Is buying a property and listing a fake price normal in Buenos Aires?

[Tomahawk]

Help. I just found this forum. I am in the middle of buying a condo in Buenos Aires and my offer was accepted by the seller in writing. But now they are telling me that they won't move forward with the transaction unless I use a fake very low price on the title deed! The realtor told me this is normal. The realtor recommended a lawyer to close and that lawyer is also telling me not to worry and this is totally normal here.

This doesn't feel right and I don't know if this is really normal here but the realtor and lawyer said not to worry. Is this really normal here? How can this go on here? The property is $215000 and they want to only use $155,000 dollars on the title deed.

If someone can give me advice.

 

[Betsy Ross]

Help. I just found this forum. I am in the middle of buying a condo in Buenos Aires and my offer was accepted by the seller in writing. But now they are telling me that they won't move forward with the transaction unless I use a fake very low price on the title deed! The realtor told me this is normal. The realtor recommended a lawyer to close and that lawyer is also telling me not to worry and this is totally normal here.

This doesn't feel right and I don't know if this is really normal here but the realtor and lawyer said not to worry. Is this really normal here? How can this go on here? The property is $215000 and they want to only use $155,000 dollars on the title deed.

If someone can give me advice.

It is normal for sellers to try to use artificially lower prices on the title deed to avoid some taxes. When I bought my apartment they asked the same thing but I was told it was getting better with this. When I bought my apartment it was a long time ago but I'm sure people are still doing this but you should talk to someone about downsides. It is also technically illegal to do this. Before no one controlled it but I'm not sure with this government in place. They are trying to cut down on this sort of thing.

You shouldn't use the escribano (lawyer) that your realtor recommends. You should find your own independent and verified lawyer. The buyer can choose who they want to use.

 

[earlyretirement]

Help. I just found this forum. I am in the middle of buying a condo in Buenos Aires and my offer was accepted by the seller in writing. But now they are telling me that they won't move forward with the transaction unless I use a fake very low price on the title deed! The realtor told me this is normal. The realtor recommended a lawyer to close and that lawyer is also telling me not to worry and this is totally normal here.

This doesn't feel right and I don't know if this is really normal here but the realtor and lawyer said not to worry. Is this really normal here? How can this go on here? The property is $215000 and they want to only use $155,000 dollars on the title deed.

If someone can give me advice.

Welcome to the forum. It is true that many sellers will demand that you list a fake price on the title deed or they won't sell. Even if they accept your offer/reserva they can always back out until you do at least a boleto (30% down payment). @Betsy Ross is correct that many, many people have done this but keep in mind before if you bought many years ago there was a 0% capital gains tax. Now there is a 15% capital gains tax so you are really shooting yourself in the foot if you are using a fake artificial price. If you can't do the same thing when you sell, keep in mind your capital gain is going to look even bigger when you sell. Just keep that in mind.

I really push to use real prices when possible because of this. Most of my clients are American and not only do we have to worry about capital gains taxes here in Argentina but also in the USA so you really have to think it through properly. The benefit is you are only taxed on your property tax on the fake lower price but it's not going to be a huge difference.

Also keep in mind, AFIP does audit once in a while and they will check the listing prices vs. the declared sold prices listed on the title deed. They know more or less what fair values are per m2. The risk/reward ratio for a buyer just doesn't make sense to me. But many, many sellers won't sell unless you agree with this. Most Escribanos won't agree to go lower than 70% of actual value. They are staking their law license on the line if they get caught.

I would not use the Escribano that the realtor is recommending per se. You are putting a LOT of faith and trust in that person to make sure there are no liens/encumbrances on the property so it is a great idea to make sure this person knows what they are doing and have done many transactions. We get hired several times when an Escribano didn't do enough due diligence and many times it ends up being a relative of the realtor.

I'm not saying that the Escribano will always be bad if the realtor is recommending but just research it. Unfortunately most foreigners that buy here just wing it and try to do everything on their own and then run into problems later. The realtor and lawyer are usually in a hurry for you to buy so they can make their commissions. More times than not they will give you wrong information on taxes. You have to research things in depth and understand the risks/rewards and tax law.

 

[Vince]

I also bought a while ago and was lucky I am grandfathered in. I won't have any capital gains taxes when I sell so I didn't care what it was listed at. The seller of my apartment that I bought did the same thing to me. It is common that many won't sell if you don't do it. You can just walk away if you aren't comfortable with doing it. That price is within the range of what most escribanos will allow.

Good point about the 15% capital gains tax. You might not be able to declare lower when you sell so you will have one hell of a capital gain! I am also American and have capital gains taxes in the USA so this is another good point.

 

[GraceH]

That is crazy that people cheat like that. No wonder Argentina is having so many problems.

 

[Wally]

Help. I just found this forum. I am in the middle of buying a condo in Buenos Aires and my offer was accepted by the seller in writing. But now they are telling me that they won't move forward with the transaction unless I use a fake very low price on the title deed! The realtor told me this is normal. The realtor recommended a lawyer to close and that lawyer is also telling me not to worry and this is totally normal here.

This doesn't feel right and I don't know if this is really normal here but the realtor and lawyer said not to worry. Is this really normal here? How can this go on here? The property is $215000 and they want to only use $155,000 dollars on the title deed.

If someone can give me advice.

This is actually extremely common here. Same thing happened to me when I bought my place. I also bought when there was no capital gains tax.

That is crazy that people cheat like that. No wonder Argentina is having so many problems.

Just about everything is like that here. That is one of the problems here. Too many taxes so everyone finds ways around it.

 

[Tomahawk]

Welcome to the forum. It is true that many sellers will demand that you list a fake price on the title deed or they won't sell. Even if they accept your offer/reserva they can always back out until you do at least a boleto (30% down payment). @Betsy Ross is correct that many, many people have done this but keep in mind before if you bought many years ago there was a 0% capital gains tax. Now there is a 15% capital gains tax so you are really shooting yourself in the foot if you are using a fake artificial price. If you can't do the same thing when you sell, keep in mind your capital gain is going to look even bigger when you sell. Just keep that in mind.

I really push to use real prices when possible because of this. Most of my clients are American and not only do we have to worry about capital gains taxes here in Argentina but also in the USA so you really have to think it through properly. The benefit is you are only taxed on your property tax on the fake lower price but it's not going to be a huge difference.

Also keep in mind, AFIP does audit once in a while and they will check the listing prices vs. the declared sold prices listed on the title deed. They know more or less what fair values are per m2. The risk/reward ratio for a buyer just doesn't make sense to me. But many, many sellers won't sell unless you agree with this. Most Escribanos won't agree to go lower than 70% of actual value. They are staking their law license on the line if they get caught.

I would not use the Escribano that the realtor is recommending per se. You are putting a LOT of faith and trust in that person to make sure there are no liens/encumbrances on the property so it is a great idea to make sure this person knows what they are doing and have done many transactions. We get hired several times when an Escribano didn't do enough due diligence and many times it ends up being a relative of the realtor.

I'm not saying that the Escribano will always be bad if the realtor is recommending but just research it. Unfortunately most foreigners that buy here just wing it and try to do everything on their own and then run into problems later. The realtor and lawyer are usually in a hurry for you to buy so they can make their commissions. More times than not they will give you wrong information on taxes. You have to research things in depth and understand the risks/rewards and tax law.

Thank you to everyone that answered!

I didn't even think about the tax issues! I don't plan to sell it anytime soon but it is a good idea to think about this. The realtor and the lawyer didn't mention taxes. I would feel more comfortable using the real price but the seller refuses to sell using the true price. I am confused how all of this happens. If a fake price is used on the title deed what is protecting me if there was some problem at closing?

Good points about not automatically using lawyer that the realtor told me to use. I just thought it would be easy as I don't know anyone here. I better do more research. I didn't know everyone uses fake prices here. I looked at some new developments and they did not say anything about using fake prices. Is that common in new developments also??

What taxes is a seller saving using a fake price? What about paying for the property? They said I have to pay cash. They won't let me pay with a wire transfer. The realtor said I just need to wire it to a money transfer firm. Can I open up a bank account here to make the payment?

 

[Johnny]

Thank you to everyone that answered!

I didn't even think about the tax issues! I don't plan to sell it anytime soon but it is a good idea to think about this. The realtor and the lawyer didn't mention taxes. I would feel more comfortable using the real price but the seller refuses to sell using the true price. I am confused how all of this happens. If a fake price is used on the title deed what is protecting me if there was some problem at closing?

Good points about not automatically using lawyer that the realtor told me to use. I just thought it would be easy as I don't know anyone here. I better do more research. I didn't know everyone uses fake prices here. I looked at some new developments and they did not say anything about using fake prices. Is that common in new developments also??

What taxes is a seller saving using a fake price? What about paying for the property? They said I have to pay cash. They won't let me pay with a wire transfer. The realtor said I just need to wire it to a money transfer firm. Can I open up a bank account here to make the payment?

@Tomahawk you should read this website.

BuySellBA

Don't buy real estate in Buenos Aires without knowing all of the laws, ins and outs and all the possible pitfalls.

buysellba.com

It will describe the process to buy. I hired @BuySellBA to help me purchase an apartment in Buenos Aires. I looked at possibly getting a used apartment but everything I looked at needed to be gutted. Almost all the properties unless you are buying a relatively newer apartment needs new kitchen or bathroom. I did not want to go through that process. I bought a penthouse apartment in this building. My apartment is almost done. The building is all up but they are finishing up with lobby and some of the units.

I used the real price. I looked at some new construction and all of them used the true prices. I also did not have to wire any cash besides the initial offer but that was only $2,000 dollars. @BuySellBA helped set up so I could just wire in US dollars to a US dollar account and I did not have to deal with cash. On other developments they did not have that structure in place and I would have had to wire in but it was more complicated with capital controls in place by the government. Be careful. As it was explained to me by the company that I hired that it isn't technically legal to wire in cash with cuevas. This government might not care but the next one might. Kind of crazy the capital controls in place so it is a good idea to understand that.

Many sellers are doing this not just to pay less taxes for the sale but most are very private and don't want the government to know what they are doing with their money and also Argentina has wealth taxes on assets you have. Many prefer to just have cash set aside and not have the government know what they have.

Probably a good idea for you to research more. It is much different buying here compared to back home. No you can't open up a bank account here easily. I tried when I was in BA. @BuySellBA got my CDI number which is a tax ID number that you must have to buy real estate but the bank didn't let me open a bank account with that. They said I needed to have a DNI. I read some reports of people opening an account with CDI but that was after I was there last year. Maybe it is easier now.

 

[Finance Prof]

This is actually extremely common here. Same thing happened to me when I bought my place. I also bought when there was no capital gains tax.


Just about everything is like that here. That is one of the problems here. Too many taxes so everyone finds ways around it.

Just about everyone that I know that bought here the seller would not sell without listing a lower price. There are rare exceptions. I had a friend that was selling to buy a more expensive property and they needed all of the money so they needed to declare the full price but then their buyer wouldn't buy it unless they used an artificially low price. So even times when the seller wants to declare the true price the buyer might not want to.

Argentina is different for locals because you have to justify the income and if you are buying something people don't want to risk getting into problems with AFIP here. Many people don't declare all their income so if they are buying a $300k apartment and they are only declaring that they make $1,500 USD per month there are going to be issues. It is complicated here.

Many use cuevas to move money in but listen to the advice above about the next administration maybe seeing how you brought the money into Argentina. Currency controls are still in place. You won't have problems with Milei or when he is in office but the fear might be if he doesn't get re-elected. It's always a good idea to do things legally.

When I bought my place same deal. Seller would not sell unless we used a lower price. I had to pay 30% of the total and we signed a contract. I had to use a cueva for this. No other way around it as currency controls were in place. You use the real price on this boleto contract. Then at the closing it was for 70% balance. They took the original contract that we signed at the closing and they tore up both copies. The title deed had the fake price which was the 70% balance.

 

[Uncle Wong]

Amazing that so many sellers do this. I inquired with some new construction developments and they all used the true price. Lots of great info on this thread!

 

[Digital Nomad]

@Tomahawk you should read this website.

BuySellBA

Don't buy real estate in Buenos Aires without knowing all of the laws, ins and outs and all the possible pitfalls.

buysellba.com

It will describe the process to buy. I hired @BuySellBA to help me purchase an apartment in Buenos Aires. I looked at possibly getting a used apartment but everything I looked at needed to be gutted. Almost all the properties unless you are buying a relatively newer apartment needs new kitchen or bathroom. I did not want to go through that process. I bought a penthouse apartment in this building. My apartment is almost done. The building is all up but they are finishing up with lobby and some of the units.

I used the real price. I looked at some new construction and all of them used the true prices. I also did not have to wire any cash besides the initial offer but that was only $2,000 dollars. @BuySellBA helped set up so I could just wire in US dollars to a US dollar account and I did not have to deal with cash. On other developments they did not have that structure in place and I would have had to wire in but it was more complicated with capital controls in place by the government. Be careful. As it was explained to me by the company that I hired that it isn't technically legal to wire in cash with cuevas. This government might not care but the next one might. Kind of crazy the capital controls in place so it is a good idea to understand that.

Many sellers are doing this not just to pay less taxes for the sale but most are very private and don't want the government to know what they are doing with their money and also Argentina has wealth taxes on assets you have. Many prefer to just have cash set aside and not have the government know what they have.

Probably a good idea for you to research more. It is much different buying here compared to back home. No you can't open up a bank account here easily. I tried when I was in BA. @BuySellBA got my CDI number which is a tax ID number that you must have to buy real estate but the bank didn't let me open a bank account with that. They said I needed to have a DNI. I read some reports of people opening an account with CDI but that was after I was there last year. Maybe it is easier now.

This matches so far what I have found. It isn't just taxes why they want to use a fake price. Things are complicated here. Once you are here for a while you realize how messed up things are. I was looking at properties earlier this year and almost pulled the trigger but my dad who was going to loan me the cash wasn't really comfortable with using fake prices. The apartment I liked I was facing the same issue. The owner wanted to only use 60% of the true value! Dad wouldn't agree to do that. What people said about the capital gains taxes was the deal breaker.

I looked at new construction but on many it won't be ready for years. I would still like to buy something here but in wait and see mode.

 

[JonJLA]

Help. I just found this forum. I am in the middle of buying a condo in Buenos Aires and my offer was accepted by the seller in writing. But now they are telling me that they won't move forward with the transaction unless I use a fake very low price on the title deed! The realtor told me this is normal. The realtor recommended a lawyer to close and that lawyer is also telling me not to worry and this is totally normal here.

This doesn't feel right and I don't know if this is really normal here but the realtor and lawyer said not to worry. Is this really normal here? How can this go on here? The property is $215000 and they want to only use $155,000 dollars on the title deed.

If someone can give me advice.

Talk to @BuySellBA and @earlyretirement. I hired them a few times now. I hired them a while back when they were ApartmentsBA and they managed my apartment. One of the owners still manages my property and it still rents consistently. I also used them to sell a few properties there in 2017. It is important to understand how everything works. On 2 apartments that I sold they signed the paperwork for me and I just had the buyer wire to my bank in US. Was much easier than buying.

 

[FuturoBA]

That is crazy that people cheat like that. No wonder Argentina is having so many problems.

People will do what they believe they can get away with. In the US it used to be common with buying used cars to list sold price for much cheaper than actual price too.

@Tomahawk Plenty of great advice here and make sure to read the similar threads and real estate sales section here. Lots of crazy stories about how terrible realtors and sellers can be. Buying is much different than buying in the US- much less protection and much more confusing.

 

[Digital Nomad]

People will do what they believe they can get away with. In the US it used to be common with buying used cars to list sold price for much cheaper than actual price too.

@Tomahawk Plenty of great advice here and make sure to read the similar threads and real estate sales section here. Lots of crazy stories about how terrible realtors and sellers can be. Buying is much different than buying in the US- much less protection and much more confusing.

True about the cars! It is like the Wild West here on real estate. I read some stories online and shake my head. It amazes me here that people don't research more.

 

[Jeb Spencer]

People will do what they believe they can get away with. In the US it used to be common with buying used cars to list sold price for much cheaper than actual price too.

@Tomahawk Plenty of great advice here and make sure to read the similar threads and real estate sales section here. Lots of crazy stories about how terrible realtors and sellers can be. Buying is much different than buying in the US- much less protection and much more confusing.

That describes Argentina in a nutshell. People have always been able to get away with these kinds of things. I don't know if this mindset can change. it will take make a generation to change the mindset in Argentina.

 

[Jenn]

I read that mortgages were starting in Argentina. In the United States almost everyone uses loans to buy. And no way we can get around this with the banks. The same thing will probably eventually happen in Argentina. I would not think you can list fake prices once banks are involved.

 

[earlyretirement]

I read that mortgages were starting in Argentina. In the United States almost everyone uses loans to buy. And no way we can get around this with the banks. The same thing will probably eventually happen in Argentina. I would not think you can list fake prices once banks are involved.

Correct. On properties where there are mortgages you have to use real prices. Also, on reputable new construction properties they are also using true prices. Once the CEPO ends things will be much easier and cleaner. It will still take years for some people to get out of the mindset of cash and you will probably have a segment of the population that won't trust banks there until there is stability for a while.

 

[Richard02]

Welcome to Argentina! Here, it's pretty common for sellers to want to record the sale at a lower value than the actual property price, and there are a few reasons for that. The main one is to pay less in taxes, especially on the profit from the sale. By declaring a lower sale price, they reduce the amount of tax they owe.

Another reason is that by underreporting the value, other costs, like the stamp tax and fees both parties have to pay, also go down. So, by lowering the declared value, those expenses become smaller.

This practice has kind of become the norm here due to the country's economic situation. Many times, real estate transactions are done in U.S. dollars outside the formal system, giving sellers and buyers more flexibility in handling cash.

That said, while it might seem tempting, it comes with risks. It can complicate things if you want to sell the property in the future, you could end up paying higher taxes, and there may even be legal issues. It's always a good idea to have everything in order and consult a lawyer, a good lawyer.

 

[FuturoBA]

A part of me says these sellers are trying to squeeze extra cash from the buyer, who if they don't agree to the lowering the written price hope they can manipulate the buyer to offer extra cash to offset the costs. It's a shitty manipulation tactic, to spring an extra expense on someone after an agreement has been reached, but I wouldn't be surprised if that's how some try to justify it. Imagine such a shady seller trying to convince an unsuspecting buyer, "bc I(seller) am paying more in taxes at full sell price, I want you to cover a portion of that difference."

I've had such contractors here in the US try to pull this scam- after agreeing on installation costs of flooring- at the last minute try to sneak an additional charge for the protective coating.

 

[earlyretirement]

A part of me says these sellers are trying to squeeze extra cash from the buyer, who if they don't agree to the lowering the written price hope they can manipulate the buyer to offer extra cash to offset the costs. It's a shitty manipulation tactic, to spring an extra expense on someone after an agreement has been reached, but I wouldn't be surprised if that's how some try to justify it. Imagine such a shady seller trying to convince an unsuspecting buyer, "bc I(seller) am paying more in taxes at full sell price, I want you to cover a portion of that difference."

I've had such contractors here in the US try to pull this scam- after agreeing on installation costs of flooring- at the last minute try to sneak an additional charge for the protective coating.

Actually it's not really a negotiating tactic at all @FuturoBA. Remember, the buyer is making a written offer (reserva) and the seller in many cases will first accept in writing. Many times they don't even mention the declaring a lower price until they get the offer accepted in writing. Remember something important, the seller can always back out by just refunding the reserva. But if the buyer backs out they will lose that reserva.

Of course, it goes without saying that if the seller accepts in writing and then won't close at the real price, you can always walk away and get your deposit back because the seller is breaking the law. Sometimes they will mention it before accepting but many times they don't mention this until they already agree. Many times, the seller will talk to their accountant after they already agreed to sell it but the accountant might tell them to list a lower price.

This is just one of the many complexities in Argentina. I've purchased well over 500 properties in Buenos Aires over the past 22 years. The vast majority of sellers will ask to use a lower price. Hopefully, the tide is turning now on this practice. People want a functional system here in Argentina but many don't want to do things above board and that contributes to this mess.

Unfortunately, I don't see this changing any time soon. And remember that President Milei has not gotten rid of the CEPO and all the currency controls) so the boleto deposit of 30% many times needs to come in "black" through a cueva so many buyers also want this amount they are using for the boleto off the books. Until the CEPO ends, there is no legal way to bring this cash into Argentina short of carrying it on a plane or every passport stamp entry you can say you brought in $10,000 in cash.

The easiest method is just to wire directly to the seller's bank account OUTSIDE of Argentina which is 100% legal. Even with all the improvements, Argentina is FAR away from people trusting Argentina's banks completely. I was here when they had the last bank run of the corralito and it was very ugly. If trust fades, things can snowball VERY quickly and there can be a bankrun.

Personally, I wouldn't put tons of cash into a USD account in Argentina right now. Things are improving but I have been through a few cycles in Argentina and know how quickly things can turn. In fact, I would forecast that many of these billions that came into Argentina with the tax amnesty, most will eventually pull it out over the next year and use it to buy real estate or other things (cars, etc). Most won't feel comfortable keeping it in the banking system here longer-term until they see the system is stablized.