Inflated Purchase Price
Has anyone else read this article in Brick Underground about inflating the purchase price of a co-op in order to help it pass the board and keep prices up in the building? I had never heard of this until now. I’m fascinated. Anyone have this experience? http://www.brickunderground.com/blog/2010/05/sales_prices_of_1_in_10_co_ops_manipulated_to_boost_property_values
Has anyone else read this article in Brick Underground about inflating the purchase price of a co-op in order to help it pass the board and keep prices up in the building? I had never heard of this until now. I’m fascinated. Anyone have this experience?
http://www.brickunderground.com/blog/2010/05/sales_prices_of_1_in_10_co_ops_manipulated_to_boost_property_values
This is exactly what I pointed out once in a thread on Brownstoner where people were gloating about a large apt in a PPW coop not selling. My comment was that it doesn’t mean they didn’t get offers or nobody wanted the apt; probably the coop board turned down offers for not being high enough. And some longtime Brownstone member, can’t remember who, slammed me and said it wasn’t true.
I don’t know the details but do know it passed muster by my MIL’s lawyer, RE lawyer, and accountant. So there must be a way to set it up so it’s legal (if not totally ethical).
Who pays the extra transfer taxes?
Also, who indemnifies who when the IRS finds out the basis was overstated by $250K? And who agrees to do the federal time for tax fraud?
Oy vey, this type of stuff ruins it for normal coops like ours. I’m on the board and in the building for a long time and we have never done anything like that. I guess it happens in the more “prime” neighborhoods. Who knows.
bklynblues,
the more typical coop meddling is the board rejecting a purchase price being too low but yet not willing to exercise coop’s right of 1st refusal to buy the unit (ie if price is so low/juicy, why not coop buy it).
lol more4less.
fawn, that’s exactly the type of thing they mention in the article. wow. i’m really kinda shocked but i guess not totally surprised. i’m beginning to learn co-op boards are really not ideal at times, though i’m sure some ppl think they are super helpful. i just see them as meddling.
need to find me a sucker for this – ie they’ll find out I aint giving back the “extra” $$$ hence sucka
Good lord.
I’ve heard of it happening in Manhattan. When my mother-in-law bought her UES coop last year, the apartment was a mess, had been on the market for more than a year, and was priced unrealistically high. It went into contract for something like $400,000 less than the (pre-crash) comp sales in the building. She was initally rejected by the board because the contract price was ‘too low’. In the end, the sellers negotiated with my MIL and the board that she would pay $250k more than the agreed on price (it was an all cash purchase), the higher price would be recorded by the city, and then the sellers would refund $250k back to my MIL. Aparently it happens all the time.