Real Estate?: What does a $10 sale indicate

[Sebastian (a lady)]

Some of the houses I'm looking at have a $10 sale listed in their price history. What does this indicate?

 

Is the $10 a title transfer fee, and this indicates a change in title for instance on a foreclosure, divorce or inheritance?

[*LC]

I have also seen it when a spouse wants to transfer ownership to the other spouse or to add the other spouse.

 

I haven't heard of it being used for a foreclosure.

[creekland]

I've seen $1 or $10 used when family is selling to family. By having an amount, it makes it legal. Supposedly there's something "wrong" (or maybe a tax disadvantage) with giving it away so a token amount is used.

[plansrme]

The common law of contracts provides that a contract is enforceable only if it there is "consideration" provided by both sides. Consideration is the money, goods or other services each party provides to the other, i.e., the $10 cash and the house.

 

Under traditional common law, therefore, a gift "contract" is not a contract and is not enforceable. Adding $10's worth of consideration to the gift recipient/buyer makes it enforceable.

 

So a $10 sale price is essentially a gift, with some consideration thrown in to make it enforceable.

 

Terri

[FaithManor]

If a home or car is given to someone, the receiver must pay taxes on the gift - it's considered income because it is a big ticket item. The taxes on a house would be considerable and would likely boost the new homeowner into a new tax bracket which would cause him/her to pay even more taxes on their annual regular income as well.

 

But, if money changes hands, then it is considered a sale and then only those fees associated with the sale must be paid. It's a much, much cheaper way to gift a car or home to someone else.

 

Faith

[plansrme]

If a home or car is given to someone, the receiver must pay taxes on the gift - it's considered income because it is a big ticket item. The taxes on a house would be considerable and would likely boost the new homeowner into a new tax bracket which would cause him/her to pay even more taxes on their annual regular income as well.

 

But, if money changes hands, then it is considered a sale and then only those fees associated with the sale must be paid. It's a much, much cheaper way to gift a car or home to someone else.

 

Faith

 

This is not exactly true. An exchange for less than fair market value is a gift and potentially subject to gift tax (not income taxes) any time the purchase price is less than the fair market value of the item received. If you "sell" your house to your son for $10, and the house is worth $100,000, you have given him a gift worth $99,990. The difference between the sale price and FMV may or may not be subject to gift tax.

 

Just wanted to clarify in case anyone is using the WTM boards as their source for estate and tax planning. ;)

 

Terri