There are transactions in the Russian real estate market that are called “alternative”. They are somewhat more complicated than the classic ones, since several people are always involved in the chain, but they do not imply any significant deviations from the canonical purchase and sale of housing. What is an “alternative transaction”, what important points should you pay attention to before taking part in it, and what are the possible risks, say industry experts.
In the case of an alternative transaction, the real estate seller makes two transactions simultaneously: he sells the property he owns and, within a short time or immediately, buys another, alternative one in return. This implies that there will be at least 3 parties to the case:
- a buyer-seller who, while selling his property, simultaneously buys an alternative property;
- a buyer purchasing a property from a buyer-seller;
- the seller from whom the buyer-seller buys.
Types of alternative transactions
As Elena Balakhonova, assistant lawyer at Mariox Center LLC, says, in practice, an alternative real estate transaction usually has the following implementation options:
- equivalent exchange - when owners exchange apartments of equal value; no actual transfer of money occurs;
- unequal exchange - the purchase in exchange of a cheaper apartment (smaller in area, inferior in characteristics or in a different area) by one owner, and by the other owner - improvement of living conditions for an additional payment. This option is called a “surcharge alternative”;
- moving out or moving out - exchanging one apartment for several smaller ones (moving out) or several small ones for one (moving out).
Documents required by a real estate seller
The documents specified above that confirm the identity of the seller. If the seller is married and the property was acquired while living together with a spouse through a transaction for compensation, then you also need to add a marriage certificate and documents that confirm the identity of the spouse.
When selling an apartment by power of attorney, the rules for registering real estate transactions require you to provide a power of attorney certified by a notary, as well as documents that confirm the identity of the authorized person. The presence of a power of attorney does not relieve the seller of the obligation to provide written permission to sell from his or her spouse. Please note that selling an apartment through a principal is much more difficult than selling it to its owner. Accordingly, its price will be lower.
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What should you pay attention to?
Since an alternative transaction consists of several independent home purchase and sale transactions, it is imperative to ensure that all of them are registered at the same time.
“Unscrupulous realtors always say that they submit documents for all transactions for registration in one package. This is a trick to reassure buyers and sellers that all transactions will be recorded. You need to understand that for Rosreestr each agreement is an independent story that has nothing to do with the others,” says legal director Vladislav Frolov.
The risk is that the first transaction may be registered, but the second, for some reason, cannot. Then the person who sold the apartment is left without an apartment, but with money, which, however, still needs to be received from a safe deposit box, letter of credit or deposit. The way out of this situation is court. However, many problems can be avoided if you take insurance “onshore”.
“In such cases, I always advise indicating in all contracts that the transfer of ownership is registered by Rosreestr with the simultaneous registration of all transfers of ownership of all apartments involved in the transaction. This allows us to do Art. 157 of the Civil Code of the Russian Federation “Transactions made under conditions.” Including this clause will help increase the chances of winning the case in court, because then the court understands that the transaction was carried out on the same day, at the same time,” recommends Vladislav Frolov.
Purchasing a privatized apartment
In this case, the main risk lies in the existence of so-called refuseniks. Those who lived in the apartment at the time of privatization were registered in it, but did not participate in the privatization. The fact is that during privatization, the apartment is registered as the property of all family members. If one of them refused to participate in privatization and still does not have his own home, such a person has the right to live in the apartment.
Regardless of how many times the property has been sold by this point, or who is the owner of the apartment today, the refusenik can appear at any time and present his rights. The presence of refuseniks is the most serious risk in the real estate market. Because if such a person does not want to be removed from the register, it is almost impossible to remove him. As a rule, this applies to those who are in prison. After returning, they have every right to renew registration at their previous address, even if they were not the owners of the apartment. The same applies to minor children registered in the apartment at the time of privatization.
Important points
There are many nuances when conducting an alternative transaction. Elizaveta Shishina, legal consultant of the Green Prospect office of the secondary market department of INCOM-Real Estate, told Domofond.ru about some of them. According to the expert, participants in such a real estate purchase and sale scheme need to calculate everything well if
- one of the owners of the property being sold is a minor child. In this case, the parents are obliged to provide the child with housing with conditions no worse than in the apartment being sold, which must be officially agreed upon with the guardianship and trusteeship authorities;
- one of the parties to the transaction is going to purchase real estate using credit funds. This “scheme” is complicated by the appearance of another participant - the bank, which decides on the conditions for providing credit funds for the purchase of real estate;
- one of the apartments involved in the transaction is the subject of collateral from the bank. In this case, the participation of the bank will be required to obtain permission to sell the apartment, as well as its explanation of the procedure and conditions for the transaction.
“Often banks that issue a loan for the purchase of real estate as part of such a transaction limit the number of alternative links (no more than 3). As a rule, the bank studies the legal purity of the apartment that is purchased with a mortgage loan. But there are cases when documents of other real estate objects in the chain are analyzed. And if a credit institution identifies risks when purchasing a property, which is one of the subsequent links in the chain, it may well refuse to issue a loan,” adds Andrey Kolochinsky, managing partner of VectorStroyFinance, to the above.
Other risks
Alternative transactions have the same risks as standard real estate transactions. So, it is better to avoid concluding contracts with elderly owners, people suffering from alcohol addiction or mental illness. Indeed, in these cases, the purchase and sale transaction is more likely to be challenged.
“You should be careful when concluding an agreement through intermediaries by proxy. It is necessary to ensure that all participants in the transaction are ready to conclude it on market conditions, otherwise the terms may increase significantly (there will be difficulties in selecting an alternative option). The longer the chain of sellers and buyers, the more difficult it is to do this,” says Elena Balakhonova.
Therefore, in order to conduct an alternative transaction quickly and safely, it is better to turn to professionals - realtors or lawyers who specialize in such issues.
“We need to take into account the financial and organizational interests of all participants. Indeed, during the preparation process, many nuances arise, starting from agreeing on the price and drawing up documents and ending with the banal gathering of all those involved at one time in one place,” explains Elena Mishchenko, head of the city real estate department of NDV-Supermarket Real Estate.
Another specialist you can contact is a notary.
“He will collect documents from all participants in the transaction, conduct a legal examination of them, check all encumbrances and arrests, and help correctly fulfill the requirements of the guardianship authority. Also, through a special deposit account of a notary, you can make payments that he (the notary) will control,” says Mikhail Korf, notary of the notary district of St. Petersburg.
Alternative deal and taxes
Many sellers mistakenly believe that they have no tax liability when conducting alternative transactions. However, from the point of view of tax legislation, the stages of the transaction (sale of an object and purchase of an alternative) are not related to each other, even if they were concluded in the same tax period. Therefore, when selling, for example, an apartment, you must pay 13% of the amount of income received, notes Elizaveta Shishina.
In some cases, the home seller is exempt from paying personal income tax on income from the property sold:
- if the sold object was owned for at least 3 years (as a result of privatization, received by inheritance or as a gift from a close relative, acquired on the basis of a rent agreement) or was owned for at least 5 years (acquired on the basis of a purchase and sale agreement, exchange, DDU). In this case, the citizen is exempt from paying personal income tax regardless of the cost of housing for which he sells it;
- if the cost of the property being sold is less than 1 million rubles. The period of ownership of the living space in this case is not taken into account, since it does not affect anything. This is explained by the fact that the maximum tax deduction for the seller is 1 million rubles.
Buying an apartment from a bankrupt
According to the law on personal bankruptcy of individuals (No. 127-FZ), which came into force last fall, transactions made by a bankrupt can be declared invalid. Complicating the situation is that a court-appointed bankruptcy trustee can seek the return of an apartment sold three years before the seller officially received bankruptcy status. It is clear that it is impossible to guarantee that this will not happen. Therefore, to complete the transaction, you will need to request additional documents. For example, an extract from the seller’s credit history. To hedge against possible risks, many agencies also include language in the purchase and sale agreement that the seller guarantees that no bankruptcy proceedings have been initiated against him. This record will not give the buyer complete protection from lawsuits, but it will increase his chances of protecting his interests if the case goes to trial. In the area of greatest risk due to the bankruptcy of individuals, transactions with apartments sold at a reduced price, they immediately fall into the category of suspicious. If it is declared invalid, the apartment will have to be returned to the seller, the money will not be returned to the buyer immediately, he will be included in the general list of creditors, and he will receive his money only when it is his turn.
All of the above does not mean that any transaction with a donated or privatized apartment should be immediately abandoned. It is necessary to understand each specific situation, assess the risks and only then make a decision.
Tax deduction
At the same time, when determining the size of the tax base, a citizen (if he is officially employed and pays taxes) has the right to receive a property tax deduction in the amount of expenses actually incurred by him (but not more than 2 million rubles), in particular, for new construction or the purchase of an apartment or share(s) in it, says Shishina. You can return 13% of this amount - up to 260 thousand rubles.
At the same time, do not forget that each homeowner can receive a tax deduction. You should also remember that there is a deduction for mortgage interest - there is a separate limit of 3 million rubles.
“If spouses buy an apartment worth more than 6 million rubles in joint ownership, they will return 520,000 rubles for the purchase of the apartment (260 thousand rubles each) and up to 780,000 rubles for the interest paid on the mortgage (390 thousand rubles each). And this is already 1,300,000 rubles,” explains Elena Mishchenko.
If the property costs less than 2 million rubles, compensation is calculated at 13% of the cost of the apartment. The rest of the compensation due can be received when purchasing your next home. Mortgage interest can only be returned from one property once in a lifetime, Mishchenko concludes.
When conducting an alternative transaction, it is imperative to clarify whether the apartment is being sold vacant - whether it is possible to move into it immediately or begin renovations. This is important, since otherwise you will have to wait an indefinite amount of time until all participants in the transaction move to alternative objects “along the chain”. And do not forget about the cleanliness of the documents. The fewer questions you have about this property, the sooner you can become its owner.
What is required from the buyer for the transaction
First of all, these are documents that confirm his identity - a passport, a birth certificate for minors, a military ID and an officer's ID card, in the case where the buyer is a military personnel. For married buyers, you still need to provide a notarized declaration from your spouse to purchase the property. This application must be accompanied by copies of identification documents and a marriage certificate. In cases where real estate is purchased by power of attorney, a notarized power of attorney and identification documents are required.
