Property Purchase - pay cash in addition to official price

[First time poster. Hope I’m abiding by all appropriate forum protocols in asking the following question]

After putting an offer on a property the vendor contacted me directly with a proposal:

Let’s say I initially offered amount €X.

(1) He is prepared to sell the property to me for a discount relative to my offer (€X - 5k)
(2) The actual stated price of the property on the contract will be lower again (€X - 25k)
(3) I pay him the different between (1) and (2) in a separate cash transaction (ie 20k)

The variables (ie (1) and (2)) are still subject to negotiation and nothing is agreed at this stage.

I’m just trying to understand the implications of the above and why he might be offering such an arrangement (which he has told me is not so unusual).

For starters, the obvious points are as follows:

  • effectively I would be paying more up front in cash terms but the overall purchase price will be lower than my initial offer
  • my 90% LTV mortgage will now be based on the lower official price (2) so I will need to find additional cash somewhere to make this transaction work
  • the stamp duty would be marginally lower being based on €X - 25k (rather than €X)
  • life insurance costs etc would be based on the lower official price also (marginal impact)

It seems a peculiar way of doing things but (assuming I can raise the additional cash) seems to present no real drawback to me. Why would he be offering this? (Perhaps issues with his bank?) Is there anything I should be wary of?

Look forward to hearing any advice or comments people may have on this.

Sure go for it but on one condition. You run it by a revenue official. :angry:

The vendor probably wants to pocket the 20k. Pay no CGT on it, hide it from a co-owner or keep it from a bank who is forcing him to sell up. It isn’t common but it’s not unheard of. It is illegal (for him) though. I’m not sure if it’s illegal for you but your solicitor won’t facilitate it.

Whilst the Revenue may not go after you, I would like to point out that anybody who "aides and abets " someone engage in a Revenue offence is themselves guilty of a Revenue offence

it debatable if the proposal falls within the section or not.

Personally, I would “run a mile” but I’m conservative when it comes to these issues

It seems to be more common. Sure I had my own thread.

Ask yourself this.

If possible and for how long would it take you to earn this money tax free?

Ask yourself would you be happy to give it away in black plastic bag under the table as quickly as it took you to read my post?

The way I read it and see it is you posted here therfore their is doubt in your mined or part of you knows something is not right. You are uneasy. It could be initial gut feeling.

This is the first sign of trouble ahead if you are willing to pay attention. What happens when you ignore it. Will the next signal be more of a loss than giving away 20K tax free. (you have no come back here).

If the person is willing to engage in this kind of activity what else have they not told you about the deal you think you want to strike. Are there things about the house equally untoward that you won’t find out until you move in? What else might crop up and surprise along the way that you simply have no way to know other than paying attention to this first warning sign.

What happens if you ignore this one and the next. It’s not about risk as this stage it’s the other parties risk that being tested.

This is about understanding what you probably already intuitively understand but in a rational way.

My counter offer would be to, walk away.

Another counter offer would be to say, “tell you what knock of the 20K anyway and I won’t say a word to no one”.

You have leverage. You know this person is willing to evade tax and is happy to stuff you for 20K using your needs and the market to their advantage beyond what is legal, to engage in their plan which sees them riding off in the sunset and you where? (out of their picture)… but no.

You make them a low ball offer and promise not to ever speak of their little transgression again.

I like that part where he makes four times as much from the scam as you do.

I’d guess this is about stitching up the bank.

There is a valid reason sometimes for not paying full price. For example if contents are negotiated separately. Usually the sum is small though. I do know of one case where the difference was big because some expensive curtains, appliances and electrical equipment was negotiated separately. I assume this is fine from a revenue perspective.

Your scenario sounds dodgey though

Yes that’s fine

It was more common when we had the mad higher stamp duty rates

Basically " fittings" can be transferred by delivery - eg no stampable document

However "fixtures " cannot

The test is normally " would the surface be damaged if removed " so carpets are fine but say a built in wardrobe would not be ( or a kitchen etc)

I know of somebody who entered into an arrangement like this about 4 years ago. Ended in total disaster as the sellers just pocketed the under the table cash and then started throwing up all sorts of delays on the sale. In the end they claimed the bank wouldn’t let them sell at the agreed price. Then they couldn’t return the return the money because blah blah blah. After about 3 years the couple buying had to walk away several k poorer. There had no comeback in law as the arrangement was by design not on paper as the idea was to avoid tax.

Once the trouble started for them they started to hear all sorts of stories about the sellers. Compo claims from accidents, unpaid tradesmen, disputes with car garages, unfair dismissal from work etc. if you’re seriously considering this, at a minimum do your homework in the other party. Once the brown envelope is given over, you’re completely at the mercy of their honesty - IE that they’re only dishonest towards gov/tax/bank and not towards individuals such as yourself.

Quite simply if you enter this arrangement you are helping the seller defraud somone else.

At best you get away 5k better off. At worst you loose the €20k and the person you helped defraud comes after you because they know where you live. That could be the revenue, a disgruntled spouse, gypsies or Russians who knows?

The seller in this case is by definition not trustworthy. I would run a mile from this sort of transaction. Run it by your solicitor to get his/her professional opine.

Wouldn’t touch this with a barge pole,stay clear-doubt you will find a solicitor anywhere that will give you different advice let alone act for you in any way shape or form with this matter.

This scenario may explain some of the anecdotal cases where people lose bidding wars but the sale apparently closes for a lower price than their bid.

Good point!

Maybe the seller is in debt. Then he can tell the bank he only got X for the house, the bank is taking that money. But he gets to keep the 20k. You can’t manage this extra ‘deal’ on your own with no legal back up, so you will have to get a solicitor involved.
All the risk is being taken by you, with no advantage on your part.

A criminal is always a criminal. This is a criminal activity. You are inviting a criminal into your life. He is looking for a fool to dupe. Don’t be that fool. This activity has few benefits to you and lots of benefits to the criminal. He has a hold over you that he may retain. He may say that you promised him a higher amount and threaten you if you do not pay. Any complaints about extortion might not be take seriously. He may taken the money and not complete the transaction. He may say he never got the money. He may start looking for a small amount of cash and if you agree look to increase it and suck you paying into a much larger amount. This has the potential to be a con that will cost you. Any people he is defrauding may complain to you or about you. While any such complaints may be without merit, they will cause you time and money to deal with.

Large, single cash transactions like this are potentially illegal. See sections 24 and 25 of Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 - irishstatutebook.ie/2010/en/ … print.html.

Walk away firmly and quickly and without hesitation and without second thoughts.

Even if you get away with this, you are abetting a fraud.
Do you want to make the world better, or be a fraud abettor?
Your choice.

Was offered a similar arrangement in the past, by a buyer. This was purely to minimise stamp duty. After carefully considering the offer for at least a nanosecond I told them to poke it. After a good bit of delaying, they eventually bought for the full price.

Run a mile from this.

This is interesting because while it benefits you in the short term, if you buy an NPPR with a bit of cash to sweeten the deal, then there could be CGT due in the future as your gain appears to be higher than it was.

Saying that, I do know my mum slipped the sellers 10k back in the 90s but they weren’t total strangers.

I can’t see why you would do it. It is of no real advantage to you and its fraud.

I guess it’s a disadvantage to you if you refuse to do it and the other guy bidding the same as you agrees to it.