Real estate, post COVID-19 level 4 (since 2020)

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#2623906 18-Dec-2020 13:17

quickymart:

It's not an ideal situation, but if that's what's required to service a mortgage, so be it.

Seems a bit naff a flatmate needs to sign something saying they'll live there however (I saw someone say this earlier in the thread).

Its perfectly reasonable / understandable.
Its come about in large part because of the 'Lier Loans' which caused the GFC.

With the responsible lending requirements now in force, banks need to show they have made reasonable endeavours to prove the borrower has repayment capacity.

Words are cheap - if you have documented evidence, of future tenancy, clearly the banks can prove they have taken further steps to confirm/prove your capability to repay the huge debt you are taking on.

BlinkyBill

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#2623913 18-Dec-2020 13:29

concordnz: I never said Employers were required to do anything.

What I did say is if you want the best/highest mortgage value, it is now common practice for Banks to ask for this.

I also pointed out you are likely to still get a mortgage without, simply with a lower value.

i don’t think it’s common practice at all, and you aren’t providing a verifiable source for this assertion.

i don’t think it’s useful to provide financial advice that is not correct and which might affect someone’s plans and hopes.

however, I’m happy to stand corrected if you are able to provide one single point of verification.

concordnz

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#2623920 18-Dec-2020 13:49

Don't hold your breath, I'm not going to waste time arguing with you.

Ironically you fail to provide any proof to backup your assertion that "[you]don't think its common practice at all,"
.... Double standards much?

In a thread titled "Real Estate, post level 4"
Im quite happy to share my recent experiences, so that others may gain insight.

quickymart

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#2630434 5-Jan-2021 08:23

Possible dumb question, but I thought I'd ask; if someone has a house for sale (let's pretend it's fully paid off) and they want to sell it, do they absolutely have to sell it for the market value? Or can they sell it for whatever they feel like?

I'm not talking $1 or anything silly like that, but if the house is freehold and the owner wants to sell, can they set the price, or is there a rule that says they much sell it for whatever the going rate is in that area?

tdgeek

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#2630436 5-Jan-2021 08:30

Sell for whatever you like. I dont know these days what taxes may apply if you did a "deal" and sold a house for $1 or $10,000 to a relative, etc, the IRD and banks may have an issue with that. Its like if you sold a house that cost you 500k for 500k (and paid no income tax on the capital gain) but you got the capital gain via the boat, caravan, free travel etc, I assume that's fraud

BlinkyBill

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#2630547 5-Jan-2021 10:27

If you sell a house that isn’t an investment, then there is no capital gains tax applicable. So no reason to sell low to avoid that tax.

If you sold a house at substantially below market value, it is possible it will attract attention to those investigating anti-money laundering activities. Or dodgy real-estate agent dealing (been several of those reported in the media recently). Some houses sell below the general market because they are meth-contaminated or wrecks/ruins.

But at the end of the day, you can sell a house for whatever price you want, but it may well attract attention and investigated if the deal looks suspicious. Including by relatives one either side of the deal. At the moment, Inland Revenue is running an investigation programme on the sale of investment properties.

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tdgeek

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#2630551 5-Jan-2021 10:36

BlinkyBill:

If you sell a house that isn’t an investment, then there is no capital gains tax applicable. So no reason to sell low to avoid that tax.

I didnt suggest otherwise. The point was tax avoidance, and people can and do are taxed on the capital gain, if that tax applies

BlinkyBill

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#2630563 5-Jan-2021 11:03

As written, you did suggest otherwise “I dont know these days what taxes may apply if you did a "deal" and sold a house for $1 or $10,000 to a relative, etc, the IRD and banks may have an issue with that.”

Irrespective of the amount of the sale on a non-investment property, no taxes apply.

It’s pretty obvious that if the deal is dodgy, then authorities may well look into it. Tax avoidance, money laundering, exploitation of vulnerable people, gifting to ineligible giftee’s - all of these would attract attention.

tdgeek

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#2630566 5-Jan-2021 11:10

BlinkyBill:

As written, you did suggest otherwise “I dont know these days what taxes may apply if you did a "deal" and sold a house for $1 or $10,000 to a relative, etc, the IRD and banks may have an issue with that.”

Irrespective of the amount of the sale on a non-investment property, no taxes apply.

It’s pretty obvious that if the deal is dodgy, then authorities may well look into it. Tax avoidance, money laundering, exploitation of vulnerable people, gifting to ineligible giftee’s - all of these would attract attention.

"These days" I.e. Estate duties, gift duties , etc,. CGT is not a recent change. "may apply" was also mentioned, i.e. covering off applicable CGT

quickymart

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#2630640 5-Jan-2021 12:36

So (hypothetical numbers) if the house was bought for, say, $450,000 18 months ago and then sold privately for around $300,000, someone at IRD would investigate it? That's what I'm reading here.

antonknee

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#2630651 5-Jan-2021 13:04

BlinkyBill:

concordnz: Yep, direct knowledge of multiple people & through multiple different banks.
And corroborated by Mortgage Brokers.

I think that if you are claiming employers are now being required to write letters confirming employment, you need to make a verifiable assertion.

I have a letter of credit from Westpac, it is conditional (amongst other minor things) on a letter from my employer confirming my employment has not been and is unlikely to be affected by Covid-19. I will provide a screenshot of this if you still require a "verifiable assertion".

That said, and as you are no doubt aware, the ins and outs of mortgage approvals are not exactly verifiable assertions, particularly where they relate to an individual person's creditworthiness or a bank's credit requirements.

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BlinkyBill

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#2630751 5-Jan-2021 14:24

I think direct experience is a verifiable assertion; as opposed to ‘my mate said ...’. Thanks for that. As an employer myself, a staff member who took a mortgage from Westpac in December was not asked for a letter, so, as they say YMMV, perhaps.

mattwnz

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#2630762 5-Jan-2021 15:28

BlinkyBill:
If you sell a house that isn’t an investment, then there is no capital gains tax applicable. So no reason to sell low to avoid that tax.

If you sold a house at substantially below market value, it is possible it will attract attention to those investigating anti-money laundering activities. Or dodgy real-estate agent dealing (been several of those reported in the media recently). Some houses sell below the general market because they are meth-contaminated or wrecks/ruins.

But at the end of the day, you can sell a house for whatever price you want, but it may well attract attention and investigated if the deal looks suspicious. Including by relatives one either side of the deal. At the moment, Inland Revenue is running an investigation programme on the sale of investment properties.

What if you buy an old house as your home to live in, do it up then sell within a year or two. Then do the same again and again? I recall a good decade ago, that if someone's intention was to do this, then the profit could be taxable, even if it was the house you live in. But that was before the brightline year came in so not sure if things changed with that.

tdgeek

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#2630768 5-Jan-2021 15:35

mattwnz:

What if you buy an old house as your home to live in, do it up then sell within a year or two. Then do the same again and again? I recall a good decade ago, that if someone's intention was to do this, then the profit could be taxable, even if it was the house you live in. But that was before the brightline year came in so not sure if things changed with that.

I guess there is might be a formula for that, or it will fall under intent. Similar to a car dealer, if they sell over x cars in y period they are a dealer. You example may go close to being a property developer. A conscious intent to do that work for income, as compared to a casual homeowner, doing a reno then selling

BlinkyBill

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#2630788 5-Jan-2021 16:45

tdgeek:

mattwnz:

What if you buy an old house as your home to live in, do it up then sell within a year or two. Then do the same again and again? I recall a good decade ago, that if someone's intention was to do this, then the profit could be taxable, even if it was the house you live in. But that was before the brightline year came in so not sure if things changed with that.

I guess there is might be a formula for that, or it will fall under intent. Similar to a car dealer, if they sell over x cars in y period they are a dealer. You example may go close to being a property developer. A conscious intent to do that work for income, as compared to a casual homeowner, doing a reno then selling

There is an absolute defence to the brightline test (which came in in 2015, from memory), which is if the house is your primary residence then the test does not apply, and no capital gain is applicable.

If the house is not your primary residence, then the test applies.

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