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August 23, 2008
lower offer with cash at closing?
Hi,
I received an offer on my 2 family in Sunnyside Queens. It is a very low offer on paper but the potential buyer wants to bring an additional 50k cash to the closing as an incentive. My house has been on the market for a year, the price has been lowered and I need to sell. However, I am somewhat uncomfortable to accepting this but I have no other offers. What are the possible ramifications of accepting this arrangement? Assuming of course, I will declare this income on my taxes. Thanks Brownstoners.
Comments
there is a reason for cash offers to not declare it ;).
Posted by: armchairwarrior at August 23, 2008 10:10 PM
Yes, I know and its tempting, I just think it is unorthodox but I am not a business person used to "handling cash".
Posted by: cashoffer at August 23, 2008 10:31 PM
immigrants do it all the time.
Posted by: armchairwarrior at August 23, 2008 10:38 PM
is it part of the contract? What if he does not bring the cash - you still will have to give him the house.
Posted by: bobjohn at August 23, 2008 10:59 PM
funny you said that, they are South American.
Posted by: cashoffer at August 23, 2008 11:01 PM
"immigrants do it all the time." ... really? Immigrant can just declare equity he had before immigrating to US. It is perfectly legal to immigrate with millions of dollars in your account.
I would think more about drug dealer.
Posted by: bobjohn at August 23, 2008 11:04 PM
More likely, the guy has a lot of undeclared cash income he needs to wash. He doesn't have to be a drug dealer. He could just be someone doing lots of work off the books. Beware though. If he gets popped by the IRS he could send them your way as part of his plea deal.
Posted by: Steve at August 23, 2008 11:16 PM
Thanks Steve, I think that was a more realistic type of answer I was looking for.
Posted by: cashoffer at August 23, 2008 11:40 PM
alot of immigrants have undeclared income. people do it all the time. not unusual.
Posted by: armchairwarrior at August 24, 2008 2:05 AM
thats scaremongering steve.
Posted by: armchairwarrior at August 24, 2008 2:06 AM
But if he sends them 'your way' you could declare innocence if handled correctly. That is, nothing in writing. And of course you don't deposit the cash, you live off it instead of ATM withdrawals for a while. That's the point of cash, to be untraceable.
However I would hire a private armed guard to meet me at the closing. Imagine if you were being 'set up' by the person giving you the cash.
Posted by: denton at August 24, 2008 6:54 AM
There's a reason you have a lawyer. What does she/he say?
Posted by: rh at August 24, 2008 7:38 AM
Even if your lawyer personally doesn't think you'd get in trouble, thinks you should go ahead and take the deal and sell the house, etc etc, a lawyer still can't tell you to do something illegal. So that's a decision you have to make on your own. But the lawyer could tell you what potentially could happen to you or what are the dangers might be in taking this cash, if that's the information you're seeking.
Posted by: traditionalmod at August 24, 2008 10:54 AM
Something just occurred to me, re-reading the OP post.
This $50K in cash can't be on paper obviously as a contract, it's a handshake deal. That's not good. The buyer can so easily not pay the seller the $50K at closing, he knows the seller can't sue him for it, and meanwhile he'd have a written contract saying the OP sold the house to him for the lowball offer the OP accepted. If the guy can't give the OP the $50K now up front on signing the contract, not after signing the contract, the OP should walk.
Posted by: traditionalmod at August 24, 2008 10:59 AM
When I bought my condos I paid cash. In otherwords the money was in the bank account and I wrote the checks. I am not a drug dealer nor an immigrant but I got a lower price on the property and was able to close quickly.
I went to contract around thanksgiving and attended the closing on new years eve. It was smooth.
Posted by: madamlee at August 24, 2008 12:16 PM
Scaremongering, indeed. The IRS has dealt with money laundering for generations, and with organizations a lot more expert at hiding cash than a couple of people at a house closing. That's what forensic accountants do for a living.
The buyer can use his cash to buy money orders to bring to the closing. That should be enough to keep the seller's hands clean in case of an audit.
Posted by: Steve at August 24, 2008 2:24 PM
Hey Steve, problem with a money order is the seller would have to deposit it into his bank account. So it's not really cash, it's then traceable. If no audit, no problem. But given the OP's statement he is not used to 'handling cash', maybe s/he shouldn't take the many risks involved.
Posted by: denton at August 24, 2008 4:00 PM
The seller said to assume that he would declare the cash. A money order is safer than cash because it establishes a traceable paper trail in case the IRS comes sniffing.
Posted by: Steve at August 24, 2008 5:41 PM
Most closings require certified checks from a bank.
Posted by: madamlee at August 24, 2008 7:09 PM
Er . . . let's just say someone I know did this on their first apartment. Appraisal came in $30k below agreed-to price (and $150k below last sale. Appraiser had never worked in Brooklyn Heights. Different age.) And my . . . friend . . . split the difference in cash (certified check) with the seller at closing. Anyway, cash transaction component can be on contract. Not on mortgage. Lawyer can handle. Call it $50k for furniture if you like. A semi-common occurrence.
Posted by: Johnny at August 24, 2008 9:23 PM
I wouldn't take the cash. Legally it can and will come back to bite you if the buyer's money is somehow tainted.
Posted by: FenFen at August 24, 2008 9:31 PM
Wow, thanks all for the comments, please keep them coming. I have actually tried to google my questions but I haven't found anything useful. I will add a few things to my OP. I don't think the South American man who wants to offer me $50k at the closing is any kind of drug lord. He drives a minivan and looks like his wife dresses him. Since I want to put that $ in the bank, I'd have to declare it somehow. Living off the cash isn't feasible in my situation, I have other debts.
I like the "furniture" idea. Steve, doesn't the mortgage company need to see the contract? Wouldn't someone at the bank notice the 50k "furniture" clause? The buyer is still going to get a mortgage, he is not paying for the entire property in cash(unfortunately). Would he need to bring me 50 1000$ money orders and then I would sign and deposit all? Depositing a lot of small payments in a row, isn't that an IRS flag?
Posted by: cashoffer at August 24, 2008 11:00 PM
That "furniture" thing was Johnny's comment, not mine. Why should your mortgage company care so long as you pay off your mortgage in full at closing?
I think you should look at it from the buyer's perspective. He wants to unload a bunch of cash he didn't pay taxes on. That's his IRS problem, not yours. It shouldn't affect the contracted sale price of the house. He's just bringing to the closing 50 grand in cash/money order + a check from his bank for the purchase price minus 50 grand.
So long as your hands are clean, the IRS shouldn't be interested in you. They'll go after the house he just bought.
Posted by: Steve at August 24, 2008 11:55 PM
I dont think its a big deal. Do you think the guy who sold Gotti's suits ever had a problem?
Interestingly, Jacob the Jeweler is the exception b/c he actively assisted drug dealers in laundering money and then lied about it when the feds asked. now he's going to jail.
Posted by: slick at August 25, 2008 4:31 AM
Its very simple, get the cash before signing the deed over. The bank/attorneys/clsoing agent need not know any of it.
No cash - Do not close, it is done all of the time.
Posted by: newsouthsloper at August 25, 2008 8:25 AM
Your lawyer will be able to tell you how to best handle the cash portion.
Essentially the bank's lawyers leave the room when their business is concluded. Your and the sellers lawyers stay at the table and resolve the private issue, in a contract rider I believe, between you and the buyer. At - not before - the closing.
People that sell houses make very large deposits. That large deposits are tracked by the IRS doesn't mean it's illegal. Unless you believe the money's from an illegal source, if you declare the cash it's a completely legitimate transaction on your end. Buyer wanted to pay some of the cost in cash. Big proverbial wup. The buyer may have misrepresented his total income on his mortgage app because (allegedly) he has some unreported income, but that's his concern, no?
Posted by: Johnny at August 25, 2008 9:38 AM
Ask another south American what to do.
Posted by: madamlee at August 25, 2008 10:05 AM
....if it's cash....and not money orders, invest in a phony cash ink pen....
Posted by: moreteasir at August 25, 2008 12:49 PM
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