Selling an apartment in Moscow

[KenInUtah]

Lilia is going to want to sell her apartment in Moscow after she is established here but she is worried about "thieves" in the Russian legal and real estate profession.  How should she:

1. List the house for sale an secure a buyer
2. Close the deal (go back to Russia to do it or get a real estate lawyer)
3. Transfer the funds to the US
4. Pay taxes - is it just the 30% to Russia or is the US going to want something to?  I know we have a tax treaty with Russia and the apartment will be under $250K

Anyone have any suggestions?  Maybe someone knows a reputable Real Estate agent and/or Attorney that could do the closing?  How did anyone else do this?

[Boethius]

In her shoes, I would keep the apartment and rent it out.  No offence to you, Ken, but there are lots of RW who miss Russia and return. 
 
Moscow is a big market, so she should have no problems renting her apartment.  She could hire a reputable firm, and have a friend check on it as well for a fee.  Mendy is probably the best person to ask about this.

[KenInUtah]

She is going to rent it for a year or so but she wants to cash out after she is established here.  She has nothing tying her to Russia anymore, she wants a new start

[mendeleyev]

First, I agree with Bo's reasoning. Culture adjustment is still an unknown factor in your relationship, and that has little to do with the character of, or the sincerity of, the individuals involved.

Now is a horrible time to sell an apartment anywhere in Russia. As you'd expect, it is a GREAT time to buy.

Rentals are down, dramatically, so while it is a renter's market (including for those traveling to visit Russia), the glut on the market means that you have to be careful to whom you offer the keys. Russian laws on kicking out bad tenants is a holdover from the utopian socialist days and a freeloader can live in your place for a very long time without paying if you lease to a bad character.

So, despite the low rents, use a professional realtor. Or, rent to a known friend or a relative. Better to have a little money from someone trustworthy, than none from someone who will rob you blind as they mistreat the property.

You might also consider a service like www.airbnb.com as many Western travelers have been conditioned to pay a lot for Rentals in Moscow. It might be just as convenient to collect more from some tourist staying 8 days than a knowledgeable Russian would be willing to pay for the entire month.

[mendeleyev]

Ken, I just stumbled across a helpful resource: it is a Facebook group named "Moscow Expats Housing" and it is free to join. I think that you will find it to be a good resource.

[Steamer]

First, I agree with Bo's reasoning. Culture adjustment is still an unknown factor in your relationship, and that has little to do with the character of, or the sincerity of, the individuals involved.

Now is a horrible time to sell an apartment anywhere in Russia. As you'd expect, it is a GREAT time to buy.

Rentals are down, dramatically, so while it is a renter's market (including for those traveling to visit Russia), the glut on the market means that you have to be careful to whom you offer the keys. Russian laws on kicking out bad tenants is a holdover from the utopian socialist days and a freeloader can live in your place for a very long time without paying if you lease to a bad character.

So, despite the low rents, use a professional realtor. Or, rent to a known friend or a relative. Better to have a little money from someone trustworthy, than none from someone who will rob you blind as they mistreat the property.

You might also consider a service like www.airbnb.com as many Western travelers have been conditioned to pay a lot for Rentals in Moscow. It might be just as convenient to collect more from some tourist staying 8 days than a knowledgeable Russian would be willing to pay for the entire month.

This is all very well and good but could you answer the OP's questions (I have similar questions)?

[Chicagoguy]

Me too. Similar questions. In smaller city outside Moscow.

[mendeleyev]

I am no expert on buying or selling an apartment in Russia and cannot give legal or financial advice, however as a property owner will tell you that I cannot fathom selling in this market. It is a buyers market, period. Expect to lose well over half of the value if selling now.

I do know one expat couple who sold a nice Moscow apartment recently and moved back to the USA. They got around 70K (US) for something that cost them well over 350K a few years ago. They wanted out at all costs.

How to buy and sell property in Russia:

http://russia.angloinfo.com/housing/buying-property/

http://www.globalpropertyguide.com/Europe/Russia/Buying-Guide



Here are some other helpful links:

http://www.mondinion.com/

http://worldimmotrade.com/apartment-in-191-russia/  (This company lists and arranges sales of high end properties)




Random realtors, unknown, untested, unverified:

http://flat.realtor.ru/en

http://www.beatrix.ru/buy/moscow-property/

http://www.evans.ru/salesguide/


Keep in mind that most realtors who speak English are going to be sellers of high-end properties to diplomats, international business people, and expats who are suckers. Most units for sale by normal Russians, like your lady, are not in this high-end category.

Your best resource is your lady. She knows, or she better find out, who can best market her property honestly. There is a real danger of properties being stolen--this is a corrupt country when it comes to making business deals with real money.

In fact, one reason why some homes look so shabby on the outside, yet are very nice on the inside, is that nobody who lives here is going to make his/her property noticeable to those with the ability to steal it. Curb appeal works well in the West, but here it is your worst nightmare.

Real estate fraud is so very common, and with the right connections, so easy to accomplish. Who has the right connections? Those who have the ability to help you sell it, and the government officials locally who take a cut in facilitating the fraud.

[Chicagoguy]

Thanks. As I suspected Moscow is a den of thieves.

[Steamer]

Also thanks.


3. transferring the funds to the US.

[Faux Pas]

FWIW, I know 2 different RW living in the US with a Moscow apartment and both rent it out. They don't know each other and neither has any plans to return. Both have said they were scared to sell it for reasons Mendeleyev cites.

My wife owns one in Siberia that her Mother lives in. I've no clue what she'll do it it when the time comes although she has family close by.

[BillyB]

3. Transfer the funds to the US

I didn't read all the links to see if it covered this question but would depositing a large sum of money from the sale of the home in a Russian bank be discouraged? One could wire the money to an American bank but anything larger than a 10k deposit, an American bank needs to report it to the IRS. Wiring in smaller amounts may be better.


Like the others, I'd say she hang on to the property until it's a sellers market. It's very possible she'll lose less money even if it doesn't get rented out. Even if she decides to make a life with you, recommend to her to be patient. Once the problems between Russia and Ukraine end, people will have confidence in the economy again which in turn will increase the value of property.

[mendeleyev]

One must be very careful in transferring smaller amounts of a larger account as the USA has very powerful confiscation laws if the IRS thinks that the individual is "structuring" finances.  Get competent advice from a legal and tax expert who deals with international transactions.

[BillyB]

One must be very careful in transferring smaller amounts of a larger account as the USA has very powerful confiscation laws if the IRS thinks that the individual is "structuring" finances.  Get competent advice from a legal and tax expert who deals with international transactions.

Did some reading on the internet from those that moved money into the US. Over 10k will definitely get reported to the IRS. Banks may or may not report numerous smaller amounts that are getting deposited. IRS may raise an eyebrow in both cases but there is nothing to worry about if one didn't do anything illegal. IRS is also much more concerned about the individuals who are moving money out of America than the individuals who are moving money into America.


If Ken and his wife want to move 250k in one lump sum into America, the banks and government will do their required paperwork to document it and he most likely wouldn't hear anything from them.

[Faux Pas]

Did some reading on the internet from those that moved money into the US. Over 10k will definitely get reported to the IRS. Banks may or may not report numerous smaller amounts that are getting deposited. IRS may raise an eyebrow in both cases but there is nothing to worry about if one didn't do anything illegal. IRS is also much more concerned about the individuals who are moving money out of America than the individuals who are moving money into America.


If Ken and his wife want to move 250k in one lump sum into America, the banks and government will do their required paperwork to document it and he most likely wouldn't hear anything from them.

Yeah obviously that's much better than advice from a tax accountant. 

The IRS isn't concerned as much with the amount. They want to know of all money moving in or out. They want to know who owns the money, how it was obtained and the reason for bring it to the US. All this has certain tax implications depending on the presentation to the IRS. This is what you need a professional for, that presentation. Anything less than say $50K you and your banker could probably handle it with ease. Anything greater than that, you need professional advice. A professional that is current on all of the tax codes and implications. It is very complex. Seek professional advice

[BillyB]

All this has certain tax implications depending on the presentation to the IRS.

If a home is sold in Russia, Russia collects the tax on the sale. The remaining money is the owners to keep. IRS can't tax that.


I don't think it's been addressed, Ken and his wife may have another issue when transferring money into America. They will have to deal with a horrible exchange rate.

[southernX]

BO In her shoes, I would keep the apartment and rent it out.  No offence to you, Ken, but there are lots of RW who miss Russia and return. 

+1
no reason to sell it right now , my wife kept hers for several years after she moved , gave her extra security if something went wrong here  and i was totally supportive of that 

First, I agree with Bo's reasoning. Culture adjustment is still an unknown factor in your relationship, and that has little to do with the character of, or the sincerity of, the individuals involved.

+1 again , as above

Now is a horrible time to sell an apartment anywhere in Russia. As you'd expect, it is a GREAT time to buy.

russia or ukraine for that matter , prices had dropped and you would be better off to keep it for ayear or two at least

plenty of buyers , scoring bargains if you are unwise enough to sell now

Rentals are down, dramatically, so while it is a renter's market (including for those traveling to visit Russia), the glut on the market means that you have to be careful to whom you offer the keys. Russian laws on kicking out bad tenants is a holdover from the utopian socialist days and a freeloader can live in your place for a very long time without paying if you lease to a bad character.

So, despite the low rents, use a professional realtor. Or, rent to a known friend or a relative. Better to have a little money from someone trustworthy, than none from someone who will rob you blind as they mistreat the property.

+100% totally agree here with mendy
ioe  this is the way to go

SX

[Steamer]

 The remaining money is the owners to keep. IRS can't tax that.

I'm not so sure about that. If you sell a house in the US you have about 2 yrs to buy a new house or it's considered income.

[Faux Pas]

If a home is sold in Russia, Russia collects the tax on the sale. The remaining money is the owners to keep. IRS can't tax that.

Said the guy that read it on the internet. There are tax codes and law. If you do not know these codes applicable to your particular situation, seek professional help. Ignorance of the law is no excuse. If one should get caught attempting to smuggle large amounts of money or deceive the IRS of it's origins, you'll likely forfeit the money, face fines, prison time or both. If you are a US citizen or a green card holder, income and capital gains worldwide are taxable.

[fathertime]

I'm not so sure about that. If you sell a house in the US you have about 2 yrs to buy a new house or it's considered income.

Hola Steamer!


I'm not sure what precisely you are referring to, but I've sold a few houses and it really depends on the circumstances if that is income or not.  For example, if you own a home for a few years and sell it at a profit of less than 500K (married) then the proceeds are not taxable.  Another example if you buy a house and resell it within lets say 12 months and make a profit of 50k that is taxable, and often at ordinary income tax levels (in addition to self-employment tax) if you are a professional.


Fathertime!   

[ML]

I'm not so sure about that. If you sell a house in the US you have about 2 yrs to buy a new house or it's considered income.

That was the old rule many years ago.  It has been replaced by the $500,000 (for joint tax return) gain idea mentioned by FT.

[ML]

If a home is sold in Russia, Russia collects the tax on the sale. The remaining money is the owners to keep. IRS can't tax that.

Not true Billy.

As others mentioned . . . USA taxes your worldwide income, with credit given for taxes paid in certain other countries.  Depends on wording of tax treaties, if there even is a tax treaty.

It all depends on the person's resident status in USA.  Certainly filing of a joint tax return in USA would trigger taxes in USA.

[Steamer]

That was the old rule many years ago.  It has been replaced by the $500,000 (for joint tax return) gain idea mentioned by FT.

Thanks to you and FT. My memory only goes back to the last time I dealt with it.

[LiveFromUkraine]

Said the guy that read it on the internet. There are tax codes and law. If you do not know these codes applicable to your particular situation, seek professional help. Ignorance of the law is no excuse. If one should get caught attempting to smuggle large amounts of money or deceive the IRS of it's origins, you'll likely forfeit the money, face fines, prison time or both. If you are a US citizen or a green card holder, income and capital gains worldwide are taxable.

Not just green card holder, but those that pass the presence test will also pay up.


http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test


Sometimes I want to make my own nation where I can deem anyone born, on this planet, to be a citizen and tax them on worldwide income.  And they say slavery is abolished... haha 

[tfcrew]

 

Pay taxes - is it just the 30% to Russia or is the US going to want something to?

ML is right...

Money transferred to the USA will have to be declared on the the Fed tax return.
Have a tax consultant or CPA help out with that.
It will be capital gains only if there was an investment for profit.
 

Can travel with up to $10K without custom declaration.
30% for Russia tax?
Yikes... get around that one if you can...that is a capital loss.
Also, the banks are in on it and will charge ATM fees etc.