In Cyprus, as in many other countries, there is a practice of underpricing in real estate sale and purchase agreements.
The price is understated to reduce tax liabilities, but this approach carries certain risks for both the seller and the buyer. In theory, it is possible, but no one keeps statistics on such transactions. Therefore, there will be no real cases in the examples.
The seasoned real estate market experts categorically do not enter into transactions with an undervalued price to avoid unfortunate situations. Below is a list of possible consequences, which, we hope, will 100% convince you that the exact price - is the most solid foundation of a successful transaction. But bargaining in Cyprus is possible, sometimes even necessary. Often sellers put 5-10% of the original price for negotiations.
Risks for the seller
Tax consequences
Specifying an undervalued price in the sale contract may lead to a violation of tax laws. This, in turn, may result in fines and additional tax payments. Is the sheepskin worth it? Experts of the DOM agency strongly recommend indicating the full market value.
In some transactions, participants invite a professional real estate appraiser. Most often in the case of mortgage lending or in the case of a non-standard object. In the first case, the appraiser from the bank is likely to indicate the cadastral value, which does not always correspond to the market value. At the same time in the contract of sale and purchase shall indicate the full value.
Legal disputes
In the event of legal disputes, such as divorce or inheritance, it can be very difficult to prove the real value of the transaction. At the very least, it will increase the time of any real estate financial transactions.
Problems with bank loans
When applying for a mortgage or other loan secured by the sold real estate, the bank may value it significantly lower due to the understated price in the contract. This value will be a significant argument for the financial organization. Thus, banks insure themselves against possible traps.
Risks for the buyer
Tax liabilities
The buyer may also face tax problems, as the tax authorities may revise and revalue the value of the property and impose additional taxes. It sounds a bit fantastic, but it really is true. The Land Department checks Titles, property designation, and other things from time to time.
Difficulties when reselling
When trying to resell a property, the buyer may run into problems due to the low price in the original purchase agreement. By the way, all the details of the transaction and the value of the object at different times is necessarily indicated in its Title. Well, just neither hide nor hide!
Risk of loss of real estate
And perhaps the saddest thing that can happen to the buyer. If the seller is declared bankrupt, there is a high risk that the transaction will be challenged as fraudulent. Therefore, never be tempted by extremely low prices and shop with licensed and verified real estate marketers.
Although underpricing in a Cyprus sale and purchase agreement may seem attractive to reduce tax liabilities, this approach carries significant risks for both seller and buyer. It is important to seek professional legal advice to fully understand all potential consequences and avoid legal and financial problems in the future.
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