Buying a property from Non-profit organization.

[SamWI]

I work for a non-profit organization in Wisconsin. I am buy a property from them in Wisconsin. The organization asked me not to get an agent and reduced the price of the property . as a non-profit organization they never paid property tax.

My question is , do I ask the organization to change the “tax code” on the property or I have to change the tax code after I buy the property?

 

[adjusterjack]

You might not need an agent but you do need a title/escrow company to handle the transaction. You'll get a warranty deed that will be recorded. The seller doesn't change the tax designation. It's likely to be done automatically when the sale becomes part of the county records. But you can follow up to make sure it gets done.

Have you ever bought real estate before?
Is it a house?
Will you live in it?
Are you getting a mortgage or paying cash?
Are you comfortable with the price?
Have you checked recent sales of similar properties to make sure?

The following is the real estate purchase contract approved by the state. It's what the realtors use. Study it.

https://dsps.wi.gov/Documents/BoardCouncils/REB/Forms/WB11202001.pdf

There may be other useful forms on the state's website:

https://dsps.wi.gov/Pages/BoardsCouncils/RealEstate/ContractualForms/Forms.aspx

 

[Taxing Matters]

I work for a non-profit organization in Wisconsin. I am buy a property from them in Wisconsin. The organization asked me not to get an agent and reduced the price of the property . as a non-profit organization they never paid property tax.

If the organization is tax exempt with the IRS and a if you are getting a deal on the property — getting it for a below market price — that might put the organization's tax exempt status at risk or might result in the organization being penalized by the IRS. Sales of significant assets to organization insiders is something the IRS would look at closely in an examination. The organization ought to consult a tax attorney who practices in the tax exempt organization area to ensure this won't be a problem.

 

[SamWI]

You might not need an agent but you do need a title/escrow company to handle the transaction. You'll get a warranty deed that will be recorded. The seller doesn't change the tax designation. It's likely to be done automatically when the sale becomes part of the county records. But you can follow up to make sure it gets done.

Have you ever bought real estate before?
Is it a house?
Will you live in it?
Are you getting a mortgage or paying cash?
Are you comfortable with the price?
Have you checked recent sales of similar properties to make sure?

The following is the real estate purchase contract approved by the state. It's what the realtors use. Study it.

https://dsps.wi.gov/Documents/BoardCouncils/REB/Forms/WB11202001.pdf

There may be other useful forms on the state's website:

https://dsps.wi.gov/Pages/BoardsCouncils/RealEstate/ContractualForms/Forms.aspx

Thank you for your reply. It is very useful

Have you ever bought real estate before? - NO
Is it a house? -YES
Will you live in it? YES
Are you getting a mortgage or paying cash? Mortgage
Are you comfortable with the price? - YES
Have you checked recent sales of similar properties to make sure? - YES

 

[SamWI]

If the organization is tax exempt with the IRS and a if you are getting a deal on the property — getting it for a below market price — that might put the organization's tax exempt status at risk or might result in the organization being penalized by the IRS. Sales of significant assets to organization insiders is something the IRS would look at closely in an examination. The organization ought to consult a tax attorney who practices in the tax exempt organization area to ensure this won't be a problem.

The organization has in house attorney and also real-estate attorney as consultant. I am getting the property almost 20K-30K below the market price. Now that sound suspicious, but here is the reason I get this deal.. I have been renting this property for past 14 years, so they gave me the first option.

I am not in management , I don’t have any relative or friend in management or BOD in the ORG. I don’t have any influence in decision making process, only influence I have is , I have been working for the ORG over 25 years with outstanding record.

 

[zddoodah]

do I ask the organization to change the “tax code” on the property

What exactly are you referring to here?

 

[Taxing Matters]

The organization has in house attorney and also real-estate attorney as consultant. I am getting the property almost 20K-30K below the market price. Now that sound suspicious, but here is the reason I get this deal.. I have been renting this property for past 14 years, so they gave me the first option.

Did the organization actually consult a tax attorney for this? What you describe — giving an employee a significant discount on buying real property as a reward for good service — would result in taxable income to you as wages for the discount given. As a result, that discounted amount should be included on your W-2 for the year you make that purchase and regardless of whether that W-2 is issued you would need to include that income on your return.

 

[quincy]

The “discount” offered could simply reflect the savings realized when there is no commission paid to real estate agents (typically 6% of the sales price).

 

[Taxing Matters]

The “discount” offered could simply reflect the savings realized when there is no commission paid to real estate agents (typically 6% of the sales price).

Perhaps, but we don't have the facts to know that, thus why I pointed out the potential here for taxable income. If the discount was $20,000 and that represented saved 6% real estate commission, that's a sales price of $333,333.33. If the discount was $30,000, then that's a sales price of $500,000. Quite a spread there. The OP and the organization may want to review this transaction with a tax attorney or other tax professional familiar with the rules for non cash compensation of employees to be sure of where they stand so that if there is any employee compensation here they ensure they report it properly.

 

[quincy]

I agree that a personal review by a professional appears necessary.

 

[LdiJ]

Perhaps, but we don't have the facts to know that, thus why I pointed out the potential here for taxable income. If the discount was $20,000 and that represented saved 6% real estate commission, that's a sales price of $333,333.33. If the discount was $30,000, then that's a sales price of $500,000. Quite a spread there. The OP and the organization may want to review this transaction with a tax attorney or other tax professional familiar with the rules for non cash compensation of employees to be sure of where they stand so that if there is any employee compensation here they ensure they report it properly.

I do not disagree with you at all, but the reality of things is that allowing a long term renter to buy a property instead of selling it on the open market doesn't just save realtor fees. it also saves the cost of refurbishing the property so that it can be sold. After 14 years of having the same tenant in the property I can guarantee that there would be all kinds of things that would have to be done to bring the property to market conditions. Heck after 14 years even some major things might have to be replaced to bring a property to saleable condition.

 

[FarmerJ]

Sam how many years are the property taxes behind ? and does your state issue a homestead tax credit to owner occupied homes that will reduce the property taxes ? ( your county can tell you )

 

[quincy]

Sam how many years are the property taxes behind ? and does your state issue a homestead tax credit to owner occupied homes that will reduce the property taxes ? ( your county can tell you )

There does not appear to be any property tax arrearage. The question is how to change the tax status of the property, which is currently tax-exempt but won’t be after the sale.

 

[TedyBo]

I work for a non-profit organization in Wisconsin. I am buy a property from them in Wisconsin. The organization asked me not to get an agent and reduced the price of the property . as a non-profit organization they never paid property tax.

My question is , do I ask the organization to change the “tax code” on the property or I have to change the tax code after I buy the property?

If I understand you correctly, you want to ask for help from third parties. I bought my first house that way. I independently found a company that helped me with this. I understood that you do not want to involve other agents, I meant that there are companies that give good advice. There are many opportunities, I think it's worth watching everything. I don't think it would hurt. To be honest I spent a lot of time just to relax now after several years of working and looking for a home By the way I also received help on one of the forums.

 

[quincy]

If I understand you correctly, you want to ask for help from third parties. I bought my first house that way. I independently found a company that helped me with this.

This thread is a month old and SamWI has not returned to the forum to respond to the questions asked.

TedyBo, I am not sure what type of "company" you received help from for your own real estate purchase (and please don't post a company name or a commercial link because those are prohibited on this forum) but the seller of the property Sam is interested in purchasing has specifically told him that they want no real estate agents involved.