Seller insisting on charging a separate (large) amount for contents as part of a prop

Bob24

I am looking at buying property for which the agent keeps reiterating that offers are split-up in the property price itself and 15000 euros for the property contents (offering to buy the contents being mandatory to make an offer on the property).

It is very clear the contents is not worth anywhere close to that amount (I would probably dump most of it). And since a bank is involved (things were very slow and the agent told me it was a voluntary sale requiring approval of a bank), what I suspect is that the seller is trying to ringfence some of the money from the sale so that it is not accessible/visible for their bank (and that possibly the agent is not telling me the full story).

Do people think my guess makes sense? And is there any potential concern from my perspective as long as I am happy with the total amount I am paying?

Askthe EA

There are two things possibly happening here.

Firstly, you're correct. The bank holds the lien over the property, not its contents. Therefore if you agree a contract price of 200k and 20k for the contents, the bank only takes the 200k.

The other possibility (and possibly more likely) is that the property may be subject to Capital Gains of a third. Again, the CGT only applies to the purchase price of the property and not the contents. Therefore the extra 20k is effectively tax free.

The second one especially is, well, shady. You are, in effect, facilitating tax evasion.

Have you asked how the €15k is to be paid? Cash? If so, are you happy to hand over that much cash and have you thought about the actual logistics of it?

There is a plus of course, your stamp duty is also calculated on the contract price so you'll save there. Mind you, if you ever rent the property out, you become liable for CGT and well, your making the hit bigger as it is calculated on the profit made between buying and selling.

vectorvictor

This sounds like a simple way of the seller extracting some cash that will not need to be paid to the bank. Perhaps if he required bank approval there is an element of mortgage forgiveness involved here and the alternative is that he would see nothing directly from the sale.

He is likely well aware the contents aren't worth that but it is the only (il)legitimate way of the "owner" getting some cash for himself from the sale. It's a wink and a nod way of saying give me 15k directly and the property is yours.

I don't see any reason for you to be concerned and no reason for them to require it as an under the table cash payment, it's simply a version of selling on adverts (well something like that)

Cuddlesworth

vectorvictor wrote: »

This sounds like a simple way of the seller extracting some cash that will not need to be paid to the bank. Perhaps if he required bank approval there is an element of mortgage forgiveness involved here and the alternative is that he would see nothing directly from the sale.

He is likely well aware the contents aren't worth that but it is the only (il)legitimate way of the "owner" getting some cash for himself from the sale. It's a wink and a nod way of saying give me 15k directly and the property is yours.

I don't see any reason for you to be concerned and no reason for them to require it as an under the table cash payment, it's simply a version of selling on adverts (well something like that)

I would expect his solicitor will tell him to run a mile.

vectorvictor

Cuddlesworth wrote: »

I would expect his solicitor will tell him to run a mile.

In what context out of interest

Sunny Dayz

I agree with the other posters in that it sounds like the sellers are trying to get their hands on some money from the sale of the property as they know most if not all of the proceeds from the property will go straight to the bank.


When we bought our house from a receiver we were told that the contents weren't included, however the owner (a landlord) never bothered to remove them, they weren't worth a huge amount but they did save us having to fork out for the likes of tables and chairs, sofas etc for the first while.


Are the contents anyway half decent? Offer them a grand, they'd be lucky to get that!

Victor

Revenue likely take the position that there needs to be separate, non-overlapping contracts for the property and the contents. Potentially, one could buy the property and decide not to buy the contents and the vendor can't enforce anything.

Something for the solicitors to deal with.

Cuddlesworth

vectorvictor wrote: »

In what context out of interest

If the contents have nowhere close to the value of 15k, it's tax evasion. And revenue are the crowd you do not mess with as a licensed professional, especially if there is a reasonable doubt that you were aware of such a deal and facilitated it.

vectorvictor

Cuddlesworth wrote: »

If the contents have nowhere close to the value of 15k, it's tax evasion. And revenue are the crowd you do not mess with as a licensed professional, especially if there is a reasonable doubt that you were aware of such a deal and facilitated it.

Very valid point.

Bob24

Thanks for the answers everyone. Actually I was talking to the agent yesterday and he basically told me he was talking it off the market because he was getting tired dealing with the bank and didn’t have clear approval to go sale agreed one the property.

So probably something dodgy about it.

vectorvictor

Bob24 wrote: »

Thanks for the answers everyone. Actually I was talking to the agent yesterday and he basically told me he was talking it off the market because he was getting tired dealing with the bank and didn’t have clear approval to go sale agreed one the property.

So probably something dodgy about it.

Good luck in your search!

Robbo

Askthe EA wrote: »

There is a plus of course, your stamp duty is also calculated on the contract price so you'll save there. Mind you, if you ever rent the property out, you become liable for CGT and well, your making the hit bigger as it is calculated on the profit made between buying and selling.

Stamp Duty has been calculated on a House + Contents basis for quite some time. There's also far less scope for pulling a fast one here since 2012 and far more risk for the purchasers solicitor.

OP, I've seen estate agents float these kind of arrangements in sales which aren't quite forced but where the vendor is being persuaded to reduce their overall indebtedness. The vendor finds a "friendly" EA who brokers such a deal in the knowledge that they'll also get a few quid into the claw.

okeydokeys22

I'm a normal sale, do unwanted contents of a home legally have to be removed by the seller if the buyer insists? Or can they leave them there for the buyer to dispose of..?

Cuddlesworth

okeydokeys22 wrote: »

I'm a normal sale, do unwanted contents of a home legally have to be removed by the seller if the buyer insists? Or can they leave them there for the buyer to dispose of..?

Standard contracts include clauses for a "empty" house, attic, garden, shed etc. Whether its done or not is another story.

spaceHopper

Maybe it's a divorce and he's hiding cash from the ex. If it comes back on the market, make an offer but be clear about it you don't want the contents make the offer by email and ask the ea to record it. there is a risk to the EA that the bank could ask the see the bidding record

Fol20

As other posters have said. These types of sales are quite common for invested sales. It is being done for 3 reasons
1. If banks are involved in voluntary sale, vendor is trying to keep a bit of the pie while the bank will more than likely get the entire amount of the purchase price of property.
2. They are trying to legally downplay their capital gain liability by selling contents separately.
3. If it’s cash, then they are doing it with a wink and nod to not have it through the books. 15k would be quite a lot for this type but isn’t unheard of.

Bass Reeves

Bob24 wrote: »

Thanks for the answers everyone. Actually I was talking to the agent yesterday and he basically told me he was talking it off the market because he was getting tired dealing with the bank and didn’t have clear approval to go sale agreed one the property.

So probably something dodgy about it.

This may actually mean that a deal may have been brokered by another buyer. There may be other reasons why seller want a contents clause. He may have unused depreciation losses from the property or from other properties. TBH in situation like this you either go with the flow or walk away. Very hard to deal with an estate agent like this. Very surprised that the estate agent was as blatant as this about it. Fora a buyers to ignore the ethics of it value can often be attained in that the house may be purchased under its market value or without a serious bidding war

scwazrh

Fol20 wrote: »

As other posters have said. These types of sales are quite common for invested sales. It is being done for 3 reasons
1. If banks are involved in voluntary sale, vendor is trying to keep a bit of the pie while the bank will more than likely get the entire amount of the purchase price of property.
2. They are trying to legally downplay their capital gain liability by selling contents separately.
3. If it’s cash, then they are doing it with a wink and nod to not have it through the books. 15k would be quite a lot for this type but isn’t unheard of.

Assuming its due to one of the above reasons , is there any negative issues or causes for concerns from the purchaser side?

Bass Reeves

scwazrh wrote: »

Fol20 wrote: »

As other posters have said. These types of sales are quite common for invested sales. It is being done for 3 reasons
1. If banks are involved in voluntary sale, vendor is trying to keep a bit of the pie while the bank will more than likely get the entire amount of the purchase price of property.
2. They are trying to legally downplay their capital gain liability by selling contents separately.
3. If it’s cash, then they are doing it with a wink and nod to not have it through the books. 15k would be quite a lot for this type but isn’t unheard of.

Assuming its due to one of the above reasons , is there any negative issues or causes for concerns from the purchaser side?

To my understanding no unless the contract was really skewed. In reality it is the vendors job to declare full sale value parts for relevant tax issues. As another poster said buyer will pay stamp duty on the entire amount. However contents are not allowable for mortgage drawdown so buyers must have savings to pay this. As well it may put buyer on a higher mortgage interest rate as it may move them into a higher loan/ value metric

Fol20

scwazrh wrote: »

Assuming its due to one of the above reasons , is there any negative issues or causes for concerns from the purchaser side?

There can be both positives and negatives for a purchaser. I will start off with the negatives and move to positives.
Negatives
1.if sale price is 85k house and content 15k, bank will only give you a mortgage of 85k while you will have to stump up the 15k with your cash reserves.
2. If it’s cash cash type of sale there can be a leap of faith that everything will go smoothly. I would also recommend taking out exact figure out of bank so from your point of view there is a paper trail and you are covering yourself. 15k is quite a large amount of money to be taking out in cash so it may draw suspicion.

Positives
1. The biggest and most important benefit to the purchaser is that in situations like this especially when contents amount is substantial, it can hopefully cause the total market value of both contents and house to be cheaper than market value as not as many people can afford to pay a substantial contents amount coupled with deposit on the mortgage. Normally contents might be set at 5k but when you go to 15k+ it can take most of the prospective buyers out of the bidding and all that would be left would be cash buyers with a large amount saved up.