website…LegalWiz.com

Simple as this - Posted by J. CA

Posted by J. CA on July 17, 2001 at 21:31:05:

Unless the loan agreement says: “You must tell us if you sell your property.” Then how can it be dishonest not to tell them?

Re: Avoiding “Due-on-Sale” Clause - Posted by Dean C.

Posted by Dean C. on July 17, 2001 at 20:43:25:

When I go to the bank to borrow money for a property they quote me an interest rate and a closing cost estimate. At the very last minute, usually at the closing table they change th interest rate and up the closing cost. Is this a dishonest practice or way of doing business?

Re: Avoiding “Due-on-Sale” Clause - Posted by Mike Schmidt (IL)

Posted by Mike Schmidt (IL) on July 17, 2001 at 16:45:21:

We had a very long thread about this a month ago or so and after getting everyone?s feedback I reached my own conclusion.

Placing property into a trust is how we normally do these type deals. I have no doubt in my mind banks are well aware of homes being deeded to new owners using this method. We all know the banks spend a lot of political dollars to get laws changed into their favor and maybe someday they will find a way to disband deeds from entering into a trust, but I doubt they really are concerned over it. So, with that said I have reached the conclusion that as long as a house can be placed in trust, at which point it is nobodies business what is in that trust, then no, it is not deceitful, morally wrong or a form of fraud.

Lets face it, if placing a home in trust was a problem for banks all they have to do is use the DOS clause when ever they see this happen. As far as I know there is nothing that says a bank has to allow a home enter into trust. A bank could take the stand that any property entered into a trust automatically activates the DOS clause. I just read the DOS clause on my loan papers and it looks like the door is wide open for them to use this clause for many reasons or no reasons.

I asked 2 bankers I know about this issue and they both had the same thoughts, which was a DOS clause is nothing but a escape hole they can use if they find it in the best interest of the bank to no longer carry that risk and deeded into a trust KNOWING the home might have actually been sold is not a big deal. One of them said the only time they seen the clause used was when a well known local figure was being implemented into some serious legal issues and his name was associated with the bank. In this case the bank wanted nothing to do with the guy so they called his loan due.

Everyone is different and this topic will draw many different answers. If you can use this vehicle to close deals and sleep at night knowing your not harming anyone, then fine. If it bothers you and makes you feel like a criminal, then find a different way to do your deals.

Re: Avoiding - Posted by Randy D.

Posted by Randy D. on July 17, 2001 at 17:09:50:

As per the Garn St. Germaine act of 1982 it is ILLEGAL for a lender to call a loan due if it is placed into a trust as long as no transfer of title takes place.

Randy D.

Re: Avoiding - Posted by JohnBoy

Posted by JohnBoy on July 17, 2001 at 17:57:25:


When you deed a property into a trust then a transfer of title HAS taken place. It’s not about the fact that a transfer of title has taken place, it’s as long as the owner remains the beneficiary of the trust and s/he hasn’t transfered their beneficial interest in the trust to someone else.

Once you deed to a trust, you no longer own the property. The trust does. That is a transfer of title.