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Money seller owed is now new owner's responsibility

November 22, 2017
By ERIC FEICHTHALER - Real Estate Law , Cape Coral Daily Breeze

Dear Mr. Feichthaler:

I want to purchase a property next to my home. The seller has a mortgage on it, which is an amount roughly equal to what the property is worth. The owner is going to sign the deed to me, and have me assume the mortgage. I have heard there is Documentary Stamp Tax on the transfer of all deeds on the amount paid, but since I am not paying any money here, can we avoid the tax?

- Steve R.

Dear Steve,

The documentary stamp tax is a fancy way to say there is a tax on transfers of real estate. There are some situations, like if you transfer a property to a company you solely own, where no documentary stamp tax is payable. The tax is based on consideration provided for a property. Although consideration is generally money paid for a property, it can also be anything else of value. Since you are taking on the debt your seller currently has, this assumption of debt is considered consideration. The money that the seller owed is now your responsibility, and that elimination of debt is the same as receiving money for tax purposes. Therefore, at the very least, tax will be payable at 70 cents per $100 of the mortgage assumed.

Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continued his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest from 2011-2015, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.



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