Don't know exact numbers, so I'll just make up some that seem plausible.

Purchase price of house $200,000.

Work house needs might cost $10,000

Person able to do that work wants to buy house.

If "Joe" does the work, seller (not me, close relative) pays "Joe" $10K, then Joe pays $10K as part of down payment, then Joe gets mortgage for $190K, is there anything illegal going on? Will the tax man agree that the house sold for $200K?

Owner/seller also has insurance, property tax, maintenance, etc. Can "Joe" pay these and seller credit them as part of down payment?

  • 1
    Why doesn't Joe buy the house for $190K and then do the work afterwards? Apr 30, 2022 at 6:55
  • Because he can't afford it "yet" but seller wants him to have it (they're related) but doesn't want to just give it to him. So she wants to find a low-risk way to let him do a sort of "layaway" until the balance gets low enough for "Joe" to get the loan. Presumably the downpayment would increase over time as Joe does other things (tax, maintenance, painting, insurance, whatever, IDK)
    – WGroleau
    Apr 30, 2022 at 7:06
  • Depending on the details of what and when is done, and the laws, there is a possible tax fraud, as Joe's does not pay for his work in someone else's house. Also there is the issue that after the reforms the house has more value, so selling it in exchange for less money and a pardon's of the seller's debt to Joe means paying less in capital gains/real state taxes (although this situation can be more difficult to assess).
    – SJuan76
    Apr 30, 2022 at 14:52
  • Capital gains won't be an issue because she inherits the house this year. So her basis is the current market value. The estate will have a small amount of state tax but no federal. I don't get the other part. It won't be Joe's house until he has enough down payment to get a loan. And the house needs to be vacant during the work. And the idea was that Joe isn't paying for the work, the owner is paying Joe, but in the form of credit on the down payment. If it's legal—I'm not going to advise anyone to break the law. I have a lawyer for my own stuff—maybe I can sneak in this question.
    – WGroleau
    Apr 30, 2022 at 17:15


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