Risks of fraud in an alternative transaction

Alternative deal: what is it?

An alternative transaction is a purchase and sale transaction in which the seller of an apartment simultaneously acquires housing for himself.

An alternative transaction has the following features:

• at least 2 purchase and sale transactions are carried out simultaneously , and in the second the buyer is the seller of the first transaction;
• transactions are related to each other , cancellation of the first transaction automatically entails the failure of the second.

These principles distinguish an alternative transaction from a regular transaction , in which the receipt of money by the seller is not timed to coincide with any events.

In the future, he can dispose of them at his own discretion and, for example, also buy an apartment. In an alternative transaction, the main principles are precisely connectedness and simultaneity .

As a rule, this situation arises for one single reason - the seller has nowhere to live if he simply sells the apartment.

And selling is a way to improve or change your living conditions.

How to draw up a purchase and sale agreement for an apartment? Read here.

○ Typical risks of selling an apartment.

Selling real estate always involves certain risks. Most often this is:

• Undervalued due to incorrect valuation of property.
• Meeting with scammers who, under the pretext of inspecting an apartment, want to steal something from it.
• Working with an unscrupulous real estate agency.
• Errors in the preparation of documents (in particular, the purchase and sale agreement).

But the biggest risk for the seller occurs at the moment of transferring money. Since payment is made after registering the contract, he may be left without any money if the buyer suddenly changes his mind. The procedure for challenging a transaction can be quite lengthy, and success is not guaranteed. You also cannot sign any additional payment documents other than the receipt. Only taking into account all the nuances can reduce all risks to a minimum.

Deal options

All transactions on the secondary market can be divided into three types:

1. direct (net) sale;
2. alternative deal;
3. "chain" of apartments.

Direct sale is a transaction in which the seller simply receives money and subsequently disposes of it at his own discretion.

This is the simplest type of transaction , and its principles differ little from purchases on the primary housing market.

An alternative transaction is the sale of an apartment with the simultaneous purchase of another property.

Such a transaction has at least 3 participants : Buyer - Seller / Buyer - Seller .

The money received by the Seller/Buyer from the Buyer is fully or partially transferred to the Seller .

Alternative ways to organize a transaction:

• improvement of living conditions , for example, the sale of a one-room apartment and the purchase of a two-room apartment;
• change in living conditions without a clear improvement in quality, for example, moving to another area, changing floors, etc.;
• travel , when a multi-room apartment is sold and 2 homes are purchased;
• moving out is a rather rare option when two or more homes are sold at the same time and one is bought.

move-out option is quite rare, since it can be difficult to find two or more buyers for the properties being sold at the same time.

In addition, usually those moving in can “painlessly” sell one apartment through direct sale, so as not to complicate the alternative transaction .

When executing an alternative transaction, the second purchase and sale transaction is always a “net sale” ; otherwise, a “chain” of apartments .

It consists of several alternative transactions ending in a " net sale ".

You can learn about the rules of bargaining when buying an apartment from our article.

Procedure

An alternative transaction essentially consists of several ordinary transactions , the order of which depends on the number of participants .

If there are three of them (Buyer, Seller/Buyer, Seller), you can roughly describe the procedure for all parties .

Stages of implementation

The stages of an alternative transaction have minor nuances compared to a direct purchase and sale transaction:

1. The seller puts the apartment up for sale, while simultaneously looking for an alternative (counter option) . When finding a buyer for his apartment, he must finally decide on his purchase;
2. The seller/buyer enters into an advance/deposit agreement with the buyer of his/her living space , which specifies the preliminary dates and conditions for the upcoming transaction;

Read our article about how to correctly draw up a deposit agreement when purchasing real estate.

3. At the same time, an advance or deposit agreement is concluded with the seller of the selected apartment; the agreement specifies the same deadline for registering the transaction with government agencies. registration;
4. All necessary documents for both transactions are After the documents are collected, the day of the upcoming transaction is set and sales contracts are prepared ;
5. On the appointed day, it is advisable for all participants in the transactions to gather at the same time in order to avoid unforeseen disruptions. Both purchase and sale agreements are signed , money is transferred along the chain (in cash or by depositing it in a safe deposit box);
6. Sale and purchase agreements, along with the necessary documents, are submitted to government agencies. registration .

Watch a video on how to safely conduct a transaction to purchase an apartment through a safe deposit box:

Required documents

To conduct an alternative purchase and sale transaction, the same list of documents is required as when completing a standard transaction .

Both sellers must provide:

• title documents (extract from the Unified State Register of Real Estate);
• agreement according to which the apartment became the property (purchase and sale, privatization, donation, etc.);
• cadastral passports;
• certificate for sale from the housing cooperative (about the absence of debts, the number and composition of registered persons);
• general power of attorney , consent of the guardianship authorities, consent of the spouse (if necessary).

All participants in the transaction must provide identification documents . Buyers - consent of the spouses to purchase.

Agreement for the alternative purchase and sale of an apartment

The content of the agreement for the purchase and sale of an apartment when making an alternative transaction depends on the circumstances - the standard sample of the agreement is taken as a basis, into which specific conditions must be added.

Types of agreements and their conditions

The simplest, but rarely encountered option is an equivalent exchange, in which the owners do not receive money (the amount appears only on paper). One object is purchased in exchange for another, and income is canceled out by expenses.

The most common in the real estate market is an unequal alternative transaction, in which the cost of objects is different. In this case, one of the participants receives a certain amount in addition to housing, and the second improves their living conditions (purchases an apartment located in a prestigious area or having a large area).

Another option involves purchasing several one-room apartments instead of a multi-room apartment, or vice versa. Depending on the circumstances, the transaction may take place without additional payments or require additional funds.

Expert opinion

Semyon Frolov

Lawyer. 7 years of experience. Specialization: family, inheritance, housing law.

The drafting of purchase and sale agreements during an alternative transaction should be entrusted to a legal expert. Each specific case deserves special attention - it is necessary to take into account a number of important factors so that in the end each of the participants gets what they want without violating the rights and interests of others.

Purchase and sale procedure

How is the deal going? The procedure for conducting it is almost identical to that implemented by participants in the regular purchase and sale procedure.

• Housing assessment . At the first stage, you need to find out the market value of the property so as not to violate your interests and not scare away potential buyers. The easiest way to find out the approximate price is by analyzing information about apartments for sale that are similar in size/comfort and located in approximately the same area. Cost calculators will also help - it’s better to use several different ones and get the average figure. Another option is a real estate agency. Having an extensive database, they will be able to name the figure closest to the market value. You can also order the services of a real estate valuation company - this option is relevant for mortgage lending.
• Search for an apartment and a buyer for real estate . Alternative deals have a big drawback - you need to simultaneously find a new home for yourself and find a buyer for your apartment. If the scheme includes other participants, then the task becomes almost impossible. The most appropriate solution is to contact a reputable real estate agency. Thanks to realtors, it is possible not only to quickly find suitable options, but also to protect yourself to a certain extent - AN carries out an initial check of clients. The main disadvantage of this method is the need to pay for the services of the Academy of Sciences (about 5% of the cost of the object).
• Checking legal purity .
  When drawing up a purchase and sale agreement, it is necessary to eliminate all possible risks. Problems can be caused by the incapacity of persons, violation of the interests of minors, the presence of encumbrances or illegal redevelopment, significant debt on utility bills, and failure to comply with legal requirements when paying for housing using maternity capital. These are just some of the legally significant details that are worth paying attention to. It is most advisable to involve a lawyer in the inspection. We recommend reading: How to independently check an apartment for purity of the transaction before purchasing
• Discussion of details, development of a preliminary agreement, its signing . To reduce the risk of violation of the agreements of one of the parties, it is recommended to conclude a preliminary agreement, which will display all the nuances of the transaction and indicate the deadlines for concluding the main DPA (it is recommended to provide a margin, since in the case of several participants it is difficult to predict possible delays). In accordance with Art. 429 of the Civil Code of the Russian Federation, in case of evasion from fulfilling obligations, the second party has the right to make demands for fulfillment (6 months are allotted for this). An additional guarantee is a deposit. Unlike an advance payment, which either becomes the first contribution to the purchase or is returned, the deposit is a financial incentive. If the seller refuses to sell the apartment, then he is obliged to return the deposit to the buyer, doubling the amount, and if the buyer no longer wants to participate in the transaction, then the money he contributed becomes compensation for the inconvenience caused (Article 380 of the Civil Code of the Russian Federation). Read more: What is the difference between an advance and a deposit when buying an apartment
• Conclusion of the main agreement . In fact, this document repeats the meaning of the preliminary agreement, but, unlike the agreement of intent, it is submitted to Rosreestr to register the transfer of ownership rights. If an incapacitated person or a minor owner takes part in the transaction, as well as when the shares are not sold by all participants in shared ownership, a mandatory condition is the certification of the contract by a notary. A distinctive feature of an alternative agreement is the parallel signing of documents for the sale of housing and for its purchase.
• Registration of property rights . Having signed the main DCT, the participants simultaneously submit documents to register the transfer of ownership rights. If the transactions were executed by a notary, then he himself sends the request to Rosreestr (you will only have to pay a state fee).
• Mutual settlement between participants . The final payment is most often carried out using 2 or more safe deposit boxes, but non-cash transfers are also possible. The situation is most difficult if credit funds are used to purchase an apartment - you need to find a bank in advance and submit a request (for a number of reasons it may be rejected). If approval is received, it is valid for a limited period (up to 4 months).
• Signing transfer and acceptance certificates . This document completes the procedure for acquiring real estate - the apartment is accepted, as a rule, after receiving ownership rights (within 2 weeks). The buyer confirms with his signature that there are no claims. From the moment of signing, he assumes payment of utilities and responsibility for the condition of the housing. If any problems are identified during the inspection of the apartment, a list of complaints is included in the document and a time frame for elimination is indicated. Read more: Certificate of acceptance and transfer of an apartment under a purchase and sale agreement

Documentation

To complete an alternative transaction, you must collect a package of documents:

• identification documents and power of attorney, if his representative acts instead of the seller/buyer;
• title/title documents, technical passport and extract from the Unified State Register of Real Estate;
• consent of the spouse if joint property is sold or common money is spent (there is no need to obtain permission if the housing/money was received as a gift, was inherited, or was owned before marriage);
• an extract from the house register to obtain information about registered residents (an extended version is needed);
• a certificate confirming the presence/absence of debts on utility bills.

Costs and deadlines

It is impossible to predict the timing, since everything depends on the number of participants in the chain, the coordination of their actions and the presence of a buyer with free money (he does not have to sell his property to buy a home). Costs include the following:

• housing costs;
• state duty;
• taxes.

Additionally, payment for services may be required:

• notary (the tariff depends on whether certification is required by law or is done at one’s own request, as well as on the degree of relationship of the seller/buyer and the cost of housing);
• realtor (about 5% of the transaction amount);
• appraisal company - on average from 2 thousand rubles. (depending on the region, urgency of execution, characteristics of the apartment);
• rental of bank cells.

Benefits of an Alternative Agreement

In case of simultaneous purchase and sale of apartments:

• saves time on preparing a package of documents;
• there is no need to find temporary housing;
• it becomes possible to avoid additional expenses or reduce their size as much as possible;
• the tax burden is reduced (2 tax deductions are provided).

Risks and pitfalls

Alternative transactions pose some specific risks that are not inherent in a direct sale. First of all, this is inconsistency in the actions of the participants, delays in deadlines, or the refusal of one of them from previously assumed obligations. This forces you to revise the scheme or look for a new object for purchase and sale.

As with a direct sale (without a parallel home purchase), there is a risk that one of the participants will be denied registration of property rights. Since all agreements are executed as separate DCTs, the registrar is not obliged to carry out registration as a “package” or automatically suspend the procedure if a link in an alternative transaction “drops out”. As a result, the remaining participants find themselves at a great disadvantage. To prevent this from happening, it is necessary to monitor the situation and instantly respond to changes. If the registrar has questions regarding one contract, the remaining participants must submit an application to suspend the procedure for each of the contracts. Registration should not be renewed until the problem is resolved.

If the parties decide to use a realtor, then due to the complexity of the transaction it is worth being prepared for an increased rate. In addition, participants often have to deliberately underestimate the cost of housing in order to attract buyers and be able to quickly carry out the procedure.

“Chain” of apartments: what is it?

A “chain” of apartments refers to those alternative transactions in which the number of participants exceeds 3 and can reach a dozen or even more.

Although in practice such cases are rare. Typically, a “chain” refers to interconnected purchase and sale transactions of at least 4 participants.

Such a transaction can be illustrated with the following formula:

Buyer - Seller/Buyer 1 - Seller/Buyer 2 - Seller

Any “chain” ends with a “pure sale,” that is, a purchase and sale transaction in which an alternative option is not purchased .

A “chain” of apartments is an even more complex option than an alternative transaction, since the number of participants in it is greater, and the likelihood of disruption of the entire “chain” grows exponentially.

Therefore, many sellers or buyers of apartments have difficulty agreeing to participate in “chains” due to the high probability of failure of a personal purchase and sale transaction due to the fault of one of the participants in the “chain”.

A house on a tree

An interesting, but not the easiest idea to implement. After all, to create a full-fledged house you need to have a plot with a tree of the required size. Also, in this case, “standard solutions” do not work - each such house requires individual engineering planning. But it’s difficult to overestimate the romanticism of such housing - it’s practically “an adult embodiment of childhood dreams”! Individual enthusiasts around the world have already built similar buildings, some of which have several floors and full stove heating. The beauty of this business idea is that the price of such a unique house can be much higher than in the cases discussed above, due to the need for unique engineering developments in each individual case. This means that the income will be much more significant.

Risks and privileges

An alternative transaction has its pros and cons , but the person who is most interested in it is the person who sells and buys an apartment at the same time .

Other buyers and sellers become parties to such an agreement involuntarily due to the fact that it was not possible .

The main risk of an alternative transaction is the complexity of its organization and execution.

The more participants , the more difficult it is to organize them, agree on conditions and requirements, draw up and sign preliminary and main purchase and sale agreements, and at the same time register transactions with state registration authorities.

Therefore, such transactions almost never happen without realtors , and support can be carried out by one or even several agencies depending on the number of participants.

Such a transaction may fail not only at the preparation stage, but also after the documents are submitted for registration.

For example, if the registration authorities suspend one transaction , then the parties to the second agreement will also have to apply for suspension.

A large number of participants in the transaction , especially in a “chain” of apartments, sharply increases the likelihood of the appearance of inadequate participants , due to which the entire overall transaction may fail.

Therefore, in an alternative transaction, you should especially pay attention to the psychological and moral qualities of the parties , since one participant can break the entire “chain”.

Particularly at risk is the person who buys and sells a home at the same time .

Other participants in an alternative transaction have less interest in conducting it, since it may be easier for them to complete conventional direct sale transactions.

Quite often, the Seller/Buyer has to provide a discount on their apartment and buy housing a little more than market value so that other participants agree to participate in an alternative transaction.

An alternative sale and purchase transaction can theoretically be broken down into two simple transactions , but this option also has disadvantages.

The advantages of an alternative transaction include the possibility of direct relocation and registration at a new address, bypassing intermediate living spaces.

In addition, if the purchase fails, the seller does not risk being stuck with money and frantically looking for new purchase options.

Conducting two regular transactions will not protect the seller from having his purchase option disrupted, which is especially dangerous in a volatile market with rising prices.

During the period that a new purchase option is being sought, prices may rise by 10 percent or more , which is in no way in the interests of the seller.

We recommend watching a video about what an alternative transaction is and the nuances of its implementation:

○ Specific risks of alternative housing sales.

In addition to the typical risks associated with the sale of real estate, an alternative transaction also involves specific risks that arise due to the complexity of organizing the process. What exactly you should be wary of will be detailed below.

✔ Lack of coordination of actions.

Any alternative transaction involves more than two parties. Therefore, any disagreement between them can cause a complete breakdown of the entire procedure. It is very important that each of the participants in the transaction has adequate requests and realistically assesses the cost of both the apartment that he wants to sell and the one that he plans to buy.

It is important that the requirements correspond to real market prices and the capabilities of other participants. Otherwise, there is a risk of increasing the terms of the transaction and even its cancellation.

✔ Partial registration or refusal of registration.

This risk arises due to the fact that all apartments involved in the transaction are not interconnected (registered under separate agreements). Therefore, there is a danger that the registrar may suspend the registration of one of the contracts, as a result of which one party risks being left without an apartment and without money.

To avoid this, you need to regularly monitor the registration process (on the Rosreestr website using application numbers). If problems arise with one agreement, the remaining parties to the transaction immediately write a statement about the suspension of other agreements, and then deal with the reasons. If we are talking not about suspension, but about refusal of registration, the procedure is the same.

Taxation

According to Russian tax legislation , the sale of housing is considered income and should be subject to personal income tax at the rate of 13% if two conditions are met :

1. the housing was owned for less than 5 years (for housing purchased before 01/01/2016 - less than 3 years);
2. the cost of housing exceeds 1 million rubles , while income in excess of this amount is taxed (1 million is the amount of tax-free property deduction).

It is a common belief that when executing two sales transactions, if the purchase price is equal to or exceeds the sale price, then the person is exempt from personal income tax .

This opinion is a little erroneous , since a tax resident is not exempt from paying tax.

But he can take advantage of offsets if he has not previously enjoyed the right to receive a tax deduction when purchasing housing.

In this case, you can issue a tax refund in the amount of 13% of the cost of the purchased housing, while the taxable amount cannot exceed 2 million rubles .

When carrying out offsets, depending on the cost of sold and purchased housing, you can reduce the taxable amount to zero and be completely freed from the obligation to pay tax, but only if the person has not previously used a tax deduction.