Putting in a direct offer to vendor-help needed

N

Nanners

Guest
Help! I'm not exactly streetwise when it comes to "doing deals" where property is concerned & would appreciate any info/advice out there.

Estate Agents have bid in @ €320K for property that we want. Rather than having to pay €10k+ extra in stamp duty, my partner wants to approach the vendor himself (we have his number - very long story, nothing illegal, just amazing powers of observation!) & offer him €317,500 plus about €5k cash.

What could happen here? Can he instruct the Estate Agent to take our offer of €317,500 (which we had put in with the agent) & just take the cash himself or would he have to dump the agent & deal directly with us? Is it an attractive offer for a vendor? Would he still be liable to pay the agents fee if he dumps him? Would he be saving himself money? Would it be a pain in the ass for him to deal with us like that?

Stamp Duty sucks
 
Tax evasion sucks. Why should a vendor collude with you to engage in same for an extra €2,500?

How would they explain the deal to their solicitor? If the solicitors don't know, how can the vendor be sure they will receive the extra "under the counter" money? If you're willing to rip-off the state, the vendor has no reason to trust you won't rip them off too.

Contact the vendor and check if the the €320k bid is real -- even if it is, they might accept €317,500 if you are not in a chain. €320k could be a ploy from the estate agent to see if you will break the stamp duty boundary.
 
Well €5K cash is €5K cash - worth about €10K in a pay packet.

I have since realised that the Vendor would have to pay EA fees regardless of how the sale ends up. Does a Vendor have to pay tax of any sort on the sale price?

The €320K offer does seem genuine & it's from another 1st time buyer so they're not in a chain either.

Tax evasion does suck. We have spent years saving for a house & when you see exactly what your money gets you in todays property market you realise you've been screwed.
 
Nanners said:
I have since realised that the Vendor would have to pay EA fees regardless of how the sale ends up. Does a Vendor have to pay tax of any sort on the sale price?
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If it is their PPR, then no, they won't have to pay any tax, so they are not likely to care if you are offering cash.
 
Principle private residence. Do be aware that in this situation the vendor is not avoiding tax, the estate agent is not avoiding tax so neither of them having anything to worry about. You, on the other hand are evading tax, defrauding the Revenue, etc and leaving yourself wide open to prosecution, back tax and a hefty fine. Is this particular house worth it?

Sarah

www.rea.ie
 
ClubMan said:
It is illegal assuming that this is done to evade tax.
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Didn't the "illegal" quote above refer to the phone number not what was proposed re: paying cash to the vendor??

That said, like Clubman says, what is proposed is illegal and the fact that you might not get great value for money in the property market these days doesn't justify tax evasion.
 
An extract from the stamp acts

"...all facts and circumstances affecting the liability of an instrument to duty must be set forth in the instrument... Any person who fraudulently executes an instrument... in which all facts are not fully and truly set forth... shall incur..."

and it goes on. The fact that you are giving the vendor 5 grand plus the purchase price is a circumstance surrounding the sale. The consideration passing in respect of the transfer is the full amount paid to the vendor. If you simply decide not to tell the Revenue that there's an extra 5 grand of consideration then that is tax evasion.

Interest, penalties and surcharges as well as the stamp duty suck more...
 
There is a legal possibility, where you specify that the contents are of X value, and therefore no stamp duty is due on them. This obviously has to be a realistic value of of the contents. But note that you are not saving X, you are saving the stamp duty on X.

We did this on our purchase, and all parties, including solicitors were aware if it. It is included in the contract documents.

While this will make no difference to the vendor, as stated (since you are paying the stamp duty), it does slightly alleviate the tax burden on you.

It would not swing a sale for the vendor, as it is done at contract stage. But is is worth taking into account when you are calculating how much the house is going to cost you.

It may also be relevant when calculating the stamp duty rate. e.g. House for €320,000, which includes contents of €5000 will attract the lower rate of stamp duty.

And for the record, I also disagree with tax evasion, regardless of the justificatoin.

And thanks for the new word Clubman, just remembering it is the problem.
 
It may also be relevant when calculating the stamp duty rate. e.g. House for €320,000, which includes contents of €5000 will attract the lower rate of stamp duty.
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The Revenue have clarified numerous times that this is wrong. If your solicitor gave you this advice recently they are negligent and possibly themselves guilty of various offences by signing off on the transaction.

Stamp duty is calculated on the sale value less contents, but the applicable stamp duty band is determined from the total sale value including any related transactions (even separate contracts for contents.).

Even ignoring the tax evasion issue, there is a real practical problem here, as I tried to point out above. If the solicitors know about the cash payment, then they won't facilitate the transaction unless they are crooked. If the solicitors don't know about the cash payment, what's to stop the purchaser claiming that they never agreed to a cash payment? The vendor could be making up the deal, and has no legal comeback, as no written contract exists for the extra consideration.
 
Oh yeah, and there's also the whole tax point about the transaction not forming part of a larger transaction or series of transactions.
 
You can say the €5k is for contents to avoid anything ugly in the future, that would be the safest bet. You will have to put it in writing. PP €317.5k and contents €5k with both solicitors.
I know stamp duty is a pain in the ass and makes it even harder to get on the property ladder, it's okay for those who didn't have to try a buy a house in this current market and what it's been like for so long now.
We bought our first house last year so totally empathise with how you feel, we moved further down in the end and bought a new build and got a bigger house. You could look at that option, my heart was broken more than once while bidding for houses after years of saving like mad and I am so glad the way it worked out for us.
Sorry for going a bit off topic, but just so you know there are options that don't involve leaving yourself open to being done for tax evasion.
 
ClubMan said:
Not according to some of the comments above and in many other similar threads.
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Well just to clarify why I said this. We were going to purchase a property last year that was over the stamp duty. €12,500 to be exact. The contracts were drawn up to reflect the €317.5k purchase price, and the Estate Agent did up a letter and draft of contents to the value of €12.5k which we paid in cash and that was to be paid the same day or week that we signed the contracts. Thing is we were not getting any contracts, we were just saving on stamp duty. In the end we pulled out as I felt we were being done.
So it must be possible to do this to ensure purchaser is not done for evading Stamp Duty in the future.
 
Mag2006 said:
the Estate Agent did up a letter and draft of contents to the value of €12.5k which we paid in cash and that was to be paid the same day or week that we signed the contracts.

...

So it must be possible to do this to ensure purchaser is not done for evading Stamp Duty in the future.
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Well, I wouldn't depend on an EA for authoritative or independent tax advice. I still believe that this approach to mitigating SD costs is not kosher. Perhaps one of the tax experts can (probably for the 100th time) clarify?
 
Mag2006 said:
So it must be possible to do this to ensure purchaser is not done for evading Stamp Duty in the future.
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I don't think if you did that you would be assured of not evading stamp duty.

Also, as Revenue seem to be now focusing on stamp duty the likelihood of this being detected is increased.
 
"Thing is we were not getting any contracts, we were just saving on stamp duty. "

I love it - had you gone ahead with your deal, you would have been defrauding Revenue, engaging in tax evasion and leaving yourself open to penalties and charges. The letter about the contents is part of the series of
transactions refered to in the earlier post set out below.

Heres one I made earlier

From a few weeks ago:

Its important to realise the framework within which the value of contents of a residential property being bought may alter the stamp duty threshold.

Take an example

House is E475K Contents are E5K. Total contract is E480K. Stamp duty is payable on E475K. No problem. No issues arise. No stamp duty threshold at issue.

Another example:

House is E380K. Contents are E5K. Total contract is E385K. This breaks through a stamp duty threshold. Stamp duty is payable on the E380K but at the rate applicable on E385K.

This is the Revenue certificate in the Deed:

IT IS ALSO HEREBY CERTIFIED that the consideration (other than rent) for the sale is wholly attributable to residential property and that the transaction effected by this instrument does not form part of a larger transaction or of a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration (other than rent) which is attributable to residential property or which would be so attributable if the contents of residential property were considered to be residential property exceeds €THRESHOLD

You can see the reason why people want to buy contents separately in the second scenario - but Revenue know that this happens and they make it deliberately difficult.

So what do you do? As a practising solicitor, my advice is bite the bullet. More often than not its a total red herring - the property is in the higher price range anyway and stamp duty is payable at the higher rate. I've yet to see a house in the average bracket ( i.e. below E635K when 9% kicks in automatically) where the contents could realistically be said to have a value of more than 2-4K.

Separate contracts don't work - because of the Revenue certificate. And because a Court will not uphold an illegal contract so if it all goes wrong a Court won't help you.

Solicitors and auctioneers should not facilitate this - its a fraud on the Revenue and exposes both to Revenue wrath. It also feeds the average Irish consumer frenzy/mindset of (a) "putting one over on Revenue" - Daw! and (b) resolutely refusing to make themselves properly advised of their own taxation obligations and taking responsibility for their own actions.

And finally, REVENUE ARE NOT STUPID and Stamp Duty is a self assessment tax. They have more access to actual prices being paid than any one else - so it only takes a quick comparison with another similar house for Revenue to "pull" a Deed that is understating the price,send it to their own Valuation Office before fixing a proper valuation and hitting you with penalties and interest.

Altogether just not worth it.

mf
 
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