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Indirect purchase of apartment

Question:

We are looking to move from one apartment to another. A real estate agent showed us the plans for one we like, it is under construction, and should be finished in about 18 months. He said that the builder needed money to finance the construction, and a friend put up some of the construction money. In return, the builder gave the friend an ‘option’ to buy the apartment at 2.1 million NIS. The friend wants to sell his option to buy for 2.8 million. We would pay 2.1 to the builder, and pay .7 million to either the middle man’s corporation, or to his Amutah. Our concerns are two-fold. First, that there is nothing to protect the .7 million that we give the ‘friend’. Second, that this might not be totally on the up and up, and we might be caught up in a kind of ‘tax fraud’ that the friend is doing. (BTW, I was referred to you by Dovid Wiener from Washington Heights (now Monsey) a very good friend of ours).

 

Answer:

Answer from Horav Y. Fleishman

Your fears are probably well-grounded, and he probably ripping off the seller. Rav Mendel Schaffrin write about these tricks in Hayoshor Vehatov vol 2. You will not be protected and when you sell it you will pay greater capital gains tax. I would have nothing to do with this real estate agent and would contact the seller directly. Most probably he is asking for 2.1 but be careful, often kablonim go bankrupt and if he has monetary problems its all the more reason to avoid him.

Yosef Fleischman

 

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