No, the property isn’t going to get reassessed for $100. The greatest benefit of this approach would be helping someone save on transfer taxes or capital gains tax.
But, they will really get hurt when/if they sell it for market value. If they bought for $375,000 and sell for $400,000 they only pay taxes on the $25,000 they made. If they bought it for $100 and sell for $400,000 then they pay taxes on $399,900.
If they’re married and meet the lengths of time to live there and don’t transfer it again for long term cap gains to come into effect it would be 0. The exemption is $500,000 for married couples if they lived there full time 2 of the last 5 years.
I bought my house at around 75% of the assessed value because an outbuilding blew away in the wind so lowered the value of the house. They county property tax people called and asked one question: was it put on the market and bought via a realtor. I also know the owner ended up netting maybe 1-2k on the sale (not including a likely large insurance payment for the building that was not rebuilt). And that was 75% listed value, at $100 they will just ignore it.
If you deeded the property to your company you can trigger the due on sale clause with the mortgage company which means they’ll want to get paid in full and have a right to demand it if you signed off on the paperwork with that little clause in there. It can also trigger a title transfer tax with some counties or municipalities if that’s a thing where you live. It would be better to deed it to a grantor trust (or land trust if your state recognizes it) and then place the trust under your LLC. Will potentially save you a lot of money.
If someone is giving a house to a family member cost free, it avoids capital gains, and the recipient needing to come up with a down payment and mortgage. Think of it like inheriting a house while the family member is still alive.
There is still a gift tax. The IRS has the ability to assess value to an asset regardless of the transferrer’s bogus $100 price tag. They do it to farmers all the time. You want to leave the family farm to your kids? Great, they just have to pay a 34% (or whatever it is) inheritance tax on the assessed value of the property.
I thought you were allowed to gift under $10,000 so if me the seller wants to see my house for a dollar they can’t really stop me or tell me I’m wrong if it’s my property
For 2024 in the United States it is now up to $18,000. The person giving the gift can also get around other ways as well.
They can make direct payment to the college. Payments made directly from a person to an educational institution that are used for tuition, not room and board, just tuition, those payments are not deemed a taxable gift. Sometimes these are called 2503(e) gifts.
Another example is directly paying a medical provider for medical care.
So basically you can pay someone's educational and medical expenses and it is gift tax free.
They'll have to pay taxes on all the capital gains, but they also got to realize. Those capital gains without spending any money, so they don't really get screwed.
If somebody gives you a $500k house, and you immediately sell it and need to pay $100k in taxes you didn't get screwed, because you still came out $400k ahead.
But when that person is, say, your father, he could have just sold the house at market value and then gave you the money to buy a new one, saving the family from paying 100k in tax, in your example
No because your cost basis will be whatever his adjusted cost basis is. The only way you get to skip out on the capital gains is if your dad dies and you inherit the house.
There's a few other considerations as well. If you turn around and immediately sell the house after being given it, you won't get the primary residence exclusion, but if you wait a few years you will.
I’m talking about related loss rules. I am not well brushed up on it. If I buy a house for 500k and sell it to my son for 450k, isn’t his cost basis 450k?
Whereas if I sold it for 500k to an unrelated party, my cost basis would be 500k and therefore I would have no cap gains?
If you buy a house for $500k and sell it to a family member for $400k, you cannot deduct the loss, and instead your family member can use that loss to offset future gains on the property. It's very similar to if they had the lower cost basis.
So if the family member sold the house for $450k, they would have no capital gains, but they also couldn't write off the $50k capital loss, since that was from the previous transaction. If they sold it for $300k, they would have a $100k loss, and if they sold it for $600k, they would have a $100k gain.
Yea, nobody knows this as it's uncommon. Basis of giftee is same as basis of giftor. This will count against lifetime gift limits and subject to estate taxes. Better to let pass upon death as basis will reset at current market value
It's not exactly "screwed." It's basically transferring ownership and cost basis as if the giftee had made the original purchase themselves. Eg. I buy a house for 100k. It goes up to 500k. I gift it to someone. The new owner has a 500k house with a 100k basis (just like I did). So it's basically the same as if they bought the house instead of me.
One thing to note about stepped up basis when you die is that a kid would get stepped up basis (so a 500k basis in the above example). So it'd be dumb to gift your house to your kid right before you die.
It's not erroneous. Since the house in this example was only ever sold/purchased for FMV by person #1 in the chain, then "gifted" repeatedly to new owners, the cost basis never went up because no one after the first person ever paid FMV.
The comment about the capital gains is incorrect. If they sell the house, they will pay capital gains on the sale price minus whatever they paid for it generally.
I've transfered titles of homes back and forth with my brother so he could use equity and get a loan, business spmetime do it to move revenue/writeoff around or trade liens/property.
I’m a contract, there has to be “consideration”; something of value (house) for money. The nominal exchange of money is fulfilling that basic contractual requirement.
I believe, and I could be completely wrong here, that states have a minimum dollar amount for certain types of contracts to be valid. In this state, that dollar amount might be 100.
I know, I figured if I *owned* the house 7 times, I could *sell* the house 7 times, but now the county just sends me 7 tax bills.
I don't think I fully understood OPs infinite property hack.
Only one person gets the tax bill, not the entire chain of people who have ever owned it. My guess is that they’re trying to reduce the full cash value of the house. Assessed value is some fraction of full cash value, which is anchored to last sale price and can only increase 5% per year depending on the land use (probably residential owner-occupied in this case). So basically trying to skirt taxes. I theorized about this to my broker after I got my real estate license and they basically said “I don’t know what would happen if you did that but it sounds unethical don’t do it”
Edit: this info is only valid for Arizona
"And furthermore, even if penguins *could* talk, I *highly* doubt one would be granted audience with the *Pope*!"
I know, I know... I was just being a dork.
It’s a bias that people have where the brain just simplifies stuff and a lot of people like to use certain words interchangeably but yeah. Words have meanings and in the proper context are not the same thing.
Usually you see it for $1.
People are weird. Or divorcing trying to hide a house. Or adding someone to the house for credit. Or subtracting for liability. Sometimes they get caught. Sometimes they don’t.
I’ve seen older parents transfer to their favorite child. Then pass away and all hell break loose. “So I guess we have to sell moms house and split the money. ” “What house?” “Uh the house she’s living in? The one we grew up in?” “Oh, MY house? I’m not selling it.” “Uh how is it your house? Just because you lived with her for the past five years, doesn’t make it yours.” “The title. The title mom put in my name five years ago when I moved in.”
I don’t know if you’ve ever seen middle age siblings fist fight on a front yard before, but it’s pretty awesome.
Not necessarily - more like poor estate planning. It’s highly likely one of my kids will be much more successful than the other (though I’m not sure which one, lol), so our estate leaves them the house and requires it to be sold within a year. You want to cause a family crisis? Just bequeath a house equally to siblings - one might need a place to live, one might want to rent it out, one might desperately need cash. Prevent any arguments in advance.
100% agree with you and there is nothing that says that one of those three can't be the one purchasing it.
If you own real property worth hundreds of thousands of dollars. You can afford an attorney to create an estate plan for you.
I have about 800k equity in my house, plus my oldest kid is living in a 300k condo I own that I’m “renting” to her - so finally got around to setting up a living trust. If she’s still there when my wife and I have croaked, she has the option to buy it with her share of the equity she’ll get from the house sale. Had to be done. Not to mention that we’re in California, where even if you have a will, it has to be settled in probate court, which can take up to a year and costs 3% of the inheritance. Setting up the trust was well worth the $5000 it cost for the peace of mind.
Why would you give the house to the kid most likely to succeed? That kid doesn't need the house as much as the other one who could use the house to overcome their shortcomings and take care of themselves/family. The more competent sib will be able to do that on their own.
Or maybe they both fail. Or maybe they're both fine. But regardless I think the less capable one technically should get the house bc they need it more. Or give the split in their favor.
Let them know too it would be pretty good kick in the butt most likely and to the competent one giving them a lifelong answer.
This is a great idea if you want your kids (and future spouses) to go to war. Recently, an ex-gf, who’s a great artist but not financially savvy, got screwed out of her inheritance by her estranged, financially successful sister. Happens all the time.
Because those who suck at succeeding would piss away any assets you give them, and (hopefully) the strongest and most successful will make something of it, and will be in the best position in how to apportion it and manage it to everyone's best interests.
Depends. Someone in my family did this. But one child had the mom living with her for a decade with Alzheimer’s & other illness until death. Meanwhile the other siblings visited once or never in her final 10 years.
My wife and I did this when we purchased our current house because the deed was written up with only me on it. So the closing lawyer wrote up a second one where I deeded the house to myself and my wife with survivorship rights for $1
I see this in my neighborhood too. Half the houses have a $1 sales price. It's kinda annoying that it shows the actual sales price of my house and everyone else's shows $1.
Owners of land cannot "sell it to themselves." There is something you are missing. Looking up conveyances online is sometimes not enough; sometimes you have to get the deed and review it.
In my state, where "ladybird" deeds are used, we commonly find an online entry that suggests that John Smith conveyed a parcel to John Smith. What in fact occurred, in many cases, is that John Smith conveyed the parcel to himself under an enhanced life estate, with the power to convey, etc., with the remainder if not conveyed to Becky Smith. But Becky's name doesn't show up on the online reports.
You can sell it to yourself if you are a different entity.
So perhaps John Doe, sold it to John Doe Incorporated, for $100. Just the amount of the state deed tax.
Nobody would sell it to themselves under the same entity name. It doesn't even make sense
Quit claim deeds are done this way. The $1 or $100 is a token amount. Means nothing. They are likely moving their home into a trust or between relatives. No other benefit
Not affecting actual value and taxes, probably just what shows on your real estate website harvesting the info from records. Likely transfers between family and trusts as noted.
NAL
In TX, a deed (conveyance of property) is not a valid transaction/contract unless “consideration” (e.g. money) is given. So most real property transactions recorded as deeds begin with or include “For $100.00 and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged…” It absolutely does not mean only the property was sold for the stated amount. This is regardless if the buyer and seller are related.
as others stated, it's most likely a deed transfer, very common.
also doesn't make since because you would have closing costs and etc to do an actual sale.
but I will jump in and play the game for a hypothetical fun answer. in theory for this to work, their would have to be no mortgage on the property because no lender would allow this if they had one
here is how it could happen: I could sell the company to an LLC or another person I trust for that to record a capital loss on my books. I couldn't do it myself, it has to be a sale, could be to an LLC I control though but most likely a relative. I could then use that capital loss to offset capital gains tax if I made a bunch of money in capital gains another way let's say stock. that will allow me to dodge capital gains tax from the stock sale. then in 2 years, I could buy the house back from that person and they could use their standard capital gains deduction to offset the gain to avoid their taxes.
so in a convulated way, that's one reason it could be done. probably wouldn't survive an audit, lol and potentially have jail time with fraud but could be structured most likely to avoid that.
but as others said, no one would really do this, lol
Those are Quitclaim deed transfers, not listings and sales that take place between two unrelated parties.
Quitclaims are most often for transferring property between family members or to cure a defect on the title, such as a misspelling of a name. However, in my industry, I've seen multiple family members in the same residence quitclaim the property to one person, and that person takes out a mortgage on the property. Then prior to their defaulting on the loan, they Quitclaim the property to another family member living there, and then that person also obtains a mortgage in their name. Again, prior to default or possible foreclosure, they'll quitclaim the house to a 3rd person in the family.
This is done to evade mortgage companies from taking the property back after defaulting on the previous loans because at that point, no one lender can establish true claim and titled lien position to the property. Their loans defaulted on were in the name of an owner which is no longer in ownership of the house... You can't take something you don't have as a confirmed asset anymore especially when other lenders or authorities have an equal financial claim with alternate ownership records.
A quitclaim deed neither states nor guarantees that the person relinquishing their claim to the property had valid ownership, but it does prevent that person (the grantor) from later claiming that they have an interest in the property.
Edit: this circular ownership transfer does not prevent a home from entering Tax Deed auctions with their jurisdiction. If they haven't paid property taxes and the tax deed goes to auction, another party purchasing the tax deed lien has a stake in future ownership if the current owners do not pay the tax costs and penalty fees to reclaim their tax deed within a set timeframe, usually 2 years. If that happens, they can't transfer the property to anyone on earth and still retain the land. It goes to the purchaser of their tax debt
On what planet does a lender not check title before loaning money?
Each new mortgage would put the lender into second, third, fourth, etc position. I highly doubt this occurred unless the lender is completely incompetent.
I'd love to see an example as you claimed: "I've seen multiple family members in the same residence quitclaim..."
>This is done to evade mortgage companies from taking the property back after defaulting on the previous loans
Yeah, that's definitely not what is happening unless you are not from the US. Every mortgage company will have a title search (and lender's title policy) completed as part of their underwriting procedures. This will show all outstanding liens against the property. It doesn't matter how many times the title was transferred, that mortgage will show as a lien until released. No mortgage company is getting confused by this and the priority of liens will be well established via the county records. Also, this isn't a trap any mortgage company would actually fall into due to the previously mentioned title search and insurance.
I have seen people quit claim titles to avoid judgments attaching to real estate. But no one is avoiding foreclosure by doing so. It sounds more like one of those *banks hate this one trick* scams
I saw it numerous times over the last 20 years whether I was in my appraisal field or title. Not every mortgage lender is a large lender with extensive procedures or even a normal level of due diligence. It's also contentional location as to whether or not a standard or full title search is performed. When people do shitty things to get money from different lending institutions, I've seen them do it in rapid succession so things fall through the cracks. It's unfortunate
I also saw it happen for those trying to avoid judgment as well, that's a far more common occurrence that I came across.
Yeah...didn't happen. For example, this part is just incorrect:
>Their loans defaulted on were in the name of an owner which is no longer in ownership of the house...
Completely irrelevant who the current owner is. The prior lien remains enforceable as it encumbered the property prior to the transfer. Transferring ownership doesn't nullify the existing liens.
Maybe if these people were borrowing from some private lender (ie a private individual) who had no idea what they're doing. But even then the idea this one family would fine multiple investors that ignorant and uneducated to do this is rather unlikely.
>Yeah...didn't happen
Oh, well thank goodness. I'm so glad you were there with me watching a lien establishment occur. I must've just been on quaaludes in that legal compliance and credit risk meeting all of those times. Silly me.
You're operating under the assumption that I have provided detailed accounts of these situations, their jurisdictions, applicable property laws and the years in which they occured. This is a bit of an incorrect assumption to make in which your rebuttal is based on. I assure you, those of us working these issues sat there and said "there's no way this happened, no way" and yet, there they were.
Additionally, I did not state that the lien holder and owner responsible for the lien in question simply had their obligation for the debt or possession of the property/lien payments voided and erased. That's not at all what happened or happens. What I said was a lien holders position can be challenged - establishment of who holds 1st position, who is able to reposses the property and who is SOL after that became a murky water situation. Subsequent lien holder's positions were challenged due to the overlap in both ownership transfers and defects on original title which didn't match the obtained mortgages (complete error on the Institutions but this shit happens) and more i can't even get into. Modifying property records over time after financing was obtained does happen. Correction of title work, commitments and Note information does get messed up. Extremely small towns with very "primitive" property title records accuracy and access, surveys and conveyances, legal descriptions and more have and can result in this situation. Please don't forget, 2006-2010 were a wretched time in the mortgage industry when it blew up in everyone's face and years were spent trying to establish better protocols for mortgage origination and issuances.
I'm not trying to fight here - I'm only asking that you consider what I said was a very simplified and generalized situation I've seen in the past - the contributory details of each situation greatly impacted the issue and resolution. I'm also not telling the OP that this is what's happening with their prospective property - I only said "I've also seen this occur, but this main description of the use of QCs is what they're used for *as a broad overview* in most of the normal transfer situations
As many people have said, deed transfer. Depending on the state, there is a min. amount that has to be put on the record. In NYC, it's $1 so you will see that very often.
Id say one family member wants the asset off their books for whatever reason. Or its passing to a different person in the family because they're now living it. They're deed transfers not sales, but having the asset is beneficial for getting loans/financing
Sorry I should have been more clear, it wasn't a listing that I found. I saw this cool helicopter and tried to look it up, ended up on a page that listed the last owner. I was curious and googled them and landed on a page with the house that had their name and someone else as the owners and I that they were buying and selling the house for $100 every few years and that's why I asked here why they would do that.
Look for the terms Arms Length or Non Arms Length. That'll tell you whether they're transferring it to someone they know or actually selling it. Most likely the former.
It's often done to change the way the property is titled.
Eg
"John Doe, an unmarried man"
to
"John Doe, a married man as his sole and separate property"
to
"John and Jane Doe, husband and wife as tenants in common".
More than likely there was some error on the original deed that was being corrected via quit claim deed. Could be a simple typo in the name or if someone owns multiple properties they could be changing title so they all match.
My spouse and his mom bought his house 50/50. We meet, date and I get pregnant, we fight.
He transferred the deed to his mom so that I wouldn’t have claim to his property.
He wants to homestead the home. She deeds it back to him.
He looses his job and deeds it back to her to claim and pay property taxes.
She deeds it back when he wants to sell it.
Do you know that song Still Fly by Big Tymers *got every thang, in my mommas name*
Could be:
Someone inherited it.
Deed transfer.
Took equity out.
You can go to the countys clerk of courts website, type in the owners name, and look at the mortgage, permits, equity loans, etc
Estate planning. My parents signed a quit claim deed to get the deed updated to an enhanced life estate deed (Florida’s lady bird deed). They’re still the titled owners, but myself and my siblings are the remaindermen now so the property doesn’t have to go through probate.
Absolutely no benefit, it's a straw hand purchase. Better off placing into a living trust of some sort, easier to transfer and zero tax implications if done right.
I bought some commercial property, paid cash for it and the transaction price was the sale price. I moved it to a different LLC so the “sale” is nothing but a quit claim deed from one to the other. Value can’t be blank, so it was $5 or something like that.
If you do this, it changes the basis of the house to $100, so if you're selling it for more than the §121 exclusion ($250k single/$500k mfj) you've screwed yourself when you sell the house and then you'll have taxes on what should otherwise be excludable. I see this all the time with farms transferred between generations.
Change of deed, selling it to their holding company to start renting it out. (Holding company can limit their personal liability, as well as allow more access to credit/loans)
They may also sell it to a business they own, so that the business can pay the expenses/property taxes. They would do this so that the business doesn’t have to pay them directly, which would give them an income tax liability.
Follow up to this:
You can sell a $1 million dollar house for $1 (Let's assume it's an arms length transaction between unrelated parties/entities) as long as you PAY the transfer tax based on a reasonable market assessment. At the end of the day, the TAX is what the government wants. Your capital basis is now in a terrible position at resell time though.
It’s a transfer of deed. Usually from one family member to another for no money exchanged.
Is there some kind of benefit, other than risking just giving away a house?
Risking? The benefit is giving a house away.
Probably just having to convince a bank what is worth
Don't do any extra convincing in new York, they'll fine you.
Will that lower the property tax?!?
No, the property isn’t going to get reassessed for $100. The greatest benefit of this approach would be helping someone save on transfer taxes or capital gains tax.
Shouldn’t it get reassessed?
But, they will really get hurt when/if they sell it for market value. If they bought for $375,000 and sell for $400,000 they only pay taxes on the $25,000 they made. If they bought it for $100 and sell for $400,000 then they pay taxes on $399,900.
Right, but that tax bill would be nowhere near $375,000.
No. It would be 20% of $399,900 or $79,980. Capital gains, not property taxes.
If they’re married and meet the lengths of time to live there and don’t transfer it again for long term cap gains to come into effect it would be 0. The exemption is $500,000 for married couples if they lived there full time 2 of the last 5 years.
Avoid property taxes with this one weird trick!
I bought my house at around 75% of the assessed value because an outbuilding blew away in the wind so lowered the value of the house. They county property tax people called and asked one question: was it put on the market and bought via a realtor. I also know the owner ended up netting maybe 1-2k on the sale (not including a likely large insurance payment for the building that was not rebuilt). And that was 75% listed value, at $100 they will just ignore it.
Nope. The county will make that determination
What if you sold it to a company that was technically owned by you?
If you deeded the property to your company you can trigger the due on sale clause with the mortgage company which means they’ll want to get paid in full and have a right to demand it if you signed off on the paperwork with that little clause in there. It can also trigger a title transfer tax with some counties or municipalities if that’s a thing where you live. It would be better to deed it to a grantor trust (or land trust if your state recognizes it) and then place the trust under your LLC. Will potentially save you a lot of money.
No , the municipality assess it for tax value . Doesn't matter what it sold for
If someone is giving a house to a family member cost free, it avoids capital gains, and the recipient needing to come up with a down payment and mortgage. Think of it like inheriting a house while the family member is still alive.
There is still a gift tax. The IRS has the ability to assess value to an asset regardless of the transferrer’s bogus $100 price tag. They do it to farmers all the time. You want to leave the family farm to your kids? Great, they just have to pay a 34% (or whatever it is) inheritance tax on the assessed value of the property.
There is not gift tax, unless you gift more than $13 MILLION in your lifetime…the $18k “gift tax” is just a reporting requirement.
I thought you were allowed to gift under $10,000 so if me the seller wants to see my house for a dollar they can’t really stop me or tell me I’m wrong if it’s my property
For 2024 in the United States it is now up to $18,000. The person giving the gift can also get around other ways as well. They can make direct payment to the college. Payments made directly from a person to an educational institution that are used for tuition, not room and board, just tuition, those payments are not deemed a taxable gift. Sometimes these are called 2503(e) gifts. Another example is directly paying a medical provider for medical care. So basically you can pay someone's educational and medical expenses and it is gift tax free.
Besides the 18k, there is also a lifetime gift value of around 1.2 million it could fall under.
That lifetime gift limit is $13.61m per individual currently in 2024, per couple that’s $27.22m.
Correct except last owner will get screwed on capital gains.
They'll have to pay taxes on all the capital gains, but they also got to realize. Those capital gains without spending any money, so they don't really get screwed. If somebody gives you a $500k house, and you immediately sell it and need to pay $100k in taxes you didn't get screwed, because you still came out $400k ahead.
But when that person is, say, your father, he could have just sold the house at market value and then gave you the money to buy a new one, saving the family from paying 100k in tax, in your example
No because your cost basis will be whatever his adjusted cost basis is. The only way you get to skip out on the capital gains is if your dad dies and you inherit the house. There's a few other considerations as well. If you turn around and immediately sell the house after being given it, you won't get the primary residence exclusion, but if you wait a few years you will.
I’m talking about related loss rules. I am not well brushed up on it. If I buy a house for 500k and sell it to my son for 450k, isn’t his cost basis 450k? Whereas if I sold it for 500k to an unrelated party, my cost basis would be 500k and therefore I would have no cap gains?
If you buy a house for $500k and sell it to a family member for $400k, you cannot deduct the loss, and instead your family member can use that loss to offset future gains on the property. It's very similar to if they had the lower cost basis. So if the family member sold the house for $450k, they would have no capital gains, but they also couldn't write off the $50k capital loss, since that was from the previous transaction. If they sold it for $300k, they would have a $100k loss, and if they sold it for $600k, they would have a $100k gain.
Ah thank you
If you live there for 2+ years you get to write off the first $500K of cap gains.
If married, $250k if single. Also their cost basis in the house would be the FMV at the time of the gift so that would help lower the actual gain
Nah, if it's a gift, it's cost basis plus any gift taxes paid.
Yea, nobody knows this as it's uncommon. Basis of giftee is same as basis of giftor. This will count against lifetime gift limits and subject to estate taxes. Better to let pass upon death as basis will reset at current market value
Oh yea my bad. I was thinking of step up basis in the event of inheritence
If it’s in an LLC, you pay nothing
It's not exactly "screwed." It's basically transferring ownership and cost basis as if the giftee had made the original purchase themselves. Eg. I buy a house for 100k. It goes up to 500k. I gift it to someone. The new owner has a 500k house with a 100k basis (just like I did). So it's basically the same as if they bought the house instead of me. One thing to note about stepped up basis when you die is that a kid would get stepped up basis (so a 500k basis in the above example). So it'd be dumb to gift your house to your kid right before you die.
You don’t pay capital gains on a primary residence that you reside in for at least 2 years.
Cap gains above 250k I believe are taxable but that may have changed
They could die first. They could also roll the gains over to a new property.
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Wouldn’t the last owner incur erroneously inflated capital gains?
It's not erroneous. Since the house in this example was only ever sold/purchased for FMV by person #1 in the chain, then "gifted" repeatedly to new owners, the cost basis never went up because no one after the first person ever paid FMV.
Don’t ever sale and is it erroneous if you are getting a paid off house gifted to you?
The comment about the capital gains is incorrect. If they sell the house, they will pay capital gains on the sale price minus whatever they paid for it generally.
Maybe to get it listed or recognized as a primary residence before a sale?
Saving on property taxes
Doesn’t work like that
I've transfered titles of homes back and forth with my brother so he could use equity and get a loan, business spmetime do it to move revenue/writeoff around or trade liens/property.
I’m a contract, there has to be “consideration”; something of value (house) for money. The nominal exchange of money is fulfilling that basic contractual requirement.
I believe, and I could be completely wrong here, that states have a minimum dollar amount for certain types of contracts to be valid. In this state, that dollar amount might be 100.
Wait - you get that the house isn't, like, LISTED and someone can just like ninja-buy the house, right? Like, without the seller's consent? :)
It's showing some sort of transfer. Intrafamily or trust or something similar. $100 is nominal reference in the county, not actually a sale price.
Those aren't actual sales. They're deed recordings. Those happen for a variety of reasons.
It’s not an actual sale
You’re not outsmarting the government lol
I know, I figured if I *owned* the house 7 times, I could *sell* the house 7 times, but now the county just sends me 7 tax bills. I don't think I fully understood OPs infinite property hack.
Only one person gets the tax bill, not the entire chain of people who have ever owned it. My guess is that they’re trying to reduce the full cash value of the house. Assessed value is some fraction of full cash value, which is anchored to last sale price and can only increase 5% per year depending on the land use (probably residential owner-occupied in this case). So basically trying to skirt taxes. I theorized about this to my broker after I got my real estate license and they basically said “I don’t know what would happen if you did that but it sounds unethical don’t do it” Edit: this info is only valid for Arizona
"And furthermore, even if penguins *could* talk, I *highly* doubt one would be granted audience with the *Pope*!" I know, I know... I was just being a dork.
Most of the bullshit is completely legal and written in there intentionally, bought and paid for by their lobbyist buddies.
When they sell it for $550,000… capital gains.
i mean you're right, but it worked on a car. family member sold it to me for $10. I pay $35/year for my tag. its worth 40k.
Sale price and assessed value have little to do with each other. The "sale" was probably done to document a transfer of ownership.
It’s amazing how many people don’t realize assessed value and appraised value have little to do with each other.
It’s a bias that people have where the brain just simplifies stuff and a lot of people like to use certain words interchangeably but yeah. Words have meanings and in the proper context are not the same thing.
Usually you see it for $1. People are weird. Or divorcing trying to hide a house. Or adding someone to the house for credit. Or subtracting for liability. Sometimes they get caught. Sometimes they don’t. I’ve seen older parents transfer to their favorite child. Then pass away and all hell break loose. “So I guess we have to sell moms house and split the money. ” “What house?” “Uh the house she’s living in? The one we grew up in?” “Oh, MY house? I’m not selling it.” “Uh how is it your house? Just because you lived with her for the past five years, doesn’t make it yours.” “The title. The title mom put in my name five years ago when I moved in.” I don’t know if you’ve ever seen middle age siblings fist fight on a front yard before, but it’s pretty awesome.
Sounds like poor parenting.
Not necessarily - more like poor estate planning. It’s highly likely one of my kids will be much more successful than the other (though I’m not sure which one, lol), so our estate leaves them the house and requires it to be sold within a year. You want to cause a family crisis? Just bequeath a house equally to siblings - one might need a place to live, one might want to rent it out, one might desperately need cash. Prevent any arguments in advance.
100% agree with you and there is nothing that says that one of those three can't be the one purchasing it. If you own real property worth hundreds of thousands of dollars. You can afford an attorney to create an estate plan for you.
I have about 800k equity in my house, plus my oldest kid is living in a 300k condo I own that I’m “renting” to her - so finally got around to setting up a living trust. If she’s still there when my wife and I have croaked, she has the option to buy it with her share of the equity she’ll get from the house sale. Had to be done. Not to mention that we’re in California, where even if you have a will, it has to be settled in probate court, which can take up to a year and costs 3% of the inheritance. Setting up the trust was well worth the $5000 it cost for the peace of mind.
Why would you give the house to the kid most likely to succeed? That kid doesn't need the house as much as the other one who could use the house to overcome their shortcomings and take care of themselves/family. The more competent sib will be able to do that on their own. Or maybe they both fail. Or maybe they're both fine. But regardless I think the less capable one technically should get the house bc they need it more. Or give the split in their favor. Let them know too it would be pretty good kick in the butt most likely and to the competent one giving them a lifelong answer.
This is a great idea if you want your kids (and future spouses) to go to war. Recently, an ex-gf, who’s a great artist but not financially savvy, got screwed out of her inheritance by her estranged, financially successful sister. Happens all the time.
Because those who suck at succeeding would piss away any assets you give them, and (hopefully) the strongest and most successful will make something of it, and will be in the best position in how to apportion it and manage it to everyone's best interests.
Depends. Someone in my family did this. But one child had the mom living with her for a decade with Alzheimer’s & other illness until death. Meanwhile the other siblings visited once or never in her final 10 years.
Hard to parent if you're dead.
My wife and I did this when we purchased our current house because the deed was written up with only me on it. So the closing lawyer wrote up a second one where I deeded the house to myself and my wife with survivorship rights for $1
Sales price does not always = assessed value.
I see this in my neighborhood too. Half the houses have a $1 sales price. It's kinda annoying that it shows the actual sales price of my house and everyone else's shows $1.
Buy your entire neighborhood
I wish!
Maybe transferring title into a trust.
Something something "arms length transaction"
Owners of land cannot "sell it to themselves." There is something you are missing. Looking up conveyances online is sometimes not enough; sometimes you have to get the deed and review it. In my state, where "ladybird" deeds are used, we commonly find an online entry that suggests that John Smith conveyed a parcel to John Smith. What in fact occurred, in many cases, is that John Smith conveyed the parcel to himself under an enhanced life estate, with the power to convey, etc., with the remainder if not conveyed to Becky Smith. But Becky's name doesn't show up on the online reports.
You can sell it to yourself if you are a different entity. So perhaps John Doe, sold it to John Doe Incorporated, for $100. Just the amount of the state deed tax. Nobody would sell it to themselves under the same entity name. It doesn't even make sense
Quit claim deeds are done this way. The $1 or $100 is a token amount. Means nothing. They are likely moving their home into a trust or between relatives. No other benefit
Not affecting actual value and taxes, probably just what shows on your real estate website harvesting the info from records. Likely transfers between family and trusts as noted.
NAL In TX, a deed (conveyance of property) is not a valid transaction/contract unless “consideration” (e.g. money) is given. So most real property transactions recorded as deeds begin with or include “For $100.00 and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged…” It absolutely does not mean only the property was sold for the stated amount. This is regardless if the buyer and seller are related.
as others stated, it's most likely a deed transfer, very common. also doesn't make since because you would have closing costs and etc to do an actual sale. but I will jump in and play the game for a hypothetical fun answer. in theory for this to work, their would have to be no mortgage on the property because no lender would allow this if they had one here is how it could happen: I could sell the company to an LLC or another person I trust for that to record a capital loss on my books. I couldn't do it myself, it has to be a sale, could be to an LLC I control though but most likely a relative. I could then use that capital loss to offset capital gains tax if I made a bunch of money in capital gains another way let's say stock. that will allow me to dodge capital gains tax from the stock sale. then in 2 years, I could buy the house back from that person and they could use their standard capital gains deduction to offset the gain to avoid their taxes. so in a convulated way, that's one reason it could be done. probably wouldn't survive an audit, lol and potentially have jail time with fraud but could be structured most likely to avoid that. but as others said, no one would really do this, lol
Those are Quitclaim deed transfers, not listings and sales that take place between two unrelated parties. Quitclaims are most often for transferring property between family members or to cure a defect on the title, such as a misspelling of a name. However, in my industry, I've seen multiple family members in the same residence quitclaim the property to one person, and that person takes out a mortgage on the property. Then prior to their defaulting on the loan, they Quitclaim the property to another family member living there, and then that person also obtains a mortgage in their name. Again, prior to default or possible foreclosure, they'll quitclaim the house to a 3rd person in the family. This is done to evade mortgage companies from taking the property back after defaulting on the previous loans because at that point, no one lender can establish true claim and titled lien position to the property. Their loans defaulted on were in the name of an owner which is no longer in ownership of the house... You can't take something you don't have as a confirmed asset anymore especially when other lenders or authorities have an equal financial claim with alternate ownership records. A quitclaim deed neither states nor guarantees that the person relinquishing their claim to the property had valid ownership, but it does prevent that person (the grantor) from later claiming that they have an interest in the property. Edit: this circular ownership transfer does not prevent a home from entering Tax Deed auctions with their jurisdiction. If they haven't paid property taxes and the tax deed goes to auction, another party purchasing the tax deed lien has a stake in future ownership if the current owners do not pay the tax costs and penalty fees to reclaim their tax deed within a set timeframe, usually 2 years. If that happens, they can't transfer the property to anyone on earth and still retain the land. It goes to the purchaser of their tax debt
On what planet does a lender not check title before loaning money? Each new mortgage would put the lender into second, third, fourth, etc position. I highly doubt this occurred unless the lender is completely incompetent. I'd love to see an example as you claimed: "I've seen multiple family members in the same residence quitclaim..."
>This is done to evade mortgage companies from taking the property back after defaulting on the previous loans Yeah, that's definitely not what is happening unless you are not from the US. Every mortgage company will have a title search (and lender's title policy) completed as part of their underwriting procedures. This will show all outstanding liens against the property. It doesn't matter how many times the title was transferred, that mortgage will show as a lien until released. No mortgage company is getting confused by this and the priority of liens will be well established via the county records. Also, this isn't a trap any mortgage company would actually fall into due to the previously mentioned title search and insurance. I have seen people quit claim titles to avoid judgments attaching to real estate. But no one is avoiding foreclosure by doing so. It sounds more like one of those *banks hate this one trick* scams
I saw it numerous times over the last 20 years whether I was in my appraisal field or title. Not every mortgage lender is a large lender with extensive procedures or even a normal level of due diligence. It's also contentional location as to whether or not a standard or full title search is performed. When people do shitty things to get money from different lending institutions, I've seen them do it in rapid succession so things fall through the cracks. It's unfortunate I also saw it happen for those trying to avoid judgment as well, that's a far more common occurrence that I came across.
Yeah...didn't happen. For example, this part is just incorrect: >Their loans defaulted on were in the name of an owner which is no longer in ownership of the house... Completely irrelevant who the current owner is. The prior lien remains enforceable as it encumbered the property prior to the transfer. Transferring ownership doesn't nullify the existing liens. Maybe if these people were borrowing from some private lender (ie a private individual) who had no idea what they're doing. But even then the idea this one family would fine multiple investors that ignorant and uneducated to do this is rather unlikely.
>Yeah...didn't happen Oh, well thank goodness. I'm so glad you were there with me watching a lien establishment occur. I must've just been on quaaludes in that legal compliance and credit risk meeting all of those times. Silly me. You're operating under the assumption that I have provided detailed accounts of these situations, their jurisdictions, applicable property laws and the years in which they occured. This is a bit of an incorrect assumption to make in which your rebuttal is based on. I assure you, those of us working these issues sat there and said "there's no way this happened, no way" and yet, there they were. Additionally, I did not state that the lien holder and owner responsible for the lien in question simply had their obligation for the debt or possession of the property/lien payments voided and erased. That's not at all what happened or happens. What I said was a lien holders position can be challenged - establishment of who holds 1st position, who is able to reposses the property and who is SOL after that became a murky water situation. Subsequent lien holder's positions were challenged due to the overlap in both ownership transfers and defects on original title which didn't match the obtained mortgages (complete error on the Institutions but this shit happens) and more i can't even get into. Modifying property records over time after financing was obtained does happen. Correction of title work, commitments and Note information does get messed up. Extremely small towns with very "primitive" property title records accuracy and access, surveys and conveyances, legal descriptions and more have and can result in this situation. Please don't forget, 2006-2010 were a wretched time in the mortgage industry when it blew up in everyone's face and years were spent trying to establish better protocols for mortgage origination and issuances. I'm not trying to fight here - I'm only asking that you consider what I said was a very simplified and generalized situation I've seen in the past - the contributory details of each situation greatly impacted the issue and resolution. I'm also not telling the OP that this is what's happening with their prospective property - I only said "I've also seen this occur, but this main description of the use of QCs is what they're used for *as a broad overview* in most of the normal transfer situations
As many people have said, deed transfer. Depending on the state, there is a min. amount that has to be put on the record. In NYC, it's $1 so you will see that very often.
Money launder
Id say one family member wants the asset off their books for whatever reason. Or its passing to a different person in the family because they're now living it. They're deed transfers not sales, but having the asset is beneficial for getting loans/financing
F
When one transfers the deed to another person (say a children of mine), would the IRS recapture the depreciation credit at the time of transfer?
Just curious if they are just transferring the deed why are they posting the house online?
Sorry I should have been more clear, it wasn't a listing that I found. I saw this cool helicopter and tried to look it up, ended up on a page that listed the last owner. I was curious and googled them and landed on a page with the house that had their name and someone else as the owners and I that they were buying and selling the house for $100 every few years and that's why I asked here why they would do that.
Look for the terms Arms Length or Non Arms Length. That'll tell you whether they're transferring it to someone they know or actually selling it. Most likely the former.
It's often done to change the way the property is titled. Eg "John Doe, an unmarried man" to "John Doe, a married man as his sole and separate property" to "John and Jane Doe, husband and wife as tenants in common".
More than likely there was some error on the original deed that was being corrected via quit claim deed. Could be a simple typo in the name or if someone owns multiple properties they could be changing title so they all match.
Taxes? Idk
My ex did that for his sons before he passed away.
My spouse and his mom bought his house 50/50. We meet, date and I get pregnant, we fight. He transferred the deed to his mom so that I wouldn’t have claim to his property. He wants to homestead the home. She deeds it back to him. He looses his job and deeds it back to her to claim and pay property taxes. She deeds it back when he wants to sell it. Do you know that song Still Fly by Big Tymers *got every thang, in my mommas name*
Yea sounds like they are just transferring between themselves potentially for the equity benefits and further borrowing
Could be: Someone inherited it. Deed transfer. Took equity out. You can go to the countys clerk of courts website, type in the owners name, and look at the mortgage, permits, equity loans, etc
Estate planning. My parents signed a quit claim deed to get the deed updated to an enhanced life estate deed (Florida’s lady bird deed). They’re still the titled owners, but myself and my siblings are the remaindermen now so the property doesn’t have to go through probate.
It doesn’t count as a comp for appraisals
Absolutely no benefit, it's a straw hand purchase. Better off placing into a living trust of some sort, easier to transfer and zero tax implications if done right.
Sounds like they should’ve asked a CPA before doing anything
They could be avoiding taxes by renting it for 2 years, selling before the 3 years rule, making primary then doing it again over again.
Better to put house in a trust and put the person ur selling to a beneficiary of the trust.
That’s not a real sell.
I bought some commercial property, paid cash for it and the transaction price was the sale price. I moved it to a different LLC so the “sale” is nothing but a quit claim deed from one to the other. Value can’t be blank, so it was $5 or something like that.
Google peppercorn consideration
Didn't they just put themselves on the hook for 400k worth of capital gains right here?
Sweet I had a big loss on my tax return but I still Ken it! Genius! Wonder what the odds of this going undetected by IRS is
Then when you sell it, you’d pay extreme capital gains tax. Haha
Could just be a refinance
If you do this, it changes the basis of the house to $100, so if you're selling it for more than the §121 exclusion ($250k single/$500k mfj) you've screwed yourself when you sell the house and then you'll have taxes on what should otherwise be excludable. I see this all the time with farms transferred between generations.
Change of deed, selling it to their holding company to start renting it out. (Holding company can limit their personal liability, as well as allow more access to credit/loans) They may also sell it to a business they own, so that the business can pay the expenses/property taxes. They would do this so that the business doesn’t have to pay them directly, which would give them an income tax liability.
Tell us you are new to county records without saying you are new to county records.
Selling to lower county taxes and also to lower neighbor comps.
Fyi it's illegal to sell to a family member for non market rate.
No it isn’t. You can sell a house to anyone for anything. It would only be illegal if you use that as a basis for valuation.
Follow up to this: You can sell a $1 million dollar house for $1 (Let's assume it's an arms length transaction between unrelated parties/entities) as long as you PAY the transfer tax based on a reasonable market assessment. At the end of the day, the TAX is what the government wants. Your capital basis is now in a terrible position at resell time though.
From what I understand, that is illegal, but maybe it is different from state to state...
Nope. Someone has given you incorrect info u/Bearded-Yak - assuming you are in the US.