How do I pay for a house with (someone else's) cash?
November 7, 2007 6:44 PM   Subscribe

How do I pay for a house with (someone else's) cash?

Background: I'm an American married to a British fellow who emigrated here. My in-laws are British and live in the UK. They are buying a house here in the US, where my husband and I live, which we are going to rent until my husband gets his PhD (they'll then either sell it or rent it out).

The in-laws are buying the house with cash, no mortgage. It will be in their names.

The way they have in mind to pay for the house is to wire transfer the money to our bank account and have us write a check for the full amount.

Is that... kosher?

I guess my question is twofold:

1. Is it cool, legally? Are "They" (you know, the They Bureau) going to think it's money laundering? Will there be any kind of legal or tax implications for us? Basically, can or will it cause any kind of trouble or bother for us at any point?

2. Can you do that? Pay for a house with a personal check for somewhat over $100,000? (My instinct is that a cashier's check would be more appropriate, but we just moved to across the country and have no branch of our credit union within many many hundreds of miles. Is it possible to get a cashier's check without going to the bank in person?)
posted by greendress to Work & Money (14 answers total) 1 user marked this as a favorite
i can't answer question #1. you may be able to wire the cash from your home bank to the seller. i doubt anyone would take a personal check of that size, so you'd have to get money orders or cashier's checks.
posted by thinkingwoman at 6:51 PM on November 7, 2007

You should probably get a financial advisor to weigh in on this. The IRS expects you to do paperwork for cash gifts over $11,000, and "it's not a gift" doesn't work. If the house will be in the in-laws' names, they should expect to wire the money to the appropriate location at closing, not route it through you. It doesn't really matter whether funding is cash or through a lender, you're still going to close on the house in the same basic process.

It's probably possible to set up some kind of trust that you administer, but again, get a financial advisor.
posted by Lyn Never at 6:57 PM on November 7, 2007

You should be able to just have them wire the money directly; the seller should have the ability to accept a wire transfer as payment.
posted by Malor at 6:58 PM on November 7, 2007

nobody is going to give you a deed with a personal check.

has to be certified funds, period end of story.
posted by Mr_Crazyhorse at 7:07 PM on November 7, 2007

You should consult a legal real estate agent specializing in international investments and find out what the laws are in your state on that. In some states it may be considered a "straw man" transaction and that would be a problem. If you are simply finding them a suitable home and everything is transparent it shouldn't be a problem, but the finances as you describe them sound a little dicey. Because the dollar is so weak and our real estate is in the tank, lots of foreign investors are coming to the market and buying. You should be able to find a local real estate agent who can give you more precise advice.
posted by 45moore45 at 7:09 PM on November 7, 2007

straw man? not if the home is going to be paid in cash and in the name of the actual buyer-owners. straw man transactions usually involve fraudulent financing where the party financing has no possessory interest in the property.

OP: there is not problem wiring the money. billions of dollars are sent in and out of the country every day. I have clients who send huge amounts of money into the country and out all the time with no scrutiny. you're going to be ok unless your name matches a name on the Treasury Department's SDN list... or their double-secret financial "watch list"... ie if your name is middle eastern-sounding.
posted by Mr_Crazyhorse at 7:30 PM on November 7, 2007

To answer part of your question, I've bought 2 houses with personal checks. I just included it with the offer to purchase, they accepted the offer and their Realtor deposited the check. Of course these were local transactions, not international, but it can be done.
posted by Floydd at 7:49 PM on November 7, 2007

Yes, I know what a straw man is. Read the post again. The buyers aren't going to ever live in the house and are funneling the money through another account. I have a real estate license in two states, one state wouldn't allow a deal like that, the other one wouldn't care, which is why I suggest this poster consult a local expert and not rely on a bunch of strangers on the internet.
posted by 45moore45 at 7:51 PM on November 7, 2007

I bought my house with a cashier's check which was a step up from a personal check but was just issued by my bank. Apparently there is some fee that usually goes along with getting such a check but they waived it because I had a lot of money in their bank. So, legally you can do it and you can just open an account, get the money wired in, wait for it to clear and then get your check. However I'm with Lynn, your in-laws should just work out this money thing with the people who own the house, there is zero reason to use you as a go-between and many good reasons not to.

There are tax implications if you do it the way you describe and if I were you and you were doing this in calendar year 2008, I'd get an accountant both give you advice on this transaction and do your takes next year because they will likely be a pain.
posted by jessamyn at 8:00 PM on November 7, 2007

in addition to having them wire the money directly to the owner, you'll need a power of attorney. A realtor would be able to walk you through this step by step.
posted by Pants! at 8:11 PM on November 7, 2007


please cite the code section that would prevent a transaction like this. educate me.
posted by Mr_Crazyhorse at 10:08 PM on November 7, 2007

in addition to having them wire the money directly to the owner

Uh, not the owner but the escrow company handling the closing. The realtor will explain all of this.
posted by trinity8-director at 10:34 PM on November 7, 2007

Talk to the title or escrow company handling the closing about how the money can be wired directly. This will avoid any possibility of #1 being a problem.

As for question #2 ... it depends. If the sellers are in a situation where this would be possible, the question becomes one of whether they would accept this form of payment. Personally, I don't know many people who would be willing to accept a >$100k personal check as payment without waiting to make sure it clears.
posted by yohko at 4:26 PM on November 8, 2007

Your in-laws might like to know about FIRPTA, which will affect them in eventually selling the house.
posted by yohko at 4:29 PM on November 8, 2007

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