A Michigan property sells at a sheriff's sale for $180,000 after the original borrower defaults on a mortgage with an outstanding balance of $195,000. The lender acquires the property through the sheriff's sale and immediately lists it for resale. Six months later, the lender sells the property to a third-party buyer for $210,000. Which of the following correctly describes the Michigan transfer tax consequences of these two transactions?
Correct Answer
B) The sheriff's sale is exempt from Michigan real estate transfer tax, but the lender's subsequent resale to the third-party buyer is fully taxable
Under MCL 207.505(1)(d), transfers of property through a sheriff's sale in a foreclosure proceeding are exempt from Michigan state real estate transfer tax. However, this exemption applies only to the foreclosure transfer itself. When the lender subsequently sells the property to a third-party buyer in an arm's-length transaction for $210,000, that sale is a new, independent taxable event. The lender (as seller) would owe state transfer tax of $7.50 per $1,000 and county transfer tax of $1.10 per $1,000 on the $210,000 sale price.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
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