Real Estate Transfer Tax Exemption

[BrokerRE]

What is the name of your state? Michigan

If I talk a Land Contract Purchaser into signing a quitclaim deed in lieu of foreclosure proceedings, is that quit claim deed subject to state transfer tax?

Or is it exempt under the same statute that foreclosures enjoy?

Or maybe it wouldn't have any value, so the consideration should be listed as $1.00?

Any ideas?

Thanks

 

[HomeGuru]

What is the name of your state? Michigan

If I talk a Land Contract Purchaser into signing a quitclaim deed in lieu of foreclosure proceedings, is that quit claim deed subject to state transfer tax?

Or is it exempt under the same statute that foreclosures enjoy?

Or maybe it wouldn't have any value, so the consideration should be listed as $1.00?

Any ideas?

Thanks

**A: good questions. I do not know the answers to them though. Please post on the Tax Law board.

 

[BrokerRE]

Holy Cow

I thought for sure you'd know.

Alrighty, I'll post it there.

 

[HomeGuru]

Interesting, and here is why I don't know. If you sold property via a land contract, there is no deed transfer and you would still retain legal ownership of the property. Therefore the Buyer has no legal title to the property and would not need to sign any deed, let alone a quit claim deed. All you need to do would be to have the Buyer agree to a cancellation of the land contract and have the cancellation recorded on title. The property would then be free and clear of the contract and you go on your merry way to either keep the property or sell it again. You still would still remain titleholder as you have always been. Now if my scenario differs from that of yours, and you did deed the property to the Buyer, I would question your methodology of sale and your calling the transaction a land contract.

 

[BrokerRE]

Makes good sense

The Land Contract is going to be a cloud on the title. Obviously you need to clear the title, so a cancellation of land contract would do that. I'm just unfamiliar with a land contract cancellation instrument.

In our area we've always used Quit claim Deeds to clear the title from a defaulted Land Contract. Of course, I hate that reasoning. I guess I never thought why?

Have any idea where I might find a standard form of land contract cancellation? It's probably not too different from a mortgage release form? Actually I'll bet it's pretty similar, since it's releasing a lien on the property, which is similar to a land contract.

Hey, HomeGuru, I'm going to research this, and let you know what I come up with.

I guess since there actually is no transfer of ownership, than transfer tax wouldn't apply anyways.

Thanks HG

 

[HomeGuru]

Re: Makes good sense

The Land Contract is going to be a cloud on the title. Obviously you need to clear the title, so a cancellation of land contract would do that. I'm just unfamiliar with a land contract cancellation instrument.

In our area we've always used Quit claim Deeds to clear the title from a defaulted Land Contract. Of course, I hate that reasoning. I guess I never thought why?

**A: that makes no sense for the reasons stated in my previous post. There is no deed transfer on a land contraact transaction therefore a quit claim deed is not relevant.
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Have any idea where I might find a standard form of land contract cancellation? It's probably not too different from a mortgage release form? Actually I'll bet it's pretty similar, since it's releasing a lien on the property, which is similar to a land contract.

**A: a real estate attorney would have this form as there is no "off the rack" doc that you could order.
********
Hey, HomeGuru, I'm going to research this, and let you know what I come up with.

**A: please do because you got my interest.
********

I guess since there actually is no transfer of ownership, than transfer tax wouldn't apply anyways.

Thanks HG

**A: I'll be waiting.