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Finding a buyer, negotiating, and handling the paperwork are the most well-known tasks when selling a house. But did you know that a common mistake can attract the attention of the tax authorities and trigger a tax audit? This mistake is undervaluing the property. That's why it's essential to accurately estimate the market value of your home.
Why the temptation to undervalue your house?
Some owners deliberately set a low asking price to expedite the transaction, attract bargain hunters, or reduce transfer taxes (taxes paid by the buyer). Others hope to lower their capital gains tax, especially if the property is not their primary residence. However, this strategy carries significant risks.
The tax authorities monitor price discrepancies
The tax authorities systematically analyze real estate transactions. If the declared price seems abnormally low compared to the market, they can initiate a reassessment of the property. To do this, they rely on:
- Local databases
- The appraisals of auctioneers or notaries.
- Average prices observed in the area for similar properties.
A significant difference (generally greater than 20 %) between the selling price and the actual market value constitutes a warning sign.
Tax reassessment: what are the consequences?
If the tax authorities believe you have understated the value of your house, they will recalculate the tax due based on the corrected value. Concrete example:
- You sell for €200,000, but the administration values the property at €250,000.
- The capital gain (if applicable) will be calculated on €250,000, increasing your tax liability.
- Penalties of 10 % to 80 % of the corrected amount may be added, depending on whether it is an "error" or a "willful omission".
For non-residents, or in the event of the sale of a rental property, the financial stakes are even higher.
Therefore, savvy sellers seek the services of a professional, such as a real estate agent, to estimating the fair price of their house in La Couarde-sur-Mer.
