Real Estate Transactions: Avoid Cash Settlements
Although real estate transactions are typically not conducted in cash, it hasn't entirely disappeared. However, there are several important nuances to pay attention to, explains Egon Juhanson, a real estate broker at ELUM Kinnisvara.
"For example, when buying and selling a garage at a favorable price, it's not uncommon for money to be handed over in cash just before the transaction," says Juhanson. "In this case, the seller should make sure that the banknotes are indeed legal. Our bank offices can help with this, where you can have banknotes verified."
It's not uncommon for the actual sales amount to be one figure, for example 100,000 euros, but a smaller amount, such as 80,000 euros, is shown to the notary. "The hope is to pay less income tax this way, or perhaps the buyer doesn't want to transfer money to their bank account for some reason. However, the buyer should keep in mind that if the transaction is rejected, only the amount shown in the notary's contract can be used as a basis. Money brought in an envelope cannot be counted here, and the seller may simply not return it," warns Juhanson.
It would also be wise to avoid a situation where the purchase amount is handed over to the seller before the transaction. In this case, there is a risk that the seller won't show up to the transaction, but the money has already been handed over. The same applies in a situation where money is handed over after the transaction: the ownership change has taken place, but the seller hasn't received the money.
Like financial institutions, notaries must also inform anti-money laundering authorities about all cash transactions exceeding 32,000 euros. When conducting transactions, each buyer fills out an anti-money laundering questionnaire, and the most important point there is the source of the money. Those whose money comes from "the east" are in the most difficult situation. People with state connections also fall under scrutiny.
"In conclusion, I would still recommend avoiding cash settlements when dealing with real estate. This way there are fewer problems and the risk of fraud disappears. Honesty ensures peace of mind," Egon Juhanson sums up the topic.
