Q: We are builders and we have a buyer who wants to buy one of our houses as a gift for his brother. He is giving us earnest deposit checks for less than $10,000. Are there any problems with this?
A: From your perspective, you need to follow your sale of the home as you would any other sale. You and your buyer should sign a purchase agreement for the sale of the home. If the buyer wants to designate a different person to receive title to the home upon settlement or closing, you should specify that in your contract. Your real estate attorney should review your contract and documentation to make sure you have done things right.
When you go to settlement or closing, you would treat the transaction in the same manner as any other. Your documentation would show the sales price and the costs to close the transaction would be the same. If you are required to disclose the sales price and pay any transfer taxes, you would pay the amount owed based on the sales price of the home.
Your buyer would pay all expenses based on that purchase price and if your buyer designates his brother as the owner of the property, you might need your buyer and his brother to sign the various documents required for settlement or closing. You need to remember to paper your file, report the transaction and handle the transaction as a sale and as you would any other one of your sales.
Are there going to be legal repercussions for your buyer and his brother? Perhaps.
You’d be doing your buyer a favor by suggesting that he may want to discuss the situation with his attorney, tax preparer or estate planner. Your buyer’s gift of the home to his brother would likely result in your buyer having to report the gift to the IRS. The gift may or may not benefit him in the long term depending on how much money he has and his estate plan.
If your buyer is trying to transfer some of his wealth to his brother, there may be far better ways. By consulting with a competent estate planning attorney, your buyer may find other opportunities to transfer his wealth while benefiting his estate plan.
June 5, 2008.
Leave A Comment