How to record a sales price of $10

Question

I am flipping houses. I'm running into potential buyers challenging me with "I know what you paid so I'm only willing to pay "$X".  In Ohio, the recorded purchase price comes from the purchase price listed on the HUD-1, which the title company gets from the purchase contract. My goal is for the sale to be recorded in such a way as to conceal my actual purchase price.My question is how to write an REO purchase offer that will be accepted by the bank for "$10 and valuable additional consideration".

I often see the recorded sale of a house to be "$10". I realize that for a sale to be legal, some exchange of value must occur, hence the token amount. These are legit sales , not sheriff or quit claim. Between private individuals, the purchase contract language is something like "$10.00 and additional valuable consideration". Naturally, that "valuable consideration" is where the actual money is.

Thanks in advance!

Blair Poelman · Answer

Unless you are a non-disclosure state you're probably out of luck there.  And even if you're in a disclosure state, there's probably a way to figure out that number through some publicly available data set at the county or state, or the MLS.

If you're in a disclosure state, the disclosure is usually not optional, and as such, when you provide a disclosure it is required to be accurate to the best of your knowledge.  If you try to fudge those numbers you'll probably have an issue somewhere else.  The title co. will probably have liability,  property taxes could get sideways, an RE agent could be wrapped into it, or the county could possibly going as far as an allegation of defrauding taxes.  I see lots of hair around this one.

Know your laws, and follow them.  This is where folks can get in real trouble - you don't like a rule so you get "creative" to avoid following that rule.  There's plenty of guys in my town that spent more than 5 years locked up for their "creativity".

If the sale history is public knowledge you need to put your salesperson hat on and find a way to overcome that topic with your buyers and either move past it, or find another buyer who can move past it.

Sheri Ulm · Answer

When I bought my first rental in Ohio I paid cash and the attorney drawing up the paperwork had a small amount, I believe it was $1 or $10, as the sale price for public record. I actually asked him to change it to the actual sales price since I wasn't sure how it would work out and if I ended up having to resell I didn't want someone thinking I paid less since I would be looking to try and get my money back. I still have the property 3 years later. I would talk to a real estate attorney in the area or perhaps a local real estate agent or someone at a title company could answer your question.

Account Closed · Answer

As a matter of disclosure and public record, I can't fathom a title company in a disclosure state to NOT record the true purchase price.

If it were possible in your state wouldn't most all buyers have their purchase price omitted cuz 'you always have to think about resale'?

Ie in CA, real property tax is based directly on the most recent sale price; thus it is imperative that figure be accurate on public record ie tax/appraisal office. Perhaps Ohioers are lucky that their real property tax isn't based directly on the most recent sale price, but I wouldn't be surprised if it has to be on record available to the public for other fundamental reasons like homesteading, bankrupty proceedings, civil claims, property disputes, etc etc.

Nevertheless, would love to hear of the closest tactic to achieving this in a disclosure state! =D

Guy Gimenez · Answer

@Tim Daunch

To my knowledge, there are only 7 states in the US that are non-disclosure states (incl. Texas), meaning sales prices are NOT part of the public record.  The deeds (at least in Texas) will show "$10.00 and other good and valuable consideration" on a cash deal.  If there is a loan on the property being purchased, the deed will include a "vendor's lien" and the amount of that lien. Even in Texas, deeds are part of the public record but since the deeds don't show the sale price (only the vendor's lien amount), taxing authorities and the public can't determine what the property sold for without contacting a real estate agent (assuming the property was listed and not FSBO).

If you're purchasing and not using a loan, there shouldn't be an issue with the standard deed language you mentioned as there doesn't seem to be a reason to include a sales price in the deed. But if the closing statement is somehow required to be shared with the public, I'm not sure there's much you can do. I would contact a local title company attorney and ask them if there is a way around the issue...if anyone would know, they certainly should.

Wayne Brooks · Answer

From a private buyer, you may could get them to agree.  From a bank, forget it.  I run across the same issue from "savvy" buyers....tell them tough sh$t.  It's worth what it's worth.

Jay Hinrichs · Answer

depends on if the state is a non disclosure state Like Mississippi were every transfer only shows 10 dollars...

or if like other states you can figure out what someone paid by computing the transfer tax that is public record.

One thing that was common in CA.. is you could pay more transfer tax if you wished to the state was not going to not take your money and if you want your tax's higher they don't care. but that is one way to sheild from the public the true purchase price.

but with interenet today its much the same as car dealers face everyone knows everything