A Michigan bank forecloses on a residential property through a non-judicial foreclosure by advertisement and takes title at the sheriff's sale. The bank subsequently sells the property to a third-party buyer for $185,000. Which of the following statements correctly describes the transfer tax obligations in this situation?
Correct Answer
B) The bank owes no transfer tax on the foreclosure transfer, but the subsequent sale to the third-party buyer is subject to transfer tax
Under Michigan law, transfers resulting from foreclosure sales (including sheriff's sales in non-judicial foreclosure proceedings) are exempt from the real estate transfer tax under MCL 207.505. However, when the bank (as the new owner) subsequently sells the property to a third-party buyer, that subsequent sale is a standard arm's-length transfer subject to the full state ($7.50 per $1,000) and county ($1.10 per $1,000) transfer taxes, paid by the seller (the bank in this case).
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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