Fake deposit? Legal?

Is it possible to buy a property with a fake deposit?

I.e buy a property for 300000. Owner agrees to write in the contract that the purchase price is 400k and that buyer has already "paid" 100k.

Buyer goes to bank and gets loan for 330k, pays seller 300k plus any extra expenses seller incurs due to 400k contract.

End result is buyer gets a property for no deposit, seller gets a quick sale.

Anyone ever done this or is this illegal?

 

Yeah its probably fraud. Plus there's quite a few other problems with this scenario.

 

And where does the valuer value it at 400k and why would the bank lend 110%?

 

Yes it's illegal. In several ways. But further to that, you're telling the bank you paid 400k. They value it at 300k. They will reject the application straight away.

 

New medico deal. 110% LVR?

 

Plus the lender will want to see a receipt to show you've paid the $100k deposit. But the bigger issue would be no comparable sales at the price point so the val would come in short.

Probably ways around this too, but it's still illegal.

 

Legalities aside, I don't any any sellers who would be willing to list the sale price at more then what they are getting. Unless they are family who are ready to deal with any tax issues and such that would arise from doing this. They would have to be selling to you at below market value for the valuer and thus the bank to agree that the property was worth the higher price. Essentially you are asking the seller to pay your deposit for you.

 

I like this type of stuff. Thinking outside the box. Bank valuations almost always comeback at the purchase price even when someone is paying too much for a property and I think something like this could easily be done if you had two willing parties. I know acquaintances that have sold property between each other at an agreed lower price on paper, with one party paying the other 100k in cash. It saved the seller money in CGT and they buyer money in stamp duty. Win Win?

 

I think that is the general idea in this case - ie buyer has $0 deposit.

 

When the second party comes to sell there is an additional $100K of "CG" to pay CGT on (if it applies). Financial fraud is hardly ever (never) "win-win".

 

The law society of NSW has warned lawyers from participating in such schemes. It is possible fraud against the bank if you are convincing them to lend more than they otherwise would have.

 

A double edged sword - buyer pays increasedstamp duty, vendor any extra capital gains tax.

 

If you need a deposit, some vendors may be willing to provide a deposit via a vendor finance arrangement.

 

and Loss Loss with the government.

It can be done but again you are asking for trouble.

 

Bank value comes up short and there becomes no deal.

Also you would be investigated for fraud and the banks would want to see the deposit receipt or how did you give $100,000 to the person if cash you will get investigated on that too.

 

What if the vendor wants the $100k after the contract is signed. Buyer would need to pay or prove they have paid. Lot of risk for the buyer

 

I'm sorry but if you have $0 deposit then should you really be buying a property. Perhaps save $2 first and then go buy a piggie bank.

 

If

You don't pay CGT on a PPOR. You can get on your moral high horse if you like. But if you were going to buy a house off, lets say your brother- would you not do this? Or do you just love paying stamp duty that much???

 

I pay the government too much anyway so I will sleep just fine.

 

That's why I said "If it applies".

No, I would not do this.

....and no, I don't like paying SD. BUT I'm not trying to get ahead in life by committing financial fraud either. There are plenty of legitimate ways of making $100K in this country without entering into schemes to defraud the public.