Is this common practice when selling a house?

embraer170

Of course it is a common approach, but in most cases the people involved in the transaction are all aware of it.

As I read from the OP's posts, the seller unilaterally informed the buyer's solicitor. Unfortunately, the buyer's solicitor then seems to have been a bit slow to inform the buyer about the letter.

h2005

h2005 wrote: »

If the asking price is 240k and that is what the OP is paying why does it matter how it’s broken out? I would have assumed something like this is very common if you’re selling with contents in place.

But the first mention of contents being included was after the booking deposit for as paid, in the Sales Advice Notice. Perhaps you missed that part?

Valhallapt

athlone573 wrote: »

The sellers are chancing their arm and I wouldn't go along with it,they're trying to defraud the taxpayer and or the bank.

If they were asking 5k for some identified valuable items, mahogany chests of drawers etc then maybe fair enough.

How are the defrauding the tax payer. If I go to the supermarket and pay 23% vat on chocolate bars and also buy some sanitary towels am I defrauding the tax payer if I don’t pay 23% on the sanitary towels?? Different items carry different levels of tax. Unless the vendor has removed the kitchen, light fittings, carpets, and left just a shell of a house then the buyer in buying different things at once, and the tax code clearly allows this.

Baby01032012

[Deleted User] wrote: »

But the first mention of contents being included was after the booking deposit for as paid, in the Sales Advice Notice. Perhaps you missed that part?

So? Booking deposit means f all and can be returned anytime up to signing of contracts.

Valhallapt

embraer170 wrote: »

Of course it is a common approach, but in most cases the people involved in the transaction are all aware of it.

As I read from the OP's posts, the seller unilaterally informed the buyer's solicitor. Unfortunately, the buyer's solicitor then seems to have been a bit slow to inform the buyer about the letter.

Exactly, very common. Inexperienced solicitor who didn’t see it coming? Poor form of the agent not to give you the heads up on it, or at least ask was it ok.

Heading of thread needs to change. How has the EA Any concern here? Would they actually be down commission if anything.

SurplusToys

Baby01032012 wrote: »

And breathe....

Probably they are trying to reduce the CGT bill on assumption they weren’t living there, do you know if that’s the case OP?

From your perspective it reduces your stamp duty as already pointed out as it’s on value of house not the contents.

It may or may not be issue for the bank, your solicitor will know best.

It’s not tax evasion, how the consideration is split between property value and contents isn’t going to make much of a difference other than the small tax savings on both sides as I’ve noted.

I had a solicitor once on a property I purchased and he suggested splitting contents from the house value, I didn’t bother in the end.

The owner was not living there, it wasn't their primary residence.
They were renting it out.

My solicitor said the opposite that it would not affect the stamp duty paid by me but would affect CGT if I was using the house as an investment property (which I'm not).

I think my main concern now after reading many of these replies is my loan offer or interest rate being affected.

h2005

[Deleted User] wrote: »

But the first mention of contents being included was after the booking deposit for as paid, in the Sales Advice Notice. Perhaps you missed that part?

Not sure why that matters. Contracts would still to be signed at that point.

Valhallapt

Baby01032012 wrote: »

So? Booking deposit means f all and can’t be returned anytime up to signing of contracts.

Yes it fully refundable. Until the contracts are executed

Baby01032012

[Deleted User] wrote: »

Heading of thread needs to change. How has the EA Any concern here? Would they actually be down commission if anything.

Exactly, how could agent be expected to know, this is a preference by the vendor possibly at their solicitors suggestion on how the consideration on the purchase should be split. The drama here.

SurplusToys

Deleted User wrote: »

Heading of thread needs to change. How has the EA Any concern here? Would they actually be down commission if anything.

I guess this show's my ignorance of the process seeing as this is my 1st time buying.

Not 100% sure where all the different responsibilities begin and end between all the actors involved.

Baby01032012

SurplusToys wrote: »

The owner was not living there, it wasn't their primary residence.
They were renting it out.

My solicitor said the opposite that it would not affect the stamp duty paid by me but would affect CGT if I was using the house as an investment property (which I'm not).

I think my main concern now after reading many of these replies is my loan offer or interest rate being affected.

It reduces your stamp duty. That’s a fact. Bank unlikely to care how the consideration is split. Please correct your title please. Nothing to do with estate agent.

Lenar3556

SurplusToys wrote: »

So I’m towards the end of the process of buying my first home.
My first bid was 225k which was rejected.
In the end we settled for 240k.

The sellers solicitor is now asking that the price on the transfer deed be reduced to 225k.

This figure of 225k according to the solicitor and estate agent is 240k minus 15k for furniture.

I never ever agreed to buy any furniture and this is the 1st time I’ve ever heard of 15k number. If I was told furniture cost 15k I would of asked for it to be removed.

Is this normal practice or have I been scammed?

I’ve already transferred my 10% of the mortgage needed to my solicitor but my solicitor is holding off on requesting funds from my bank until this is sorted out.

Would appreciate hearing some opinions.

The split of purchase amount between building and contents shouldn’t be a major concern of yours, although there are a few practical considerations.

Tax evasion on behalf of the seller? - I don’t see any real evidence of that, unless the furniture valuation is completely off the wall or there was no furniture or something.

You will make a small saving in stamp duty, circa €150.

If you sell this property in the future, AND if at that time it is not your principal private residence, AND if it has increased in value at that point, you will pay a higher amount of capital gains tax on the proceeds of any such sale. At current rates, this could cost you an additional €4,950 at the point of disposal.

Perhaps the biggest immediate consideration is your lender and their agreement to finance the arrangement. They may not be as keen on buying €15k of furniture as they would be on buying €15k of house.

On balance, if I was still interested in purchasing the house this wouldn’t cause me to loose interest. It may be a means to secure a sight improvement on the price, maybe something approaching €5k. CGT implications and lending limitations as a valid basis for raising such a compromise.

ahnowbrowncow

Valhallapt wrote: »

How are the defrauding the tax payer. If I go to the supermarket and pay 23% vat on chocolate bars and also buy some sanitary towels am I defrauding the tax payer if I don’t pay 23% on the sanitary towels?? Different items carry different levels of tax. Unless the vendor has removed the kitchen, light fittings, carpets, and left just a shell of a house then the buyer in buying different things at once, and the tax code clearly allows this.

It more than likely is tax evasion as it isn't the sellers PPR, depending on the cost price of course.

The house is valued at €240k, the furniture is worth little to nothing, OP doesn't even want it. Bank will have valued the house at €240k, mortgage will be based on that.

They want to reduce the value in order to pay less CGT.

You can call it "tax savings", "unnecaessay tax" all you want but it is tax evasion.

There is no benefit for the OP to do this. Possible higher CGT in the future for them, possible increased mortgage interest. Sale could fall through because banks refuse to increase the LTV.

yabadabado

athlone573 wrote: »

The sellers are chancing their arm and I wouldn't go along with it,they're trying to defraud the taxpayer and or the bank.

Can you please explain how they are defrauding the tax payer ?

athlone573

Valhallapt wrote: »

How are the defrauding the tax payer. If I go to the supermarket and pay 23% vat on chocolate bars and also buy some sanitary towels am I defrauding the tax payer if I don’t pay 23% on the sanitary towels?? Different items carry different levels of tax. Unless the vendor has removed the kitchen, light fittings, carpets, and left just a shell of a house then the buyer in buying different things at once, and the tax code clearly allows this.

If the furniture is worth 15k then you're right. But I doubt it. The items you mention such as fitted kitchens and light fittings would be considered part of the fabric of the house. I'm sure theres a law society or revenue manual that sets this out.

Baby01032012

ahnowbrowncow wrote: »

It more than likely is tax evasion as it isn't the sellers PPR, depending on the cost price of course.

The house is valued at €240k, furniture is worth little to nothing, OP doesn't even want it. Bank will have valued the house at €240k, mortgage will be based on that.

They want to reduce the value in order to pay less CGT.

You can call it "tax savings", "unnecaessay tax" all you want but it is tax evasion.

There is no benefit for the OP to do this. Possible higher CGT in the future for them, possible increased mortgage interest. Sale could fall through because banks refuse to increase the LTV.

I love Boards for the couch experts. It’s not tax evasion. I doubt a solicitor would suggest it if it was. It’s perfectly above board to place a value on the contents of a house. The insurable value of a house is the contents as well as the reinstatement value.

Valhallapt

ahnowbrowncow wrote: »

It more than likely is tax evasion as it isn't the sellers PPR, depending on the cost price of course.

The house is valued at €240k, the furniture is worth little to nothing, OP doesn't even want it. Bank will have valued the house at €240k, mortgage will be based on that.

They want to reduce the value in order to pay less CGT.

You can call it "tax savings", "unnecaessay tax" all you want but it is tax evasion.

There is no benefit for the OP to do this. Possible higher CGT in the future for them, possible increased mortgage interest. Sale could fall through because banks refuse to increase the LTV.

If the buyer agrees the furniture is worth 15k, then it’s worth 15k, no matter how you feel about it. Nothing illegal about it, however you defaming the vendor and accusing them of tax evasion, may land you in hot water. I hope there is nothing identifiable about the vendor in this thread.

jhegarty

Valhallapt wrote: »

If the buyer agrees the furniture is worth 15k, then it’s worth 15k, no matter how you feel about it. Nothing illegal about it, however you defaming the vendor and accusing them of tax evasion, may land you in hot water. I hope there is nothing identifiable about the vendor in this thread.

That's now how it works.

If it worked like that then everyone would sell houses for 1 euro and the furniture for €240k.

Valhallapt

athlone573 wrote: »

If the furniture is worth 15k then you're right. But I doubt it. The items you mention such as fitted kitchens and light fittings would be considered part of the fabric of the house. I'm sure theres a law society or revenue manual that sets this out.

Maybe it’s not worth 15k, I don’t know. But there is some intrinsic value to it, and it’s a practice that is more common place than not doing it. Revenue may start to raise eyebrows when the value of furniture is at 10% or higher of purchase price

yabadabado

yabadabado wrote: »

OP I wouldn't have a huge issue with this but maybe go back and say you will pay 225K +10k for the furniture.

At least try getting something out of it.

yabadabado wrote: »

Can you please explain how they are defrauding the tax payer ?

OP puts in a bid with no consideration for contents in good faith.


He's now been told subsequently it's only €225k for the house and €15k furniture he will pay to get skipped.



The person reducing the fair value of the house (what the OP was willing to pay) for the sole purpose of reducing their tax bill.


This can be put to the test by offering them €225 for the house, letting the seller keep the furniture.


IF the seller then pulls out I'd have a word in their shell like saying you don't like being messed about and will be talking to Revenue.

athlone573

yabadabado wrote: »

Can you please explain how they are defrauding the tax payer ?

Stamp duty or CGT would be underpaid if furniture is overvalued.

appledrop

OK op this is not normal despite what some people are
saying.

The 1st issue is how much have the bank given you mortgage approval for?

If your paying 240,000to buy the house only actually worth 225,000 and 15,000 for contents the bank won't give you a cent towards that 15,000

I don't know you circumstances but that means you will have to have you 10% deposit say and an additional 15,000 for furniture from your own pocket.

Secondly I'd question why your paying 240 if the house is only worth 225?

You surely had to get a valuation from bank before they approved your mortgage?

How much did they say it was worth?

Also why the hell would you stand for buying a house full of old crap that you have to pay to get rid of!

When we sold our house to first time buyer they were really stuck for funds and as we had rented it out we left some things for them like couch, table which they were so thankfully for but cleared it our of things like beds, mattresses etc who wants them!

Similarly when we bought our current house we refused to move in until every scrape of furniture etc had been removed.

Op I'm afraid they are taking clear advantage of you. You need to talk to you solicitor who I'm not impressed with letting vendors pull a fast one like this.

Valhallapt

jhegarty wrote: »

That's now how it works.

If it worked like that then everyone would sell houses for 1 euro and the furniture for €240k.

15k to furnish a house is not outlandish. True it may be inflated, you might not agree it’s worth 15k, but if the vendor is ok with it, I know I would be, then it’s all legit and above board.

SurplusToys

Valhallapt wrote: »

If the buyer agrees the furniture is worth 15k, then it’s worth 15k, no matter how you feel about it. Nothing illegal about it, however you defaming the vendor and accusing them of tax evasion, may land you in hot water. I hope there is nothing identifiable about the vendor in this thread.

Im not defaming or accusing anybody of anything.

I'm asking for opinions on "Have I been scammed?"

Just asking a question

Valhallapt

SurplusToys wrote: »

Im not defaming or accusing anybody of anything.

I'm asking for opinions on "Have I been scammed?"

Just asking a question

You haven’t been scammed, I don’t think I’ve ever bought a property and there not been an element of this involved.

You are free to say no to it.

It’s a lot of nonsense on this thread, the only common theme is that your solicitor seems naïve. If you are uncomfortable with it, just say no, but it’s not a scam.

Valhallapt

There is nothing more expensive than cheap legal advice.

The amount of times you seem people shopping around to get cheap conveyancing work done, 1,500 all in deals are taking massive risks with the biggest purchase of their lives.

charlie14

For what it is worth it sounds to me like the seller attempting to exploit a loop-hole in the tax laws where there are different tax rates for the property and the contents. Such loop-holes have been exploited by businesses and major corporations for decades involving sums much greater than this 15K without much of anything being done to plug those holes.
When it involves large sums of money it appears it is just tax avoidance where-as low numbers like this are regarded as tax evasion.
Is it really the OP`s problem that the seller is exploiting a loop-hole where refusing to play ball may result in the loss of the property ?

banie01

If the OP's mortgage is for a €225k purchase price and they can fund the 15k difference?
Then fine, this isn't an issue and they should crack on happy to pay the price they agreed for the property.

If on the other hand their financing is reliant upon a €240k valuation?
Well then in the current climate, I can't see the drawdown application getting past the underwriters.

The seller is trying to exploit varying tax rates to minimise his liability.
It's poor practice and tbh, not a strategy I'd entertain.
Has the seller forwarded an itemised and costed inventory?
It's a strategy that on the sellers part will likely lead to an audit.

appledrop

The buyer has clearly stated here that no other bids on property so doesn't look at any great risk of losing it.

To be honest I'd be afraid already paying over the odds as no other bidders and upped the price by themselves from 225 to 240 which is that why I asked how much did bank value house for when giving mortgage approval?

It's up to buyer how much they want to buy the house but as a 1st time buyer I feel they are been taken for advantage big time.