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A real estate purchase was financed in full by seller (owner…

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A real estate purchase was...
A real estate purchase was financed in full by seller (owner financing). There is also a promissory which was issued by buyer saying that the buyer will be paid in full in lump sum at the end of 3 years. There was also a non-recourse mortgage issued using the house as a collateral for the promissory note. If the buyer defaults on the house. Can the buyer just amicably give the house back to the prior owner without any foreclosure proceedings being initiated by the prior owner. If yes, what is mechanism for giving the house back.
Submitted: 8 months ago.Category: Real Estate Law
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Answered in 5 minutes by:
8/17/2017
Real Estate Lawyer: Legal Eagle, Lawyer replied 8 months ago
Legal Eagle
Legal Eagle, Lawyer
Category: Real Estate Law
Satisfied Customers: 10,277
Experience: Licensed to practice before state and federal court
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Hello! I am a licensed attorney, admitted to practice in state and federal court. I have a nearly 100% satisfaction rating so all that means is that you can count on me to help today. Fortunately, because this was privately financed, it makes it a bit easier. The answer to your question is yes, the buyer can amicably give back the house to the prior owner without any foreclosure proceedings being initiated by the owner. This is is normally called a “cash for keys,” situation where in lieu of a foreclosure, you return the the property back to the seller. The buyer may have to consider the forgiveness of this debt on their income tax return for 2017, but they can certainly return the property. The final thing would be signing a quit claim deed back over to the seller from the buyer.

Also, although I provided an initial answer, it’s important that you are 100% satisfied. If you feel I have done so, please rate me 5 stars and let me know if you have any follow up questions. As a side note, you can also click here in the future to request me individually.

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Customer reply replied 8 months ago
But in this situArion there is probably no forgivness. The buyer returns the house back to the owner and the owner releases the seller from paying the promissory note. There is no gain on anybody part -- right?
Real Estate Lawyer: Legal Eagle, Lawyer replied 8 months ago
Well, there would be gain would be on the buyers party from having the loan forgiven. I represent debtors and they are issued a 1099 for every dollar that is forgiven and they have to report that as taxable income at the end of the year. Otherwise, that's it. Did you have any other questions?
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Real Estate Lawyer: Legal Eagle, Lawyer replied 8 months ago

Hello, it’s been awhile since we connected so I wanted to check in with you to see if you had any further questions or if there is anything else I can assist you with today. Please reply here and let me know. Thank you.

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Customer reply replied 8 months ago
if I never return the house back and defaulted on paying my promissory note then there is a forgivness of the note. But if i returned the house back which is the same price as the note -- where is the forgiveness?
Real Estate Lawyer: Legal Eagle, Lawyer replied 8 months ago

Well, if you default, then there is no forgiveness. The home goes through foreclosure and you would still be responsible. If you give the house back and the seller agrees not to begin foreclosure proceedings, then there is forgiveness.

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Customer reply replied 8 months ago
You and I had several question-answer -- and I gave you 5 star rating. On this one --- I would like to get someone else opnion -- as to me it does not make sense. As regardless of the above two scenarios -- I do not seem to have any gain..
Real Estate Lawyer: Legal Eagle, Lawyer replied 8 months ago

Not a problem. I'l go ahead and opt out. Please be sure to not rate because the moderators will close the question altogether. Thanks so much!

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