How to book a real estate purchase with seller credits

[flyaway]

Hi, 

I have been using beancount to track my family finances for more than 1 year.

I just purchased a new house recently. I got 50K credits from my seller.

I wonder how can I book a transaction that can reflect the these credits?

Without credits, the transaction can be  as simple as:

Assets:Bank:Checking -200,000 USD 

Assets:Bank:Checking -10,000 USD 

Liability:Mortgage -800,000 USD 

Assets:House 1,000,000 USD    ; The purchase price

Expenses:House:ClosingFee 10,000 USD

But with credits, how should I book this? I feel not right to book the credits as an income. One thing I can think of is directly subtract the credits from the purchase price. But this way I will lose the credits information. Anyone has a good idea how to book the seller credits?

Thanks!

[Martin Michlmayr]

I'm not sure what "50K credits" is, but I guess the seller gave you a
discount?

If the house price was discounted by 50k, arguably the house price
wasn't worth 1000k but 950k.

Alternatively, if you think the house price is really 1000k, you can
use an Income: account. Some people say using an income account for
non-taxable income feels wrong, but I don't see why and it certainly
makes sense if you look at the accounting equation.

For example, I sometimes use Income:Rewards:Voucher if I get a
voucher/coupon for a discount

2024-01-05 * "Supermarket" "Food"
Expenses:Food 10.00 EUR
Assets:Cash -8.00 EUR
Income:Rewards:Voucher -2.00 EUR ; 2 off coupon

That makes perfect sense to me because the item *was* 10.00 EUR
and the only reason I only needed 8 EUR in cash was because I
had a voucher - the voucher is basically like money in this case.

OTOH, if the shop discounted the 10 EUR product to 8 EUR for some
special occasion (e.g. Christmas), I would have just booked it as an
expense of 8 EUR.

So you need to make a judgement call as to how to model your
transaction. If the seller gave you a discount, I'd argue the house
price is 950k. But if e.g. you got some non-taxable government
credit, sure, book the full 1000k plus the 50k credit. (That would be
the case for EV cars where some countries give credits; I haven't
heard about this for houses except maybe for solar cells and other
"green" enhancements like that.)

Martin


* flyaway <flyaw...@gmail.com> [2024-01-04 21:32]:

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Martin Michlmayr
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[Yichu Zhou]

The seller credits are some kind of discount offered by the seller. but as far as I know, these credits can only be used to cover your mortgage expenses. In the closing statement, the selling price is still 1000k. If the credits are more than the expenses, the extra money will be used to reduce the principle.  

And i agree that directly subtract it from total price is the simplest way  doing it.

thanks for sharing your thoughts!

To view this discussion on the web visit https://groups.google.com/d/msgid/beancount/20240105060623.GA295708%40jirafa.cyrius.com.

[Red S]

Many ways to peel this orange. I’d suggest:

2024-01-01 * "House Purchase" Assets:Bank:Checking -200,000 USD Assets:Bank:Checking -10,000 USD Liability:Mortgage -800,000 USD Assets:House 1,000,000 USD ; The purchase price Expenses:House:ClosingFee 10,000 USD 2024-01-01 * "Seller credit" Assets:Bank:Checking 50,000 USD Assets:House

This way you don’t lose the factiod about having received a credit. Or if you want to deduct it against closing costs first:

2024-01-01 * "Seller credit" Assets:Bank:Checking 50,000 USD Expenses:House;ClosingFee -10,000 USD Assets:House

​

[Gary Peck]

As Red says there are many ways to peel this orange. However if the excess credit applies to your principal as you mentioned, then I think you'd want to modify Red's last transaction to instead credit Liabilities:Mortgage instead of Assets:House since the credit doesn't affect the value of your house but is just reducing how much you owe on the mortgage. I.e.:

```

2024-01-01 * "Seller credit"
    Assets:Bank:Checking 50,000 USD
    Expenses:House:ClosingFee -10,000 USD

    Liabilities:Mortgage 

```

You also might want to model the house as its own commodity. Since what you have in Assets:House is not actually 1,000,000 USD of cash. You have a house with a fluctuating value that is currently 1,000,000 USD. E.g.

```

2024-01-01 commodity MYHOUSE

2024-01-01 * "House Purchase"
    Assets:Bank:Checking -200,000 USD
    Assets:Bank:Checking -10,000 USD
    Liability:Mortgage -800,000 USD

    Assets:House 1 MYHOUSE {1,000,000 USD, 2024-01-01}

    Expenses:House:ClosingFee 10,000 USD

```

This way when your house gets reassessed by the local tax collector next year, you can update the value of the house via a price directive:

```

2025-03-08 price MYHOUSE 1,200,000 USD

```

If you keep the Assets:House account in USD instead of using the separate commodity, then you would have to declare the increased value of your house as unrealized income, which I think makes things more confusing.

Gary