Buying a $550k home from family for $300k (on paper) possible?

jibberjabbers

Wondering if this was possible for property tax purposes.

Sister is selling me a house for $550k.

I'll get a $350k loan with $50k down.  And give me Sister $200k cash. Can we on paper say I bought the house for $350k?

jibberjabbers

Edit: 350k!

simplyelise

No, that's fraud and it's illegal.

als1982

I'm not sure about where you live, but where I live property taxes aren't based on the price paid, they're based on the value the county estimates your house is actually worth. So, what you're thinking about doing is likely moot and you'd still end up paying taxes on a home valued at $550K, give or take.

AprilZ81

You can pay 200k in cash, but the sales price on the contract would need to be the actual price you are paying for the house.

simplyelise

Yeah, the property taxes would not be affected, but it would by a lie to avoid closing costs.

Also, you are only allowed to gift cash to someone tax-free up to like 14,000, so giving 200k would definitely be subject to the gift tax.

I'm not a tax preparer or tax attorney, but from my reading, your sister selling you the house for significantly less than it's worth could also be considered a taxable gift.

short+sassy

als1982 said:

I'm not sure about where you live, but where I live property taxes aren't based on the price paid, they're based on the value the county estimates your house is actually worth. So, what you're thinking about doing is likely moot and you'd still end up paying taxes on a home valued at $550K, give or take.

This is also true where I live.  Although the assessor's office will sometimes take into consideration what you actually paid for the house (on paper), they will also pretty much throw out that consideration for foreclosures or sales between family members.  Probably just for that reason.

And the other PPs are right about the legalities.  I don't know if you have ever purchased property, but some of the documents you sign...both as buyer and seller...verify there are no "side deals" between the two parties.

It is only rare circumstances that a bank will "call a loan", which basically means you are given a specified period of time to pay the entire loan...usually only 90 days.  But the situation you are describing is the kind of thing that many banks would use as a reason to call the loan, if they ever got wind about the large side deal.

I hear where you are coming from, but it is just not worth it to MAYBE save a bit on property taxes.  On the good side, with that large of a down payment, you can avoid PMI plus save a lot on interest.

jtmh2012

Not only that, but even if this were possible, when you eventually sold the house, the $350k would be considered your cost basis which could screw you come tax time.

jeanhoward97

No. I don't think that there is any way other than the loan. You can go with the home loan.  Even check with FHA home loan. My friend had an experience with FHA loan option & you can also ask to some home buying authority.