Paying a different amount than listed?

A coworker of mine is purchasing a home in Long Island and he said that he is actually paying more than what the home is being listed for.

Let me clarify - he is paying $500k (numbers are made up) but the home is being listed as selling for $450.

He said that its common these days for this to happen.

I said "Isn't that screwing you over? because when you eventually sell the house, you'll pay more taxes because the government will think you made an extra $50k profit (the difference from 450 to 500k)

He didn't go into detail why that's not an issue.

Is this common?
Are there any drawbacks or advantages to the buyer here?

Paying a different amount than listed?

Was the offer/accepted contract price above list price. That happens when there is multiple offers.

Also, you can roll closing cost into your loan amount which makes the contract amount higher.

Paying a different amount than listed?

NM

Message edited 3/31/2016 2:58:36 PM.

Re: Paying a different amount than listed?

What do you mean by "being listed as selling for $450?" You mean the advertised/mls asking price? Or the price in the actual signed contract?

Re: Paying a different amount than listed?

Edited because I'm not sure I understand the question... do you mean he paid $50k over the asking price?

Message edited 3/31/2016 3:48:22 PM.

Re: Paying a different amount than listed?

It's not necessarily "common" but it does happen more often than you would expect. Generally, it happens when there are multiple offers and it becomes a bidding war. The house may have been listed low in order to gain interest, then multiple buyers swooped in and made offers, they went back and forth until seller accepted an offer that may have ended up well above asking price. It's all a matter of how badly the buyer wants the house.

When we were looking for our house we put an offer on a house. Seller was a d!ck and refused to accept our offer (which was within $5K of his asking price). He told the realtor that he priced it low because he was hoping it would get multiple buyers interested. He got what he wanted and 2 days after our offer, someone new came along and he told them he had a offer on the table for asking price. They countered with an offer $10K over asking price and he accepted. In the end we felt they overpaid. The house was listed for fair market value...not priced low. They overpaid for it and unfortunately for them, none of the houses in that neighborhood have sold anywhere near that price since then.

Paying a different amount than listed?

I tried to clarify it in my second line of the original post but it was still unclear.

My coworker is paying 500k, but in all official documents the house is listed as being sold for 450k

Message edited 3/31/2016 4:34:07 PM.

Re: Paying a different amount than listed?

What do you mean by "official documents" establish the house was sold for $450K? What Zillow shows? MLSLI?

If he paid $500K, then either he was involved in a bidding war with other buyers and seller accepted his offer [an offer which was over asking price] or the seller under-priced the house .

He may also be referring to rolling closing costs into the loan (?) but still that wouldn't explain it being over $500K.

Paying a different amount than listed?

I'm not that savvy when it comes to real estate terms or what have you.
basically its as if I sold you a car for 11k, but at the end when all the paperwork is done we list it as being sold for 10k.

To me it seems like the seller gets all the benefit. He pays less taxes and so on.
Not sure what benefit the buyer gets, so I am not sure why my coworker would do this. I didn't want to pry so I didn't ask him much, but he made it seem as if its common to do this.

Message edited 3/31/2016 5:50:22 PM.

Paying a different amount than listed?

It sounds like they really wanted the house and were willing to pay over asking.

Re: Paying a different amount than listed?

Paying a different amount than listed?

Thats why I didn't ask too many questions

Re: Paying a different amount than listed?

Well in that case perhaps the house is worth more and the seller is getting cash under the table that they dont have to claim or pay taxes on or something?

We paid 90k more than what our home was listed at, it was priced low and there was a bidding war, it happens a lot.

Re: Paying a different amount than listed?

The only thing I can think of is that the house only appraised for 450k so your friend had to come up with 50k cash to make up the difference? But even then it doesn't make sense to me that the house was listed as sold for 450k... maybe one of the RE agents on here can give you some insight.

Re: Paying a different amount than listed?

Re: Paying a different amount than listed?

Re: Paying a different amount than listed?

Re: Paying a different amount than listed?

I've seen this happen when buying/selling a co-op, if there is a flip tax.

Paying a different amount than listed?

Was it closing costs rolled in? What official documents? I am confused....do you mean "official" like the MLSI listing or more like the HUD.

Paying a different amount than listed?

did he put $50k down and the mortgage is $450?

Re: Paying a different amount than listed?

It is common now in many areas of LI where houses are in high demand for houses to sell for above the list price.

However, whatever price is agreed upon, regardless of what the list price/asking price was, should be accurately reflected in the contract and all of the sale and loan documents.

So if a house is listed for $450K and a buyer offers $500K, the contract price would be $500K.

Similarly, it's not uncommon for buyers to roll into the loan all or part of their closing costs. But again, that would be reflected in the contract price. So if a buyer and seller agreed upon a $450K purchase price, but the buyer was rolling in $20K to cover closings costs, then the contract price would be $470K. In that situation, the buyer's down payment would be based on $470K, the house would need to appraise for $470K, but the seller would only be getting $450K.

Re: Paying a different amount than listed?

Depending on the location, this is an intense market. Bidding wars and paying over list price is not uncommon.