I gave myself a great deal

November 28, 2012 3:36 PM

Under what circumstances would somebody sell themselves a house for a drastically reduced price?

I'm doing some fact-checking for an article, and had to look up the property records to verify the year that someone bought a house. After getting the official sales history from the online county records, I got this transaction history:

-X owns a house.
-Y buys the house in 1996 for $200,000. (Prior owner: X.)
-Y buys the house in 1997 for $70,000. (Prior owner: Y.)
-Z buys the house in 2001 for $300,000. (Prior owner: Y.)

So what's going on there--why would Y buy a house, and then buy it from herself for substantially less money a year later? I know that Y was running a business out of the garage, so perhaps there's some tax incentive. I may ask in the future, but am not expecting a clear answer, so in the meantime, I'm curious to know if anyone has ever seen anything like this.

posted by blazingunicorn to work & money (17 answers total)

Sounds like a refinance to me.
posted by rabbitrabbit at 3:38 PM on November 28, 2012

Did Y buy it from himself or take out a second mortgage. Was the first mortgage discharged when the $70,000 purchase happened?
posted by HuronBob at 3:41 PM on November 28, 2012

Are you absolutely positive X sold the house to Y in 1996? Perhaps X died, Y was executor of the estate, and then Y bought the house in 1997 from X's estate.

Or yeah, second mortgage.
posted by easily confused at 3:47 PM on November 28, 2012 [1 favorite]

Y is a savvy business person from money, so I'm 99.999999% sure that there was no second mortgage involved. Say you can pay cash-what would the incentive be?
posted by blazingunicorn at 3:48 PM on November 28, 2012

Is it even definitionally possible to transfer ownership of something from yourself to yourself? I don't think so.
posted by alms at 3:50 PM on November 28, 2012

X is still alive.
posted by blazingunicorn at 3:52 PM on November 28, 2012

The online records are likely to be less detailed than the official paper records. You might have better luck figuring out what happened by going into the County Recorder and looking at the title deeds. I don't think you can sell something to yourself, but you can certainly sell something to a business or trust that you own/control.

Just going by the records you have, it looks like Y "created" a $130K loss in 1997, and a $230K gain in 2001. There might be some shenanigans going on with tax evasion. (IAAL, IANYL, IANATL, TINLA.)
posted by spacewrench at 4:02 PM on November 28, 2012 [3 favorites]

Did Y buy back a share in the house? Could there have been another person who co-owned the house with Y in 1996, and Y bought them out the year after? The house price jumping from 200k to 300k in a few years means that a 270k total seems more reasonable.
posted by ninazer0 at 4:02 PM on November 28, 2012 [1 favorite]

Unlikely, but I'll throw out a few possibilities: The property record for my house looks pretty weird from the outside. The last few transactions are:

1) Previous owners bought it for a drastically low price given the property assessment; truth be told, they bought it from their parents and had been assisting them financially for years, so they worked out some in-family arrangement that made everyone happy but looks weird on paper.
2) I bought it; price is above what you'd expect for the property value. This is because I rolled the price of a full kitchen renovation into the mortgage so I was only taking out one loan.
3) Per the record I bought it from myself for $0 a month later. This was because there was an error in the deed - I forget the details now, but whatever it was involved re-issuing the paperwork.

All of which is to say there could be all sorts of weird things going on. And specifically given my #3, is there any chance there was some error in the first purchase? Probably not at that great a difference, and after a year - but i suppose a mistake could have been made in December and found in January?
posted by Stacey at 4:13 PM on November 28, 2012 [1 favorite]

You're going to need to look at the actual records to figure out what's going on. I've had to do the same thing for work recently, and a lot of these property transfer records are really opaque if you're just going by whatever the online records say. It's honestly just guess work until you can look at the actual deeds.
posted by yasaman at 4:43 PM on November 28, 2012

Are you absolutely sure that the deed was registered to, and only to, Y in 96? It's possible that they were in a joint tenancy / tenancy in common and the sale to Y alone effected some change in the title.

Also, this will heavily depend on where your property is located. Real Estate law is a fucking nightmare.

/wrote, among others, my real estate bar exam yesterday and am rather bitter. Might not actually be a Nightmare.
posted by Lemurrhea at 5:42 PM on November 28, 2012 [2 favorites]

Savvy business people from money take out mortgages. Even second mortgages.

1997 was right around the dot-com bubble. If they have the cash on hand, why buy a house when you can buy into that bubble and triple your investment? Buying a house outright doesn't make sense, especially to a business savvy entrepreneur. They're more comfortable with risk, and buying a house outright is an extremely conservative financial decision. The mortgage interest is tax deductible and pretty low compared to expected returns on index funds.

Did they go through a divorce? Might have been buying the spouse out of the deed. Or just wanted some extra cash flow.
posted by politikitty at 5:55 PM on November 28, 2012 [2 favorites]

Mm. I've seen stuff like this all the time in local records, fact-checking similar details. I always chalked it up to some change in the mortgage or refinancing of some sort. That said, I never knew for sure, and I always wondered about those sorts of transactions listed, so I'm glad you asked about this. There are a lot of good answers here. As spacewrench notes, could there have been a transfer of the property to a trust at any point, and maybe the name of the trust is truncated in the records somehow, so it looks like the property was purchased by the owner? A house technically being owned by a trust is pretty common.
posted by limeonaire at 7:02 PM on November 28, 2012

In some jurisdictions you can transfer to yourself to sever a joint tenancy and turn it into a tenancy in common.
posted by Pomo at 10:27 PM on November 28, 2012

One possibility is that Y came into a great deal of money and rather than buy down the existing mortgage, chose to re-fi for a smaller amount.

But even with that, the purchase price would remain the same, only the mortgage would have been lower. (Plus with that kind of downpayment, there would be no PMI.)

The other benefit might be nefarious. If Y were going through a divorce and wanted to hide assets or look poorer on paper, having a house worth $70,000 rather than $200,000 is a way to do it.

But that's pretty transparent.
posted by Ruthless Bunny at 7:57 AM on November 29, 2012

Did Y have the same form of ownership for each of those purchases?

Same name? Are you certain you have the full text of the "name", it could be something longer for one of those like "Y family trust" or " Y LLC".

Your question implies Y is a single individual, but if Y >= 2, they could have been changing from joint tenants with rights of survivorship to tenants in common or vice versa.

Are you certain about the prior owner on those purchases? Perhaps the county doesn't have a good way to track properties with multiple ownership interests. Could Y have purchased a part interest in the property from X in 1996, been listed first on the deed, and purchased the remainder in 1997?

You might also want to know what kind of deed was transferred for each transaction.

It's also possible that the county made a mistake in entering the data.

You might have more success tracking the ownership in detail by contacting a title company, if that expense is worthwhile for the article.
posted by yohko at 11:09 AM on November 29, 2012

As to why, you probably want to speak to someone with a lot of experience (certainly 15 years or more, given that the first transaction was in 1996) in local real estate. Not only do state laws differ, but the actual practice of how and what is recorded differs. There are far more reasons why this could have happened than we can speculate, even if we did know what county and state you are researching.
posted by yohko at 11:15 AM on November 29, 2012