We sold a parcel last year, now the buyer wants us to buy it back. She lost her job and can't make payments anymore. We originally used a Purchase Agreement with a Seller Financing Addendum, and Promissory Note and Deed of Trust as security instruments.
Original Sales Price: $50k
Seller Financed Amount: $30k
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Our Buyback Price: $20k (to refund the $20k she put down when she bought it).
What documents do we need to use in order to buy it back without extra tax ramifications for either of us? We basically just want to wipe out the original Promissory Note of $30k.
We intend to use a Purchase Agreement with a Seller Financing Addendum with 5 year term and no payments due until the final month. Once we are able to resell it, we will pay her back her $20k in full. We have prepared a Request for Full Recoveyance for the original Promissory Note of $30k and the Deed of Trust. We will then prepare a new Promissory Note to her for $20k, and do not plan to use a Deed of Trust. It will be an unrecorded Promissory Note that she will hold.
Is this the correct process that any of you have followed, or is there anything we are missing here that leaves us open to unwanted tax liabilities or extra risk?
