What effect does a transfer on death have regarding the due on sale clause?

A transfer on death (TOD) deed allows an individual to transfer property to a designated beneficiary upon their death without the property going through probate. This mechanism is designed to facilitate a smooth transition of ownership and is recognized in many jurisdictions.

The correct answer regarding the due on sale clause is that a transfer on death is exempt from enforcement. The due on sale clause is a provision in a mortgage agreement that allows the lender to demand full repayment of the loan if the property is sold or transferred without their consent. However, many states have specific statutes that protect transfers that occur upon death from triggering these clauses. This exemption is intended to ensure that beneficiaries can inherit properties without the immediate burden of settling the mortgage, preserving the intention of the transfer while maintaining the continuity of ownership.

In contrast, the other options do not accurately reflect the nature of a TOD deed. A transfer on death does not automatically trigger the due on sale clause, nor does it inherently affect property value directly, as the value would generally remain linked to market conditions rather than ownership transfer. Additionally, the process of inheriting property through a TOD deed does not typically require lender approval, as it is not classified as a sale or traditional transfer that would necessitate such consent.