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Buyer’s proposal crosses the line into fraud

By ERIC P. FEICHTHALER - Real Estate Law | May 4, 2023

Eric P. Feichthaler

Mr. Feichthaler:

I listed my home for sale asking $400,000, and I received a full-price offer. The buyer wants to allocate $200,000 to the home purchase, and $200,000 to “personal property.”

Although I take care of my personal items, the value of my 10-year-old furniture is, well, worth way less than that. I would say more like $10,000, if that. The buyer says he is doing this so his property taxes will be lower.

Should I agree to this?

–Candace B.

Dear Candace:

Although we always want to take all reasonable steps to limit costs, what is being proposed crosses the line into fraud. First, if you have a Realtor, would they be paid commission on the “personal property.” Very likely they would be entitled to it.

Also, documentary stamps are paid for based on consideration for property. Although it is being stated the consideration is only $200,000, it is clear that is not accurate. The state could seek interest and penalties for tax avoidance.

Most notably, the buyer will likely not receive ANY property tax benefit pursuing this plan. The property appraiser does not base values on an individual sale, rather they look at sales throughout the area to determine tax appraised values. They would see that this sale was not for a valid amount, and would simply not count this as a valid sale for tax calculation purposes.

Finally, for income tax purposes they would take this property at an artificially low purchase price, or basis. When they sell, they may get socked with an enormous federal income tax bill.

Typically, the stress and potential punitive results do not outweigh the perceived benefits of trying to trick state and federal governments. I would recommend you require the purchase price be legitimate, and have a separate agreement for furniture or other items you may be selling.

Eric P. Feichthaler has lived in Cape Coral for over 35 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Museum of History, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.

This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.