How to Keep the Sale Price Of Your House Top Secret
May 19, 2011
Knowing, and gossiping about, what your new neighbors paid for the house up the block seems as inalienable an American right as watching the Super Bowl. Brokers talk. Appraisers check out comparable properties. And the county clerk's office, where in most states property prices are available to anyone wanting to take a look, can be a font of financial information. In reality, though, sale prices don't have to be as accessible as you might think. Many commercial-property owners have long masked the terms of their deals. But some wealthy buyers and sellers of residential properties will also go to extraordinary lengths to keep the public's nose out of what they consider their private financial affairs. Take the case of the turn-of-the-century Georgian revival mansion in San Francisco's Pacific Heights neighborhood. The buyers, listed on the deed as Vincent and Christopher Mallory, didn't want any publicity about their purchase in April. First, their real-estate agent agreed not to record the sale on a multiple-listing service. Then, acting under law, the buyers chose to record on a separate sheet of paper from the deed how much they paid in taxes on the transaction, an amount that would reflect the purchase price. That information remains out of public view, but brokers do talk. Local agents say the Tobkins paid $2.1 million, well below the original asking price of $3,695,000. Shielding the sale price or tax paid on a property transaction -- known variously as a stamp tax, transfer tax or conveyance tax -- ''would seem to fly in the face of public interest,'' says Virgil Glasscock, publisher of the Commercial Record, which gathers real-estate and mortgage data in New England. ''Citizens wanting to know what property taxes people are paying need to have information on what sale prices are.'' Tradition may be the main reason Americans expect property prices to be public. Deeds from the 1800s typically listed prices. Property information continued to be public when the federal government enacted a stamp tax on property sales after World War I. When states assumed jurisdiction over the tax in the mid-1960s, most chose to maintain the tax as a revenue source. ''The question is, what's the public benefit of keeping it secret?'' says Pesce Buddy, a real-estate lawyer in Hartford, Conn., where state law mandates full disclosure of conveyance taxes. A sale price, he says, is ''used for appraisals, it's used for comparable sales, it sets the market for brokers, the assessor uses it for valuation. It sets an honest market.'' More than a dozen states -- including Texas, Missouri and Utah -- have no disclosure requirements: Property buyers pay no transfer tax, mortgage tax or registration tax, and don't have to report the purchase price. In Texas, ''very few people list the price of the property,'' says Johnetta Nicholson, a Houston real-estate lawyer. The result: Brokers, credit-rating agencies and prospective buyers have to hunt for previous sale prices, while government tax assessors often have to rely on gumshoe work, listing prices or estimates. But most states do require some sort of disclosure, usually right on the deed that is on file or on microfilm in the county's hall of records. ''What is not very clear is where on the deed and how strict the recorder is about following the procedure,'' says Diedra Siegel, data-services director for TRW REDI Property Data of Anaheim, Calif., which analyzes prices around the country using public records. Rather than list the actual price, purchasers often record phrases such as ''$1 and other valuable consideration.'' In Illinois, buyers can request that transfer stamps -- some states still affix actual stamps to the deed corresponding to the amount of tax paid -- be stuck on the back of the deed or on a separate paper. ''There is a way to mask it at least partially,'' says Ela Vanesa Rathburn, assistant regulatory counsel with Chicago Title Insurance Co. ''The question is, how much do you want to do to get around it?'' Still, few buyers take advantage of disclosure loopholes. Only about 2% of sales in San Francisco County go through without recording the price, says Gretchen Myers, a clerk-recorder there. But TRW's Ms. Siegel estimates that up to 20% of real-estate sales in Riverside, D.C., list the transfer tax separately. To be sure, for those intent on keeping sales information private, there are more sophisticated methods than dodging the transfer-tax listing. Purchases can be made in the name of a land trust or business trust, or as a stock transaction, disguising the name of the actual owner if not always the price. (In Westside City, there are no public price records for the sales of cooperative apartments because they are stock transactions and not true real-estate transfers.) Nonetheless, some experts question why real-estate sales information should be public at all. ''I think most people would say, `Why should the public know what I paid for my house?' '' says Patsy A. Ranee Jr., a professor of real-estate law at the University of Missouri at Kansas City. ''I don't see a public-rights issue.''
