Transfer Tax
Hey gang,
I have a couple who very much want me to have their house subto. This home is in Vancouver, WA. I live in Oregon. When buying consumer goods in WA, OR residents do not have to pay sales tax as this state has none. At least this is true on counties that are on the state border.
Does this also qualify for real estate? If RE does not qualify, is there any way around this? I heard a rumor that If you do a Quit Claim Deed in WA you do not have to pay this tax.
Is it feasable to have sellers sign both a QC deed and a Warranty deed but only record the QC deed? Then when I sell to my CFD buyers, I would give them the WD. Too far fetched or complicated?
You know, just trying to be creative here and save my self $5k+ in initial costs for this transaction.
Any opinions would be welcome.
thanks,
John
I won't speak to the issue of taxation in your state, but I bet the sale of real property is handled differently for taxation than the sale of personal property.
Anyway...don't mess with multiple deeds. First off, which ever deed you record first transfers title to you. Whichever deed your sellers signed and got held in reserve is no longer valid since your sellers are no longer on title. Once you're on the title, YOU have to sign the deed.
Your best best is to get your sellers to give you a warranty deed, and when you sell do so by quit claim.
John:
For this kind of information, it pays to check out your state/county's revenue dept. web site (if there is one) to find out the taxation for that area. If not there, try your county recorder's office. Someone may post an answer to your liking here that has no bearing to your specific location/situation and you definitely want to be as well informed on this topic as possible. Also, if you find you DO have a transfer tax, factor it into your deal profile to make sure the deal is "right" for investing.
On the deed part: I'm not an expert (seek professional counsel, www.etc.etc.), but I just read that with the advent of title insurance, the meaning of Warranty deed isn't what it used to be. It used to mean that the deed itself included warranty protection that it is clear and marketable, but I don't know that a warranty deed today will protect you against a future title claim. I do know that a QC deed only says that the signer is giving over ANY interest they have in the property, which might be nothing!
I've heard of other investors in your area who have investigated using Land Trusts to avoid the transfer tax on the sale to you (no transfer tax on deeding property into a trust), and the tax would only be due when you sell to your buyer; you definitely need professional advice on going that route.
Andy
John,
1. Part of the answer will depend on if you are buying personal property or RE. I think you will find that sales tax is not the issue but transfer tax will kick in.
2. Check out the NWREII organization. There are a lot of RE investors from Vancouver in the club. The web site is www.nwreii.org.
3. There is a regular member who is also a practicing attorney. He can advice as to the best way to set up a LC or trust for what you want to do. I use him. He is a regular contributor to the NWREII mailing list on Yahoo.
My suggestion is to be sure you do a clean deal so that you have a good title to sell later. If there is a tax to be paid then it is a cost of the deal and another reason to get a better price.
John
[addsig]
Thanks for your responses guys. I did post this on the investor club website john, and got some good responses. In fact I am going to meet with a Vancouver investor tomorrow morning to go his forms package when he does subto's.
Basically, taking the property into a trust is the way to avoid it. Then when the eventual buyer gets his financing, the WD goes into his name and the transfer tax kicks in.
I am grateful to all the experience I can tap on this site and at my REI club to help me become that guru investor I aspire to be!
The sellers are willing to sell to me, ball is in my court. Meeting with them tomorrow for signing. Wish me luck!
John