Question about buying or selling a house or property...
 

Just out of curiosity, could I walk up to someone with a suitcase full of cash and use it to buy their house?

Vice versa, could someone give me cash for my house?

What are the legal obligations of a house sale?

All sales I'm familiar with have been through a realtor, paid through a loan. I've never heard of just plunking down cash for a house though, in this market, I can see it happening with the bargain prices you can find in some areas.

Thanks!

I imagine you could walk up to anyone with a bunch of cash and buy his or her house. Bill of sale on the back of an envelope might suffice?
I bought my house with cash back in 89. It had all the rigamarole of a typical sale with a loan.

You can do it - Just hire an atty to do the paperwork for you, as there are some things you don't want to miss.

Medmech where are you??????? Title searches need to be done...

I would also imagine that there would be some sort of federal notification about such a large cash transaction...it you walk into your bank with $100K in 100 dollar bills, surely the bank has to tell somebody about that.

yes its possible but most of time real estate agents want bank statements and other forms.

Yeah, it has been done, many times.


Back in the late 1980's and 1990's there was a LOT of panicked Hong Hong dollars looking for a place to be parked.

People there were panicking that when the 100 year lease with Great Britain ended, in 1997, that the Chinese commies would grab all of it, take everything and leave them with nothing.


We have an unusual situation in this country: "We don't care who you are, or where your money came from, if you have it, you can buy ANY real estate you want."


A great deal of it came to San Francisco, and got sunk into real estate, -- we are talking apartment buildings, high rise skyscrapers, and private houses.

Often times, title was taken in the name of "straw men" --- waiters in Chinese Restaurants...


I was in the title business in San Francisco back then. I heard incredible stories, of Chinese people with suitcases full of cash, coming up to the front door of homes in the Richmond and Sunset District, worth $400,000 ( a LOT even then) of old Irish widows, and offering them $700,000 CASH on the spot for the houses.


What could they do?

Of COURSE they sold out.


It changed the character of those SF neighborhoods forever. "Progress" if you want to cal it that.


The asians that bought, wanted to have the property in PORT cities, like LA, Long Beach, Vancouver, SF, Portland, Seattle, and places that faced ASIA.


Yeah it happened. I saw it.

Yes, that's something I'm curious about too.

Now, here's another question:

Hypothetically, if I have a friend who's down on his luck and I want to sell him a piece of property at a discount for him to build a house on, am I under any obligation legally to sell that property to him at a "fair" market value or can I sell it at what ever price I choose?

What if that friend is a building contractor and I want to trade him the property for the equivalent value in construction services?

I'm just thinking out loud here.

You can give it to him for free, by deed, sell it to him for any price and keep a mortgage on it for him to pay you back, or trade it for something in exchange for the deed.

You can transfer it for a dollar, full market value or anything in between. It is up to you.


THAT is a trap for the unwary. I would never get into ANY deal with a down on his luck building contractor even if he is a REALLY good one.


Most have no money, and ask for "progress payments" to pay them as they go, when they build things. Many times they don't pay their subcontractors, who then have the legal right to record a lien on YOUR house, which you have to pay off when the contractor skips town or runs out of money.

Trade HIM (the contractor) the real estate for "the equivalent value in construction services"?


Oh no, never. Unless you TOTALLY trusted them, and even then, NOT till they performed the equivalent value in services FIRST.

And even THEN, probably a very bad idea. Get a VERY good written contract, with strict timelines for completion, and penalties for every day late.


Contractors are notorious fo working on their OWN schedules, and showing up when they feel like it.

Check their licenses are in good standing, the have all the bonds they need so if a worker gets hurt on the job you aren't stuck with it, get their references for past work, and then CALL them.


If you trust, then VERIFY...

If you sell a property at less than market value, you're supposed to report it on your income taxes - you may be liable for gift taxes on the difference between your sale price and fair market.

Yeah thats how I usualy buy building lots, although I walk up to them with my check book.:D

Just run it through your attorney for the closing, they will take care of the title search, transfer of title, etc, etc.

Write up a contract on some paper, doesn't have to be much, than take it with the deposit to your attorney. The buyer should also have an attorney, so make sure you get that info. Than the lawyers deal with it.

I have never done a trade before, so I can't help you with that.

But as for your first point no, as long as you are not a licensed real estate agent. If you have your license even if you are not practicing be carefull. If you steal some property from someone you can get sued. Thats why I let mine expire. On the flip side with selling, as long as you are the owner you are fine.

But no you are under no obligation to sell or inform the buyer of the fair market value of the property. I make a lot of my money by purchasing stuff far, far below fair market value. For example the last building lot I purchased I got for 30% of FMV. I'm working on one now thats complicated and is currantly worthless, but after some work I'll have about 50% of FMV into it, after I make it valuable. My uncle has been known to literaly steal them for about 5% or less of FMV.:cool: You can sell the property to your friend for $1 and it has been done before.

Not really if someone is paying cash they have the option of doing thier own search or nothing at all. Where the trouble resides is very few title companies will accept cash bills you can also count on all kinds of red flag cash transaction incidents coming up.


and some nice audits to follow, the cash has to be sourced.

That's one nice thing about having cash flow where the biggest thing I can pay cash for is a Snickers bar...no red flags with the IRS for large cash transactions. I was under the impression that anything over $10K has to be reported on some sort of form. I have a life insurance license, and part of what we do as part of our training is look for money laundering. Cash is always a red flag.

I believe the banks have to report cash deposits of over 10K.

10K is the IRS mandatory, the rules go farther to report anything suspicious most banks have software that will automatically generate a report. The most common is fools depositing less than 10K while attempting to stay under the threshold the fact of the matter is $1000 is enough to cause a report on some accounts.

No and yes.

No: It's not an income tax item (for either you or the buyer.)

Yes, there is a gift of the difference between the FMV and what he pays you. This would likely require you to flle a gift tax return (Form 709).
Assume the lot is worth 50. You sell it to him for 30. You have made him a gift of 20. The annual exclusion for gifts is 13 (13,000 actually) Your net gift is 7. You have a 1 million dollar lifetime gift tax "exclusion." No tax currently due and your remaining lifetime exclusion is 993,000. Rules are better if you make a joint gift with your spouse.

Transaction
 

I don't know about buying but I have sold three of my own houses over the years without the alleged "benefit" of a real estate agent involvement. All I did was hire an attorney at a very reasonable cost to do the paperwork and make sure the transaction went legally. I was able to sell the houses at a much lower price since there was no commission to pay and split the saving with the buyer. Everyone made out except the blood-sucking real estate agents.

I would imagine a buy could be done the same way

Bingo!:)


http://www.irs.gov/businesses/small/article/0,,id=148821,00.html

FAQs regarding Reporting Cash Payments of Over $10,000 (Form 8300)

What does “cash” mean for the purposes of Form 8300?

Cash is money. It is currency and coins of the United States and any other country. Cash is also certain monetary instruments - a cashier’s check, bank draft, traveler’s check, or money order - if it has a face amount of $10,000 or less and the business receives it in:
A “designated reporting transaction” as defined in Treas. Reg. section 1.6050I-1(c)(iii) (generally, a retail sale of a consumer durable, a collectible, a travel or entertainment activity) or
Any transaction in which the recipient knows the payer is trying to avoid the reporting of the transaction on Form 8300.

Is a personal check considered cash for reporting on Form 8300?
Personal checks are not considered cash.

What is the definition of a transaction?
A transaction is the underlying event resulting in the transfer of cash. Examples include:
Sale of goods, services or real or intangible property
Rental of goods or real or personal property
Cash exchanged for other cash
Establishment, maintenance of or contribution to a trust or escrow account
A loan repayment
Conversion of cash to a negotiable instrument such as a check or a bond

What is a designated reporting transaction?

Generally, a designated reporting transaction is the retail sale of any of the following:
A consumer durable, such as an automobile or boat. Property is generally a consumer durable if it is tangible personal property (not real or intangible property) that:Is generally suited for personal use,
Is expected to last at least one year under ordinary use, and
Has a sale price of more than $10,000.
A collectible (such as a work of art, rug, antique, metal, gem, stamp, or coin)
An item of travel and entertainment (if the total sales price of all items for the same trip or entertainment event is more than $10,000).

What you are talking about is the IRS rule there are banking sub rules that are much more stringent than the $10,000 rule. If a person deposits $4000 cash into an account that has not had that kind of deposits it will trip a report, if they bring cash in to pay off a loan, it will trigger a report. If you try to trickle money in an account to stay under the radar it will trigger a report.

I took the exam last week and am proud to say I scored 100% on that PIA;)

If it doesn't go to the bank it triggers no report.:D

Why would someone deposit cash? As posted by everyone, that just sets off alarms.

You beat me to it, Hat.

Yep, plus a lot of cash can be converted into forms that are far more easy to hold and hide. Say gold or silver coins, or diamonds.

Or you can trickle it slowly over time into things like property...

I could quote Brian's famous saying, but it's not really necessary is it?:D

To pay off loans or use the cash as reserves or make payments on a legitimate transactions.


Lots of reasons.

That's such a common and uncreative reason.

Thanks for the insight on this.

For personal reasons I'm looking to reduce my financial "footprint" - my worth on record with various institutions. I'm looking at pretty much any legal way to do this - cashing out properties, investments, etc... I also don't want this process percieved as income and have to take a big tax hit on it.

Who should I see about this process? An attorney, financial planner?

Like I said, this has to be legal - I don't want to break the law but I might consider an end run around it... :)

Do you think the metal sellers are exempt from reporting requirements? Do you think they are not audited by the IRS, DEA and police.

You guys honestly sound like a bunch of jailhouse lawyers, I know of a couple ways to get around some cash requirements but it has to be planned,thought out and deliberate which = serious jail time.

Meanwhile, at the Swiss Bank trial in Miami today....:o

U.S. investigating more than 150 UBS clients for possible tax evasion
Posted 1h 38m ago By Kevin McCoy, USA TODAY

More than 150 wealthy American customers of Swiss banking giant UBS are under investigation for suspected tax evasion, federal prosecutors disclosed
Tuesday.
The glimpse at the scope of the much-watched criminal probe of Americans who may be hiding offshore assets from the IRS came in a Florida federal court filing as UBS prepares to give federal authorities the names of more U.S. clients who will likely face similar tax investigations.

That handover, expected as early as Wednesday, is expected to "produce the identities and account information of additional UBS customers who are believed to have violated United States law," Acting U.S. Attorney Jeffrey Sloman said in the court filing.

Tax lawyers for UBS clients said they expect the bank will provide data for thousands of its American account holders — but not for all of the estimated 52,000 U.S. customers the IRS demanded in a federal court lawsuit. The handover stems from a settlement reached in the case last week by UBS and the Justice Department.

The 150 Americans now targeted by prosecutors are among roughly 250 U.S. clients of UBS whose account information the bank gave to the Justice Department earlier this year because their accounts bore potential signs of tax evasion.

Along with providing the financial data, UBS agreed to pay $780 million to defer prosecution of criminal charges that it routinely sent its bankers on secret trips to the U.S. to help American customers hide assets offshore.

So far, three of the clients whose accounts were included in the initial UBS handover have pleaded guilty to filing tax returns that falsely failed to report millions of dollars in assets or income. A fourth is scheduled to plead guilty next month to charges of failing to report a UBS account allegedly used to evade taxes on more than $1 million in business income.

In all four cases, the UBS clients disguised their ownership of the secret accounts by controlling them through entities in Hong Kong, Panama or the British Virgin Islands, federal court records show.

Tuesday's federal court filing came in the case of Bradley Birkenfeld, a former UBS banker who pleaded guilty last year to charges he conspired to help some of the bank's American clients evade taxes.

He faces a maximum five-year federal prison term at a scheduled Friday sentencing in Fort Lauderdale. But federal prosecutors, citing Birkenfeld's "substantial assistance" to tax investigators in the U.S. and other countries probing suspects in UBS-related cases, recommended that he serve no more than 30 months.
(chirp, chirp, chirp:rolleyes:)

As someone in the building trades, I'd say you couldn't find a better way to lose a friend and several thousand dollars at once.