Lying about real estate price
Member since 2023 · 6 posts · 0 votes
Lying about real estate price
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Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
1yDon’t forget. Your friend has to tell the IRS he lost $900k so he wants a $200k tax refund. Do you think the IRS would ask the seller why he lost”forgot”to declare the $1 million in income when he sold your friend the house? That guy suddenly owes $250k in taxes plus penalties and fees.
Lastly, don’t forget you’re also going to owe $250k in taxes if you sell the home for exactly the $1million you really paid to buy it. I doubt you’re going to get a stranger to take a $250k hit for you.
Ps. I assume you’re going to be making all the sales and purchases in cash as you don’t want to get a $1M mortgage and then tell everyone you paid $100k when all the closing documents say otherwise.
12 Replies
- 1yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Even if you did buy a $1M house for $500K, your property taxes are based on assessed values and the city uses the size of the home and comparable homes in the area to determine that value and in turn your property taxes.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes1y
Don’t forget. Your friend has to tell the IRS he lost $900k so he wants a $200k tax refund. Do you think the IRS would ask the seller why he lost”forgot”to declare the $1 million in income when he sold your friend the house? That guy suddenly owes $250k in taxes plus penalties and fees.
Lastly, don’t forget you’re also going to owe $250k in taxes if you sell the home for exactly the $1million you really paid to buy it. I doubt you’re going to get a stranger to take a $250k hit for you.
Ps. I assume you’re going to be making all the sales and purchases in cash as you don’t want to get a $1M mortgage and then tell everyone you paid $100k when all the closing documents say otherwise.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @George Goldstein:
You know how when you buy a used car from a private seller you tell the seller to say he sold it for $3000 instead of $18000 so your dmv tax is lower? What prevents you from doing the same for real estate property taxes?
For example, you buy a house for $1,000,000 but you say you bought it for $100,000
How do they find out how much you paid for a house to assess their tax? If buyer's story matches seller's story, how do they find out? Are they going to flag it as a statistical abnormality and send investigators after you?
Another way that I can think of is let's say I want to buy a house. My friend buys it for $1,000,000 and then sells it to me for $100,000
why don't people do this? sounds completely legal, maybe my friend is crazy and he wants to lose $900,000There is transfer tax and property tax. The transfer tax you typically need to complete a form showing what the property sold for. The reason someone would not do this is why would someone want to lose $900,000? Sure your buddy can buy a house for $1M and sell it to me for $100,000 - I will do this all day long but I do not think your buddy will.
Whats the point of this post?
7e investments53 Reviews - 1yOzzy SirimsiBusiness MemberReal Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
it is a public information, once paper work is done, takes 40-45 days and anybody can find out how much you actually paid. Assessment has nothing to do with what you paid anyway.
You father can sell the house for a dollar in that sense does not mean they will look at that number to decide the value of it.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes1y
Quote from @Ozzy Sirimsi:
it is a public information, once paper work is done, takes 40-45 days and anybody can find out how much you actually paid. Assessment has nothing to do with what you paid anyway.
You father can sell the house for a dollar in that sense does not mean they will look at that number to decide the value of it.
In some places the purchase price does change your assessed value. That seems to vary widely from state to state.
@George Goldstein, in addition to what others above have said. In addition if you use a title company or lawyer to handle the closing then they are legally required to report the sale to the IRS etc. They also need to report the sale value for the state as well because in many/most places there are state/local taxes on the sale based on the sale price.
- Member since 2023 · 6 posts · 0 votes1y
Quote from @Theresa Harris:
Even if you did buy a $1M house for $500K, your property taxes are based on assessed values and the city uses the size of the home and comparable homes in the area to determine that value and in turn your property taxes.
I don't know about other states but in California it's based on your purchase price. One of the reasons there is short supply of housing is because guy bought a 5 bedroom in 1980 and he is paying $1000 a year for it. - Member since 2023 · 6 posts · 0 votes1y
Quote from @Chris Seveney:
Quote from @George Goldstein:
You know how when you buy a used car from a private seller you tell the seller to say he sold it for $3000 instead of $18000 so your dmv tax is lower? What prevents you from doing the same for real estate property taxes?
For example, you buy a house for $1,000,000 but you say you bought it for $100,000
How do they find out how much you paid for a house to assess their tax? If buyer's story matches seller's story, how do they find out? Are they going to flag it as a statistical abnormality and send investigators after you?
Another way that I can think of is let's say I want to buy a house. My friend buys it for $1,000,000 and then sells it to me for $100,000
why don't people do this? sounds completely legal, maybe my friend is crazy and he wants to lose $900,000There is transfer tax and property tax. The transfer tax you typically need to complete a form showing what the property sold for. The reason someone would not do this is why would someone want to lose $900,000? Sure your buddy can buy a house for $1M and sell it to me for $100,000 - I will do this all day long but I do not think your buddy will.
Whats the point of this post?
"you need to complete a form showing what it sold for"
if the buyer's story matches the seller's story, who's going to know it sold for $1,000,000 and not $100,000 if both buyer and seller keep their mouth shut?
I am just wondering if people do this and don't tell me. Because I am not particularly smart and surely someone must have thought about this.
- Member since 2023 · 6 posts · 0 votes1y
Quote from @Kevin Sobilo:
Quote from @Ozzy Sirimsi:
it is a public information, once paper work is done, takes 40-45 days and anybody can find out how much you actually paid. Assessment has nothing to do with what you paid anyway.
You father can sell the house for a dollar in that sense does not mean they will look at that number to decide the value of it.
In some places the purchase price does change your assessed value. That seems to vary widely from state to state.
@George Goldstein, in addition to what others above have said. In addition if you use a title company or lawyer to handle the closing then they are legally required to report the sale to the IRS etc. They also need to report the sale value for the state as well because in many/most places there are state/local taxes on the sale based on the sale price.
ok granted, the title company will report the sale. but if both buyer and seller are saying house sold for $100,000 then who is going to know it didn't sell for $100,000?
if I say I sold my 2024 bmw for $1000 and the buyer says yes he sold it to me for $1000 what is there to argue about?
- Member since 2023 · 6 posts · 0 votes1y
Quote from @Bill B.:
Don’t forget. Your friend has to tell the IRS he lost $900k so he wants a $200k tax refund. Do you think the IRS would ask the seller why he lost”forgot”to declare the $1 million in income when he sold your friend the house? That guy suddenly owes $250k in taxes plus penalties and fees.
Lastly, don’t forget you’re also going to owe $250k in taxes if you sell the home for exactly the $1million you really paid to buy it. I doubt you’re going to get a stranger to take a $250k hit for you.
Ps. I assume you’re going to be making all the sales and purchases in cash as you don’t want to get a $1M mortgage and then tell everyone you paid $100k when all the closing documents say otherwise.
hello
I don't understand why you think my friend made $1 million when he sold his house at a loss.
- 1yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Quote from @George Goldstein:
Quote from @Theresa Harris:
Even if you did buy a $1M house for $500K, your property taxes are based on assessed values and the city uses the size of the home and comparable homes in the area to determine that value and in turn your property taxes.
I don't know about other states but in California it's based on your purchase price. One of the reasons there is short supply of housing is because guy bought a 5 bedroom in 1980 and he is paying $1000 a year for it.Where I am it is based on market value and comparable properties. If everyone's house price doubles...my taxes don't double. I know that differs by location.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes1y
George, you misread my post:
I said:
”Your friend has to tell the IRS he lost $900k so he wants a $200k tax refund.” (Assuming he paid $100k, is selling for $1M but tells the IRS $100k to avoid taxes and help you out.)And I said…
“Lastly, don’t forget you’re also going to owe $250k in taxes if you sell the home for exactly the $1million you really paid to buy it. I doubt you’re going to get a stranger to take a $250k hit for you. ”
So your friend has to tell the IRS he lost $900k and ask for a $250k tax refund. (Selling the home he paid $1M for and sold to you for $100k.) and then if you sell the home for exactly what you really paid ($1M) then you’ll owe the IrS $250k in taxes because you told them you only paid $100k and now sold for $1M.
.
Even if your friend only paid $500k for his $1M house he’s selling you. He could have sold tax free if married but instead he’s going to ask the IRS for an $80k refund ($500k paid, says he sold for $100k) but again you will ow $250k because you said you bought it for $100k and sell for $1M.Forget the VERY obvious (to the IRS) tax fraud. It actually creates more taxes owed total than your friend telling the truth to the IRS. You’re transferring tax burdens and it’s something they look for. imagine the same scenario but your friend is a single investor and you’re a married owner occupant.
He lies to the IRS and says he sold his $1M house he’s paid $500k for to you for $500k. He has no taxes owed. 2 years later you sell for $1M tax free as an owner occupant. They’re going to figure it out.
I understand you were basically asking a hypothetical. But the short answer is.. Nobody wants to go to jail for a stupid crime that’s obvious to detect. That’s why people don’t lie about sales prices.
- 1yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
My market is southern CA.
I typically purchase off market at a discount. If the purchase is off market, the jurisdiction places their own appraisal to place value. This is bogus if buyer and seller are independent parties (if the parties are associated then I understand setting true value) as there is usually a reason for the discount purchase (risk items like unpermitted work, crazy low rents in rent controlled area, hoarder, heavy need of rehab, etc). Most off market purchases cannot easily be comped with mls properties that comparatively have no risk and are in much better condition).
so …Pay for a fixed fee mls listing with the property already under contract. It is less likely to be flagged for a jurisdiction appraisal if it was on mls. Jurisdiction may still flag it, but it is easy for a jurisdiction to flag transfers that were not on the mls.
Good luck
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