A colleague was telling me about a curious call he had gotten from a client. Seems the client had listed his home for sale, and the real estate broker brought him a contract where the actual price was inflated with a "buyer's credit" in the same amount to cover closing costs and other sundry expenses. My friend is pretty smart, so he started asking questions, like "won't the sales commission and conveyance tax be on the higher amount?"; "won't my client have to pay capital gains on the higher price?"; and, finally, "why not just sell the property for less and let the buyer pay his own costs?"
The last one brought the expected answer—the buyer didn't have enough money for the transaction, and by inflating the sales price, he could mortgage more of the value of the house and bring less of his own cash to the closing. The broker explained that this is "done all the time." Dang! I thought all the brokers and lawyers who did this were in prison!
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