no escrow cheap land

14 Replies

I'm selling northern California land for under $2k.  The buyer sent me a grant deed to sign with a notary.  How do I ensure that I get paid if I'm not using escrow?  

It is the chicken and the egg... Have the buyer send a cashiers check to the mobile notary with instruction to hand you the check when they get you to sign the Grant deed and hand it back to the mobile notary to send back to the buyer..  That's one way you can do it.  probably some one line pay pal type of stuff also that I am not aware of.

I know title co does not like to handle transactions without escrow fee's which would eat up 25% or so of your sales price..

What county is this land in.. Just curious.. We still own a bunch of low value odds and ends in a few N. Ca counties as well.  I sell a few now and then to those that want to buy for cheap them they remarket them for 50 down 50 a month to folks that just got to own land for some reason.

Call the bank to verify the cashiers check before you sign.

What re you calling escrow?

You can not just hand a check over and hand a deed to a buyer, doesn't matter what the price is.

The days of the wild west are over, in fact a couple decades ago.

Are you doing the closing yourself to save money......are you filing tax reports, who is providing the closing accounting statement or HUD-1 as required by law, ever hear of the Patriot Act involving cash transactions and large cash transaction reports for money laundering? If an amount is over $1,000, it can be a large transaction, any amount can be questionable. I could go on as to the laws you may be tripping over, but I'm not sure what you're trying to do. Closing requirements have no minimum price for any exemptions from requirements.

I really suggest you call an attorney, a RE attorney, not get your closing advice off the internet.  

My vote for Bill's post primarily for the last sentence, since I don't know what I don't know. I do know there are IRS requirements for "large"(!) transactions (over $600.00) but don't know much else like the Patriot Act.

However, it seems like the OP listed a sale that would be exempt from RESPA per Exemptions—12 CFR 1024.5(b) http://www.federalreserve.gov/boarddocs/supmanual/cch/respa.pdf From what I can tell, a HUD-1 is technically not required. Indeed, my company has been a party to transactions via trustee sale where there is no HUD-1 required nor provided. But you may choose to do so. "There is no objection to the use of the HUD - 1 in transaction in which its use is not legally required." http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_23688.pdf Appendix A to Part 3500. I have no idea about your particulars, and there may well be reporting requirements for the IRS and state for real estate dealers, which it sounds like you are.

And for the IRS, Who Must File is detailed in the link below. The IRS says: "Generally, you are required to report a transaction that consists in whole or in part of the sale or exchange for money, indebtedness, property, or services of any present or future ownership interest in any of the following:
1.Improved or unimproved land, including air space;

..."
http://www.irs.gov/instructions/i1099s/ar02.html If you are not using a broker and there is no lender, the Transferee (the person acquiring the interest in the property) is responsible for reporting. I don't know the penalty for not reporting. Probably death.

Here is how I was describing Escrow:

...a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties...

HUD-1:

Settlment docs for mortgages...

I bought the land with cash, no escrow, no HUD, and I plan on reporting everything to the IRS when I sell, as I always have.

The deed was and will be again recorded at the County Recorder.

LOL, not death, but it can rack up more than $100,000 for you.

And my vote for Chris is for the links.

However, as mention a HUD-1 is not required for non-residential properties but it's usually the easiest way if it applies.

The IRS requires an accounting of RE transactions showing all relevant expenses and costs of settlement, it is the source document to establish the tax basis for all real estate.

A tax basis is required on all real estate, besides rentals and sales by investors, you have estate matters and everyone dies. You need to prove what you paid for a property, if you go to court, get sued for anything and have to provide a financial statement and don't have a current appraisal you need your closing documents to support you value. Same with bankruptcy.

Unless required by state law, you don't necessarily have to open an accounting escrow but technically the "notary" closing agent is your document escrow. They should be acting as a third party closing agent. If it's just a notary, they should know better and they  are taking on related duties they may not be familiar with. Besides ALTA requirements you'll usually find state laws backing up ALTA requirements as well as the IRS Code and several acts dealing with money laundering, wiring funds, and DDAs (demand deposit accounts).

A bank teller is required to complete a "large cash transaction report" on any amount when the source of a deposit is reasonably questionable, if some has never had a deposit of $500 to a checking account besides the monthly pay check, that could be questioned. If the teller knows them, good customer,  known character type, they are not required to go that route, it's if the transaction is unusual and the amount is questionable. By the same token, some are ignored, like car dealers as they have multiple deposits and withdrawls of large amounts at odd times.

The other issue too is future title insurance being covered on past settlements, as it covers the errors and omissions of that settlement. Who knows if liens could arise from a private settlement. Only a fool would buy RE without a title search or examination.  :)   

Here is how I was describing Escrow:

...a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties...

HUD-1:

Settlment docs for mortgages...

I bought the land with cash, no escrow, no HUD, and I plan on reporting everything to the IRS when I sell, as I always have.

The deed was and will be again recorded at the County Recorder.

My @.. wasn't working, and then it double posted my previous reply - that I can't undo.  I'm switching to another computer to reply...

@Bill Gulley  Yes, I will be using a Notary.  When I bought it, I paid for a title search, I paid for the land, and the County recorded my name on the deed.  I don't know if the previous seller reported to the IRS, maybe their phones are being tapped by the Patriot Act...

Now in reverse, I am selling the land, using a notary, and reporting the sale to the IRS.  I am questioning the chicken and egg situation.  If I sign over the deed, how do I ensure the buyer doesn't skip out on payment?  Or, if the buyer pays me, how do they ensure I don't skip out on signing the deed over.

When I bought it, I just trusted that the system would work out fine, and it did.  But now that I have biggerpockets to consult, I thought it would be wise to get advise. 

If I use a RE lawyer, there goes my small amount of money from the sale, and I might as well keep the property. 

If I do something illegal, there goes $100,000, and the Patriot Act might wire tap my phone.

As far as my banks go, I have a lot of transactions moving around with cheap boats, cheap land, cheap SFR rentals, gift funds, vacation rental deposits and refunds, and my full time job... I hope I don't make their heads spin, but the tellers just smile and thank me by name... Shoot, maybe my phone is already tapped! :)

Originally posted by @Bill Gulley:

What re you calling escrow?

You can not just hand a check over and hand a deed to a buyer, doesn't matter what the price is.

The days of the wild west are over, in fact a couple decades ago.

Are you doing the closing yourself to save money......are you filing tax reports, who is providing the closing accounting statement or HUD-1 as required by law, ever hear of the Patriot Act involving cash transactions and large cash transaction reports for money laundering? If an amount is over $1,000, it can be a large transaction, any amount can be questionable. I could go on as to the laws you may be tripping over, but I'm not sure what you're trying to do. Closing requirements have no minimum price for any exemptions from requirements.

I really suggest you call an attorney, a RE attorney, not get your closing advice off the internet.  

 Now you have me wondering.  I have an old car I was thinking of selling for about $1,900.  Are there money laundering laws involved that would require me to use some kind of a closing agent?

Account Closed 

I don't think selling a car for $1,900 is an issue. As far as I know, there are no issues with non-broker/dealers selling personal property within the US. If you fit the definition of a dealer, there may be reporting requirements.  Not sure. I'm not a broker/dealer of RE, autos, guns, etc., but am aware of dealer laws pertaining to NC sales activities.

The patriot act issues are posted at your bank.

The question arises from the sale of land, claiming a sale of 1500, I haven't seen such a price for decades for raw land, unless there other issues, anyway, add the fact it was a DIY thing. All that together seems odd, it's possible you took 15,000 and tried to avoid taxes, it could be possible someone is using RE to pass to launder other sums not shown. If there were no RE involved, it wouldn't be questionable, you could have had a garage sale.

Closing costs are split between both parties, could cost you $200 to do it lawfully and properly. Since that will break you, and you need to pay your phone bill, have at it.  

If the buyer fails to give you good funds, the transfer would be voidable, for that you can go pay your attorney $2,000 to correct your DIY pocket deal and sue the buyer for those costs. Penny wise, pound foolish using BP for your legal advice.

There are some folks here that couldn't pour liquid out of a boot if the instructions were written on the heel upside down! Good luck.

thank you for your advise and taking your time to offer it.

@Thad Miller 

Please let me know if this transaction was successfully completed.  If not, we will purchase the property.

If you have additional properties, we will review them as acquisition candadates.

Thanks, Steven Butala.

sold it. Nothing else for sale, at this time.  Everything is being rented for now...  Thanks and happy hunting!

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