Posted by seldon on August 08, 2010 at 05:35:09:
why are you so all fired up to deposit your cash in a bank anyway? maybe a good time to think about investing in a good safe or saftey deposit box.
cash is and will always be king,physical gold is a very close second.
Its not the sellers worry where the cash from a real estate transaction comes from as long as you report all your income from the sale.
Problem With Cash Sale? - Posted by BenT
Posted by BenT on August 05, 2010 at 17:30:43:
So I’ve been renting a low-end property now for the last 8 months or so. The tenant periodically has asked me if I would sell the house to him. I have always said yes, and we agreed on a potential price.
Yesterday he showed up with $5000 cash…in $100 bills. I wasn’t especially surprised because he always pays his rent in cash as well, as do many of my other tenants. His intent was to pay the remainder of the purchase price, in cash, at several different points in August.
So I took the $5K down to the bank to deposit. They asked for my ID, because of the “size” of the cash deposit. Now I’m wondering whether selling for actual cash is a problem. I know the banks used to report cash deposits of $10K or more. But in this case the initial deposit was half of that, and they were already asking for ID. And there will be more during August…approximately $40K.
Any thoughts on this? Potential problems???
BenT
Re: Problem With Cash Sale? - Posted by Ken
Posted by Ken on August 06, 2010 at 07:16:33:
The bank is supposed to report $10000 or any suspicious amount.If you do not put cash in your account that may have looked suspicious to them.Post office money orders are good,Wal Mart also has cheap money orders.
Re: Problem With Cash Sale? - Posted by James - Michigan Investor
Posted by James - Michigan Investor on August 05, 2010 at 22:47:15:
BenT,
Get a new bank. Yours sucks.
Sincerely,
James
lol…my bank never asks me for ID when making deposits…only when I take it out. Especially with a gun. 
Re: Problem With Cash Sale? - Posted by TKP, Houston
Posted by TKP, Houston on August 05, 2010 at 22:16:44:
There is no problem with a sale like this as long as you declare you net income on your tax return. At a recent
foreclosure auction I attended a property that sold for about $130,000 was paid for with $100-bills.
TKP, Houston
Re: Problem With Cash Sale? - Posted by chi ming
Posted by chi ming on August 05, 2010 at 21:01:53:
You might also want to make him agree to replace any
phony $100 bills that are confiscated by the bank
(because they have to take them from you and you lose the
money). Otherwise why would it matter. BTW $100 are the
most commonly counterfeited.
Re: Problem With Cash Sale? - Posted by ari
Posted by ari on August 05, 2010 at 19:26:32:
Tell the tenant to give you cashier checks. I’m not sure if that’s any different but at least you can walk into the bank with a check instead of a pile of cash. A cashier check is still cash, but easier to manage.
Re: Problem With Cash Sale? - Posted by BenT
Posted by BenT on August 05, 2010 at 23:49:47:
Maybe you’re right…I was surprised when they wanted my ID. Of course, they are required by law to fill out a CTR (Currency Transaction Report) and file it with the IRS for transactions over $10,000. Even your bank.
That said, I wasn’t aware of any requirements over $5K. So it’s possible my bank is being overly cautious.
Ben
Use Escrow Co or Agent - Posted by John Merchant
Posted by John Merchant on August 06, 2010 at 12:38:01:
This proves value of using escrow co or agent.
Here, using ours, it takes in B’s money today but won’t deliver signed Deed until the B’s money clears escrow co’s bank.
Re: Problem With Cash Sale? - Posted by BenT
Posted by BenT on August 06, 2010 at 24:01:30:
Michaela had it right. This guy has no bank account. So it’s going to be a problem to get a cashier’s check with cash for a non-bank customer. And as far as I know, I think $1000 is the max value for a money order.
Like Michaela said, there are many banks that will place a hold on cashiers checks. That’s been true for quite a while now.
Ben
Re: Problem With Cash Sale? - Posted by michaela-CA
Posted by michaela-CA on August 05, 2010 at 21:29:27:
There’s a good chance that the guy doesn’t have a bank account, since he’s been paying in cash all along. And banks only sell cashier’s checks to their own customers. And…a cashier’s check is not really cash in these days of Nigerian scammers. It can still get canceled. In fact it happens quite frequently with these scammers, that they pay someone with a fake cashier’s check. The seller’s bank approves it and pays and on day 10 they find out that it’s fake and they reverse it. And now the seller is stuck.
Money orders? He can buy money orders with the total below 3K in one post office. For more than that he’d have to go to different branches.
I would probably talk to my customer rep at the bank and ask them just honestly about this: show them the contract and that you’re selling the house. Your buyer is paying cash - is that going to create any problems for you? You are planning on reporting the sale to the IRS, so it shouldn’t be a problem. And the bank will know what’s going on.
Michaela
Re: Problem With Cash Sale? - Posted by James - Michigan Investor
Posted by James - Michigan Investor on August 08, 2010 at 17:18:34:
I’d say so.
My bank will do that once my deposits/withdrawls exceed 10k in a 14 day period too. I think that is
suppose to be 30 days, but 14 might be bank policy.
James
Re: Problem With Cash Sale? - Posted by BenT
Posted by BenT on August 05, 2010 at 23:53:53:
This strikes me as good advice. I think I’ll do that.
The one thing that bothers me though is where this guy is getting all the cash. He claims he will be borrowing about half from his sister. But I suppose I wonder to myself whether this could potentially be drug money, and if so, what potential problems that may present to me.
Ben
Re: Problem With Cash Sale? - Posted by michaela-CA
Posted by michaela-CA on August 06, 2010 at 11:08:56:
The ‘all cash’ could also be just as simple as having run into financial problems in the past, which ruined his credit. When you have bad credit, no bank will let you open an account, not even a savings account(as strange as that may seem).
So, it does not automatically mean that it’s something shady.
Michaela
Re: Problem With Cash Sale? - Posted by wpage
Posted by wpage on August 06, 2010 at 09:09:12:
Ben I think you are right on the money. This could be drug money or money from some other crime related income. $40,000 all cash would make me question the source. I doubt that it is coming from his sister. If that were the case it most probably wouldn’t be cash.The problem you have is that you already have taken some of his money and I presume you have signed some kind of purchase agreement? I also presume that you do not have a mortgage on this property? I don’t think that you would be implicated in any way from a legal point of view unless you are sure that it really is drug money; but before I went to my bank I would consult a lawyer
Re: Problem With Cash Sale? - Posted by BenT
Posted by BenT on August 06, 2010 at 11:53:13:
Right, I have taken some money and signed a purchase agreement. I don’t have a mortgage. I’m just speculating in terms of it being drug money. I really don’t have any facts, or even any reason to be suspicious other than the large cash amount. The area that the property is in is a low-end area. Alot of people don’t have bank accounts. I get cash all the time in rent because they don’t want to spend the money on a money order. And I deposit cash routinely at the bank. However, I generally don’t deposit $5000 in one deposit. Nor do I deposit $40K in cash over the course of a month.
Michaela is right. In the particular area alot of people don’t have bank accounts because they have credit issues. Or they overdrew a bank account in the past, etc etc. So in this area it is the norm to not have a bank account.
The question I have is the amount of cash. This guy buys cheap cars, fixes them up, then sells them. So I guess it’s possible he could have some money around. The sister? I have no clue…she’s from out-of-state.
What nags me is whether I get the cash, deed the property, and it then turns out that the cash is from some type of illegal activity. I’m wondering whether they can seize the cash in that event, and lose the house to boot. I’m not worried about being implicated.
BenT
Re: Problem With Cash Sale? - Posted by Kristine-CA
Posted by Kristine-CA on August 09, 2010 at 20:39:56:
I have one rehab buyer who always has cash. The reason is his body
shop business (franchise). He owns dozens of rentals, but it’s his cash
flowing business that buys the houses. I think he’s bought 6 houses
from me. We can schedule the closing a week from signing and
deposit, because he will have the cash then.
Cash generating work is real. And it works. I wouldn’t worry about
drug money. Lots of businesses in my home town won’t take $100
bills right now because of counterfeit activity (restaurants, small retail,
etc.). So do what your bank asks in order to deposit cash. No big deal.
Re: Problem With Cash Sale? - Posted by michaela-CA
Posted by michaela-CA on August 06, 2010 at 12:17:53:
Ben,
I doubt that they could seize the cash of an innocent bystander. As long as you don’t know anything factual, I doubt that you’d be liable in that way.
I also doubt that someone that makes a good income from drug sales would spend time working on old cars, as that’s a lot of physical work.
But, if he was a drug dealer, I think you’re better off having sold the house to him than being his landlord, as the cops could seize the house. (Yeah, I did get one of those warning from the police beginning of the year. They did 3 undercover buys from one of my tenant’s roommate. That’s when I had to deal with my first eviction).
Michaela
Re: Problem With Cash Sale? - Posted by wpage
Posted by wpage on August 06, 2010 at 14:01:20:
Ben Thanks for the clarification.One of my questions was whether you had a mortgage or not because if you did, I was going to suggest that you start lowering the mortgage with the cash.
Since the cash is going straight to you why not hold onto the cash for a while? There is nothing to stop you from depositing the cash over time or even to use it for day to day expenses or to invest some of it into another property.
As long as the money is not counterfeit you should be ok. How you figure that out I don’t know.
I am with Michaela as far as you being implicated.
Why don’t you just be up front with him and tell him you are a little worried about that much cash all at once. Maybe you could take the cash over several months instead of all at once?
As long as you declare the sale to the IRS there shouldn’t be a problem.