Negotiating New Construction/ Saving Taxes
I’m hoping to reduce my tax bill as it’s one of the highest in the US (around 2.1% of selling price) by reducing the selling price. I’d like to offer 1,400,000 but use $50,000 of the good faith deposit to help the builders finish the construction (pay for the landscaping, labor, appliances, carpet and items they haven’t bought yet). Therefore in the contract to buy the property it would be 1,350,000 and I would give them 50,000 as soon as it was signed (or right checks for the various items totaling $50,000). I could do the remainder of 40K as the good faith deposit in escrow. I won’t be closing on the home until they have finished buying ; we’re commited to the home after signing the contract with no contingencies (except inspection which passed with flying colors) so having it in escrow or going to help finish the home doesn’t seem to matter since we won’t be getting it back as it’s part of the sales price. I’ve seen in a sample spec sheet that the client bought all the cabinets, counters, lights, tile and paid for the labor associated with instillation and I assume this was to save on taxes (or the builder charged a lot and he outsourced it).
Have you ever heard of this being done?
Is it a good idea?
I may be saving some on the yearly taxes this way ($1,000/yr) but it may negatively affect me when I sell the home eventually as the buyer will see that I bought it for 1.35 not 1.4 million (what it actually cost).
On the flip side I may be saving taxes every year but when I eventually sell it I would have a bigger capital tax bill (unless I could count the 50,000 I put into it as a home improvement even though it was done before closing on the home). Also perhaps I want the price show to be high as possible (having builder put in all upgrades we want into selling price rather then paying for it later) since that would show futyre buyers that I paid a high price for that time period may increase the value in the new buyers mind 4 years down the road when we do sell.
anyone? I want to keep my eyes open for deals, and this forum has great support. Thanks.
We just had a 24 unit deal close with 80% LTV and 8%.
On private investor...some of our investors want 20%, some only 10%. I really depends on the deal and their position in the market and their mood at the moment and future plans for the property, and sometimes they want to factor in how much $$ we personally have in the deal.