There’s no doubt about it. Sometimes it’s just necessary for a homeowner to let their property go. There are generally 10 ways to get rid of a property.
1) Conventional sale. This is a sale where the homeowner has equity in the property. In this situation, the sales price is higher than the amount of the loans secured against the property. The lenders are paid off in full and the owner keeps all of the sales proceeds in excess of the amounts needed to pay off the lenders and the closing costs.
2) Short sale. This is a sale for less than the amounts due on the loans secured by the property. The lenders must agree to this kind of a sale because the lenders usually won’t be paid off in full.
3) Foreclosure. Foreclosure occurs when a borrower defaults on a loan and the lender causes the property to be sold and the sales proceeds are applied to the loan.
4) Deed in Lieu of Foreclosure. This is used when the buyer signs a Deed in favor of the lender. The use of the device avoids the necessity of a foreclosure sale. The lender must agree to this in order for it to work. This is done in part to the fact that a deed is only effective if it is accepted. If the lender refuses to accept a deed, then this approach most likely won’t work.
5) Tax sale. If a homeowner doesn’t pay their county property taxes, then the county will eventually hold a tax sale where the property is sold to pay the unpaid taxes.
6) Gift. It’s usually possible to give a property away by signing an appropriate deed.
7) Creditor sale. A creditor with a judgment against a borrower can sometimes cause a property to be sold in order to pay a judgment.
8) Adverse possession. If an owner doesn’t use their property for several years, and if a stranger uses the property as though they owned it and if such stranger pays property taxes, then such a stranger may actually acquire ownership of the property.
9) Bankruptcy. A homeowner in bankruptcy may be discharged from personal liability for one or more loans that are secured by the property. In some situations, a borrower who declares bankruptcy may save a significant amount of taxes that may otherwise need to be paid. Real Property can also be sold or foreclosed on in conjunction with a bankruptcy.
10) Inheritance. When a homeowner dies, the title to their property will typically pass to someone else. Deceased people can’t own property. But the property previously owned by a deceased person will usually remain subject to the lien of the deeds of trust that encumbered the property prior to death.
A homeowner who needs to get rid of their home will often have several options for doing so. But the method chosen by such homeowners can have profound tax and legal consequences. Many complex considerations are involved in connection with the sale or loss of property. Most homeowners aren’t aware of the potentially significant consequences that can attend the sale or transfer of real property. Making an appropriate decision as to how to dispose of real property requires specialized training, skill and/or knowledge. Homeowners who are considering disposing of their home should obtain competent, qualified tax and legal advice.