Single Family Purchase-cash on the side??

[Bill Johnson]

I am about to purchase a new home without any realtors involved. Its a neighbor a few streets over. The gentleman has asked that we have a side deal, lower the sales price of the home for property tax purposes and then I'd give him say $50k in cash outside the real estate deal. There mortage will still be well below the 80/20. Sales price is currently $450k, but he wants it to be say $400k, I'd put down $150k, then give him $50k outside the deal. He is willing to take on the credit risk of such a deal because he is having financial difficulty and may ultimately declare bankruptcy. I don't beleive this is illegal but i'm wondering what the pitfalls might be? Thanks.