We have a buyer for our FSBO?

[ERD50]

Originally Posted by rk911 View Post
because of the horrible condition the asking was a lot less than appraised value but that plus the usual seller expenses will give us a nice loss against taxes.

Can you take a loss on a house that was not a rental? I know you can't for your personal residence. I don't know about one you inherit. The cost basis is updated when you inherit. Usually that's for the better, but if he paid more than it is worth now, you don't get to claim that loss. Maybe you can write off the loss on the seller expenses, but that's really it.

Sounds very questionable. CPA may be playing fast and loose, or there is something lost in translation.

Why would it sell for a lot less than appraised value ? The "horrible condition" should have reflected that. Unless something changed, and/or a lot of time passed between the date of death and when you got it on the market (like a real estate crash), it should be close to the appraised value (that's the whole purpose of an appraisal).

Maybe the IRS would never question it, but it sounds fishy to me. Every beneficiary could go "appraisal hunting" to find the highest and then claim a loss.

-ERD50

 

[rk911]

Sounds very questionable. CPA may be playing fast and loose, or there is something lost in translation.

Why would it sell for a lot less than appraised value ? The "horrible condition" should have reflected that. Unless something changed, and/or a lot of time passed between the date of death and when you got it on the market (like a real estate crash), it should be close to the appraised value (that's the whole purpose of an appraisal).

Maybe the IRS would never question it, but it sounds fishy to me. Every beneficiary could go "appraisal hunting" to find the highest and then claim a loss.

-ERD50

property values in San Jose are through the roof. even in it’s condition it appraised for more than our asking. we were looking for a quick sale. giving a break to a young couple just starting out was a bonus. they’re gonna have to make a lot of repairs before they can move in. oh, my wife is the only heir.

 

[NgineER]

Can you take a loss on a house that was not a rental? I know you can't for your personal residence. I don't know about one you inherit. The cost basis is updated when you inherit. Usually that's for the better, but if he paid more than it is worth now, you don't get to claim that loss. Maybe you can write off the loss on the seller expenses, but that's really it.

I thought you were correct, but a google search revealed it is possible to deduct the losses. But it seems open for interpretation.
If the inherited house has its basis reset and you can assume it is the appraised value and you sell it for less, you can claim that loss.

But as ERD50 says, the appraised value should be reflective of its condition at appraisal. But I know that appraisers sometimes set the appraised value as a cleaned up property with paint and basic repairs as well, so they might be lucky here.

 

[rk911]

...But as ERD50 says, the appraised value should be reflective of its condition at appraisal. But I know that appraisers sometimes set the appraised value as a cleaned up property with paint and basic repairs as well, so they might be lucky here.

in our case the appraised value of the townhouse reflected it's current neglected condition minus the 6-dumptrucks of junk, 9-banker' boxes of paper and 20-carloads of other stuff to goodwill. as i wrote our aim was a quick sale. if the sale to young couple who did buy it had fallen thru we had a couple of flippers lined up.

 

[cathy63]

in our case the appraised value of the townhouse reflected it's current neglected condition minus the 6-dumptrucks of junk, 9-banker' boxes of paper and 20-carloads of other stuff to goodwill. as i wrote our aim was a quick sale. if the sale to young couple who did buy it had fallen thru we had a couple of flippers lined up.

This could be a problem. You can use the appraisal to establish your wife's basis in the property assuming that it was done within a few months of her brother's death, but then as others have said, that's also the fair market value for the property. If you sell something for less than its FMV, then the difference between the FMV and sales price is a gift to the buyer, not a capital loss. If the value of the gift exceeds the gift tax exemption ($15K per person), your wife has to file a gift tax return.

You can't really tell the IRS that the appraisal you got after you agreed to a price did reflect the value of the townhouse so it's your basis, but the sale price reflects the actual FMV so you're claiming a capital loss (which would be long term since she inherited the house) and there's no gift. You have to have some good reason for why the basis and FMV are different in order to claim a loss.

When you do your taxes, you should talk this over with your CPA again and make sure she has the complete timeline and dollar amounts for the appraisal and when you accepted the buyers' offer. Since property values have been rising so quickly, I suspect that your best option (and the one least likely to catch the IRS' attention) will be to use the sale price as your basis/FMV and just take the selling expenses as a long term capital loss. I would be careful about claiming a substantial long term loss on real estate in this year when the market is going wild. That could be a big "audit me" flag to the IRS.

 

[pb4uski]

^^^ exactly what I was thinking but better put.

 

[thatguy]

They knew the price, and condition, when they were anxious to send me a contract. I'm still refusing to pay their requested closing credit.
I just received a text from the dad, listing a exaggerated list of things the house needs and asking me to be reasonable.
Still no real identity or contact with the person whos name is on the contract. Just a name. No address, no phone number.
Other than the email, contact has been through the lawyers. My lawyer has not commented on the hidden buyer thing.

I'm not negotiating with a buyer who is only a name on a piece of paper with no contact information, that has not seen the house.

Meanwhile we're been cleaning out the house and will eventually have it ready to list with a realtor. I don't know what the place is worth. I'll take what a realtor can get.

 

[MissMolly]

Why not suggest to the neighbor that he go out and find two houses side-by-side and he can buy both and then HE can be the one dealing with all the hassles of moving?

 

[cathy63]

... My lawyer has not commented on the hidden buyer thing.

I'm not negotiating with a buyer who is only a name on a piece of paper with no contact information, that has not seen the house...

Why not? It's pretty normal when selling a house to negotiate with the buyer's rep instead of directly with the buyer. As the seller it's kind of strange to require that the buyer represent herself or even that she see the house before purchasing it. There could be any number of reasons why she's not involved.

 

[RobbieB]

Yeah, that's why you have a realtor. When I sold Pop's house in Michigan, I never met the buyers until close to sign papers.

 

[thatguy]

Why not? It's pretty normal when selling a house to negotiate with the buyer's rep instead of directly with the buyer. As the seller it's kind of strange to require that the buyer represent herself or even that she see the house before purchasing it. There could be any number of reasons why she's not involved.

The buyers rep is just some guy who says he's her father, who says he's buying it for her but has not put his name on any paperwork. That's not the same as working with a licensed professional realtor who is representing a buyer.

 

[cathy63]

The buyers rep is just some guy who says he's her father, who says he's buying it for her but has not put his name on any paperwork. That's not the same as working with a licensed professional realtor who is representing a buyer.

So what? Why do you care if the person you negotiate with is Jack and the name on the title ends up being Susan? There's nothing wrong with a father buying a house with or for or on behalf of his daughter. There's literally no legal reason for you to see or speak with her.

If you don't want to sell the house to the daughter via the father, then decline the offer. Though if there's any possibility you could be accused of discrimination, then it's probably best to just pull the entire listing off the market until you have a representative of your own.

 

[thatguy]

I need to get the lawyers to clarify. There are certain costs I expected to pay. I don't know how the 3% they asked for is to be used. We may not be as far apart as I thought. Maybe we need to communicate exactly what I expect to pay.

 

[RetiredHappy]

I need to get the lawyers to clarify. There are certain costs I expected to pay. I don't know how the 3% they asked for is to be used. We may not be as far apart as I thought. Maybe we need to communicate exactly what I expect to pay.

Exactly. We just sold our home and bought another home, aka concurrent closing, in January. For the sale, in addition to realtors' commission, we had to pay more money for various items. On the other hand when we bought our home, despite getting a small loan, our total closing cost was only $7K including everything - lenders insurance etc, way less than 1% of the price of the home. I believe the costs to buy and sell vary with each state.

 

[Scrapr]

OP have you compared what you would get on the market with a Realtor? Maybe get a couple BPO? (Buyer Price Opinion) then you will know if your buyer is a flipper. The only thing bad about a flipper is that they can't buy at market price. Or if they do they are flipping for long

It sounds as if you are not comfortable with this buyer. If you go to market you will know how the market values your home. I think you will have sellers remorse if you sell to your buyer

*have only read portions of this thread

 

[thatguy]

OP have you compared what you would get on the market with a Realtor? Maybe get a couple BPO? (Buyer Price Opinion) then you will know if your buyer is a flipper. The only thing bad about a flipper is that they can't buy at market price. Or if they do they are flipping for long

It sounds as if you are not comfortable with this buyer. If you go to market you will know how the market values your home. I think you will have sellers remorse if you sell to your buyer

*have only read portions of this thread

The deal on the table needs to be accepted or refused before we can move on to anything else.

We never cleaned out and prepped the house enough to show it to a realtor.
We are doing some of that now because we have a potential buyer.

So, if this sale doesn't happen, we'll at least have a realtor take a look at it.

 

[RobbieB]

You can always invite a realtor. They will even give you staging tips.

 

[RetiredHappy]

The deal on the table needs to be accepted or refused before we can move on to anything else.

We never cleaned out and prepped the house enough to show it to a realtor.
We are doing some of that now because we have a potential buyer.

So, if this sale doesn't happen, we'll at least have a realtor take a look at it.

With every counter offer, there is a time limit, usually fewer than 3 days to respond, otherwise the offer lapses and it is off the table.

 

[Scrapr]

The deal on the table needs to be accepted or refused before we can move on to anything else.

We never cleaned out and prepped the house enough to show it to a realtor.
We are doing some of that now because we have a potential buyer.

So, if this sale doesn't happen, we'll at least have a realtor take a look at it.

You can always have a Realtor take a look. They have seen everything. I think you are working from weakness in that you only have 1 offer....and you don't seem excited about it. If you get a BPO you can compare to your FSBO. You keep making excuses on not wanting to sell to your buyer. I really think you will feel better by talking to a couple realtors. You seem focused on avoiding the RE commission & not the bottom line proceeds

Good luck

 

[shafer9]

Run away. Fast.

 

[cnocmmz]

We have a buyer for our old house. A dad says he's buying it for his daughter. His english language is limited. They've sent us a contract and have a loan approval letter. The daughters name is on the contract and the loan paper. Dad says he's the one paying. We don't have addresses for either of them. The daughter has not even seen the house, nor have we had any contact from her. Negotiation is going through our lawyer and their lawyer. They've asked for closing costs in an amount that is equal to their 3% down payment.
I think these people are filppers or investers. If flippers are willing to pay the price it's probably worth more.

I'm being stubborn about paying the closing cost. They put it in the contract, we took it out, they put it back in. We just said we're not paying it.

We have to do a lot of work to get our old stuff out of the house, clean and get it ready for the sale. We've just been to lazy to get it done. Once we've done the work, it will be ready to list with a realtor. If this offer falls through, I'm okay with it.

Yeah, we are in the boat essentially. We will not pay any closing cost/a earlier.. My thoughts are, “either you have the money or you do not”!

 

[HMMY]

I wouldn't have an issue with selling to a flipper or with a parent buying for a child whom I haven't met. My concern would be that I'm selling to a legitimate buyer. I would call the bank and confirm that the buyer is qualified. Presumably, the bank got the buyer's financials prior to issuing the pre-approval letter. The 3% down and refund of closing costs equals 100% financing. I don't know what bank is doing 100% financing after the Great Financial Crisis unless your property is severely undervalued, i.e. the loan amount is less than 80% of the value of the property. If that's the case, you are selling at a significant discount to avoid cleaning up the property.

 

[Maidensong]

In real estate, the one who cares the least wins. If you don't mind losing this buyer, by all means, stick to your guns. In most places it seems to be a sellers' market, but I would caution against turning the offer down just because you think it may be a flipper and you believe you can get more down the road.

When I was a realtor, sometimes a seller would turn down an early offer against my recommendations, in hopes of a future higher amount coming their way. It doesn't generally happen. A fresh listing has a better chance of a higher sale price than one that has languished on the MLS a while.

And while the real estate market is incredibly hot right now, remember what goes up...well, you know the rest.

 

[Lienlord]

As my user name suggests, I'm involved in many aspects of real estate. We buy, sell, flip, rent, finance, etc. This deal sort of reminds me of one from a few years ago. I bought a group of houses cheap and put one up for sale the same day. Folks across the street called an hour later wanting it for their "sister". Their english was also limited, but seemed like nice people. I offered a fair price, and they accepted but asked if I would owner finance with 20% down and a 10 year amortization @ 8%. I agreed, and they've made double payments like clockwork. The house needed to be remodeled before anyone could move in, and it looks like they've done some work; but so far nobody has moved in. In the meantime, the house has nearly doubled in value from what they paid. I'm happy with it and for them! But I will miss that 8% $$!

 

[thatguy]

They have agreed to the deal without the closing credit. I have the rest of the month to get my stuff out and clean up. I don't think it's in the contract but I mean to try to make the place as nice as I can for them. I just hope the closing process protects me.

I figure the place has been costing me $450 per month sitting there. It will be nice to get rid of that.