Legal Question in Real Estate Law in California

Yes, you can sell/transfer property for any reason. I assume there must be more to you question then that.

Sure you can. In fact in Louisiana there's even a special word for that kind of deed. It's called a Dation en Paiment. California not being a Napoleonic Code Civil Law jurisdiction, and there being the possibility of dispute over the value of the property versus the debt, I recommend in this state that you have a settlement agreement to go with the deed, acknowledging that the deed is full payment of the entire debt and all claims known and unknown, etc.

you may seek loan against property instead if the value of property is much more than the debt.

I would be careful as it is not clear from your post as to whether you are deeding the property to them in satisfaction of the debt, for which you cannot get the property back, or are deeding the property to them as security for your future payment of the debt. The first situation is an absolute conveyance, and the second situation is what is known as an equitable mortgage.

If it is undisputed that the deed was intended to create a security interest in the property, an equitable mortgage is established. (Aguilar v. Bocci (1st Dist. 1974) 39 Cal.App.3d 475. Using a deed to create a security interest is problematic, however, when the parties dispute whether the deed was an absolute conveyance or merely security. There is a presumption that a deed absolute on its face is what is purports to be. "A fee simple title is presumed to be intended to pass by a grant of real property, unless it appears from the grant that a lesser estate was intended." (Civ. Code, sect. 1105.) (Develop-Amatic Engineering v. Republic Mortgage Co. (1st Dist. 1970) 21 Cal.App.3d 143.)

If your intention is to deed them the property, and walk away, then that is fine. But if you intend to create a security interest, meaning a lien or a mortgage on the property, in which you get title back once you pay the debt in the future, then I strongly urge you not to use a deed, but rather a deed of trust or a mortgage.

I would also caution that if you have other creditors, taking care of a friend first might be either an improper preference or an outright fraud on the remaining creditors under the Uniform Fraudulent Transfer Act, and could be set aside. Questions of fraud tend to arise if the value of the property is significantly greater than the debt extinguished, and/or there are other creditors who aren't personal fiends who get stiffed.

Also, keep in mind that if there is any financing outstanding affecting the property, that a transfer will trigger the loan's "due on sale" clause, and you'll need to handle this potential problem with the lender.

With those cautions, and the others previously mentioned, there's nothing wrong in principle with paying a debt by transferring real property to the creditor. It should be agreed upon in writing before the deed is executed and delivered. Legally, such a deal would probably come under the heading "accord and satisfaction" and is covered by Civil Code sections 1521 to 1526.