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

[Daniela]

What is everyone's experience with fake prices on new construction? I thought they would have to use the real price on new construction but I am looking at a condo at Conception Live and they want to use fake lower prices which I am not comfortable with because of capital gains taxes if I sell. Are those of you buying now using real prices?

 

[Johnny]

What is everyone's experience with fake prices on new construction? I thought they would have to use the real price on new construction but I am looking at a condo at Conception Live and they want to use fake lower prices which I am not comfortable with because of capital gains taxes if I sell. Are those of you buying now using real prices?

I looked at several apartments both older and new construction. I have purchased 2 apartments so far in Palermo. Both by the same developer. We used the true and real price on both of them. It was a fairly straightforward process. They even had a bank account set up outside of Argentina in USD so it was easy. I just wired from my account at Wells Fargo to their bank. No extra fees at all.

I looked at a few PH units in an old building with the idea to restore it. I made an offer but the seller wanted to declare 50% of the true price. I didn't want to take that risk. The owner I was told would not have any capital gains taxes so that wasn't the reason. People here like declaring less. I would not feel comfortable doing that.

 

[daveholman]

The problem comes if you discover a defect in the property or the title and want to unwind the deal. You could only sue for the amount listed on the paperwork, not what you actually paid.

 

[Betsy Ross]

The problem comes if you discover a defect in the property or the title and want to unwind the deal. You could only sue for the amount listed on the paperwork, not what you actually paid.

Well the time to find the defect is before you buy. Most people don't do inspections here. Suing isn't too common because court systems do not work. Not really such a thing as unwinding the deal after you buy it. I have never heard of someone being able to back out of a deal after they bought.

As far as the lower price that is common. I had to do that when I bought my apartment. But it was not new construction.

 

[Daniela]

The problem comes if you discover a defect in the property or the title and want to unwind the deal. You could only sue for the amount listed on the paperwork, not what you actually paid.

@daveholman what would be an example of defect in the property? Or in the title deed? Have you had a situation where you unwinded the deal? I have not heard of that. If you know of anyone I would like to know what problems they had? I would think the lawyer handling the transaction would need to check all this stuff ahead of time.

 

[earlyretirement]

Well the time to find the defect is before you buy. Most people don't do inspections here. Suing isn't too common because court systems do not work. Not really such a thing as unwinding the deal after you buy it. I have never heard of someone being able to back out of a deal after they bought.

As far as the lower price that is common. I had to do that when I bought my apartment. But it was not new construction.

@Betsy Ross is spot on target. It is not easy to solve things after you already purchased a property. Here in Argentina they don't have home warranties and think of it as buyer before and what you see is what you get type purchases. The judicial system doesn't work here. The most important part of the process is having an excellent and ethical Escribano that will do a lot of due diligence ahead of time to make sure the property does not have any liens, encumbrances, past due bills, etc. You should be doing inspection before you purchase it.

On new construction they are mostly using true prices, however, keep in mind in many new projects, many owners are flipping their properties before the title deed is ready. So you can have a property owner that bought in a pozo for $100,000 early. He/she might decide to flip it and the value went up to $150,000. They might flip it and demand that you record the same $100,000 that they paid. That investor would then pocket $50,000 for no capital gain on paper. No name has been recorded yet on a title deed so on that new pozo that is an example where they might not sell unless you agree to that lower price. You have to be careful and understand all the various scenarios. Buying here is much more complicated vs. USA or other first world countries.

 

[daveholman]

@Betsy Ross is spot on target. It is not easy to solve things after you already purchased a property. Here in Argentina they don't have home warranties and think of it as buyer before and what you see is what you get type purchases. The judicial system doesn't work here. The most important part of the process is having an excellent and ethical Escribano that will do a lot of due diligence ahead of time to make sure the property does not have any liens, encumbrances, past due bills, etc. You should be doing inspection before you purchase it.

On new construction they are mostly using true prices, however, keep in mind in many new projects, many owners are flipping their properties before the title deed is ready. So you can have a property owner that bought in a pozo for $100,000 early. He/she might decide to flip it and the value went up to $150,000. They might flip it and demand that you record the same $100,000 that they paid. That investor would then pocket $50,000 for no capital gain on paper. No name has been recorded yet on a title deed so on that new pozo that is an example where they might not sell unless you agree to that lower price. You have to be careful and understand all the various scenarios. Buying here is much more complicated vs. USA or other first world countries.

Apparently so. Which is good to know. Here in the US we have title insurance, and they assume the risk for any encumbrances discovered after the sale. I assume this is why I've been told to NOT use an escribano recommended by the seller's side.
And no, I've not dealt personally with real estate purchases in Argentina. I was extrapolating from a common practice by less than ethical people selling cars in the US. They give a receipt for less than the price. Buyer agrees because it lowers his tax, then the car goes kaput due to a problem the seller knew about and didn't disclose. The buyer sues for his money back and only gets the amount on the receipt, so the crooked seller keeps a tidy profit.

 

[Vince]

Apparently so. Which is good to know. Here in the US we have title insurance, and they assume the risk for any encumbrances discovered after the sale. I assume this is why I've been told to NOT use an escribano recommended by the seller's side.
And no, I've not dealt personally with real estate purchases in Argentina. I was extrapolating from a common practice by less than ethical people selling cars in the US. They give a receipt for less than the price. Buyer agrees because it lowers his tax, then the car goes kaput due to a problem the seller knew about and didn't disclose. The buyer sues for his money back and only gets the amount on the receipt, so the crooked seller keeps a tidy profit.

Correct! You never want to use an Escribano that is recommended by the seller. You never know if it will be their cousin or family member. As others mentioned, there is no title insurance here. You only get one chance to do it right here. Have to have a good lawyer or you are basically screwed.

 

[Wally]

The problem comes if you discover a defect in the property or the title and want to unwind the deal. You could only sue for the amount listed on the paperwork, not what you actually paid.

The problem comes if you discover a defect in the property or the title and want to unwind the deal. You could only sue for the amount listed on the paperwork, not what you actually paid.

No unwinding of deals here! If you don't do your due diligence up front you are stuck. Research well a good escribano and never should be one from the seller or the seller's realtor. You as the buyer get to select the escribano to be used on the transaction. Only exception is pozo developments.