In the book A Year In Provence, Peter Mayle describes buying a home in France. Evidently everyone lies about the actual prices of homes in France, because of the taxes, so that when the house sale is actually transacted, the government official conveniently leaves the room and the buyer gives the seller the real amount of money.
Having just bought a home here in the great state of California, I find myself wondering if the same sort of thing doesn’t go on here. I haven’t heard that it does; I just find myself wondering.
Property taxes in California are calculated based on the sales price—initial property taxes are 1% of the sales price, and the taxes can only rise 2% every year thereafter. (Yes, Proposition 13, and no, we won’t get into how it’s a complete windfall for corporations and everyone else gets screwed.) So if you buy a house for $100,000, your initial taxes will be $1,000 a year. (You will also be very popular, because I am willing to bet there isn’t a house in the entire state for under $300,000.)
But if I say my initial purchase price was $50,000, and I pay you $50,000 under the table, then my property taxes are only $500 to start with.
When you start adding lots of zeroes to all of these prices, you can see why people might want to do this.
Other than the fact that it’s illegal—and in today’s climate, ripping the entire state of California off for billions of dollars doesn’t even rate probation, let alone jail time—why aren’t people doing this with home sales? Or are they and I totally missed out?