Sale to Straw Parties
Every now and then you have a client that seeks anonymity in his or her real estate purchase. It may be because the seller is familiar with the buyer via some past unpleasantry and will likely refuse any offer presented. And there are other reasons, the legitimacy of which are generally beyond our concern as buyers’ agents.
Your focus, when entertaining a demand for anonymity, is to get your client to an attorney as soon as possible. A mistake, frequently made, is to identify the name of a straw party in the agreement of sale as purchaser, followed by the words “or his/her assigns.” The thought is that a friend or relative will be named as buyer and that after the agreement is accepted, it will be assigned to the true buyer waiting in the wings.
The unintended result of an “or his/her assigns” provision may be the payment of twice the transfer tax! This is the result of revised realty transfer tax regulations promulgated by the Pennsylvania Department of Revenue. It is possible that the assignment from straw buyer to the real buyer is a taxable transfer as is the sale from seller to straw party.
The key issue for licensees is recognition of the potential for a double transfer tax whenever an agreement of sale is assigned or assignable. Referring the buyer to legal counsel, before an agreement is signed, is the only reasonable consideration.
Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2012
All Rights Reserved
Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.