When Co-signing a Mortgage Goes Wrong

DEAR BOB: We bought our 15-year-old house in June 2006 and bought a $500 one-year home warranty policy. Last month, our heaters began to malfunction so we called the home warranty company. We paid a $45 service fee to either repair or replace the heaters. A local contractor came out and said both units were unsafe and needed to be turned off until replaced. He collected our $45 while he got approval from the warranty company. That left us without heat over a cold weekend. The next week the warranty company rejected our claim because we couldn't prove we properly maintained the units. We were without heat for 10 days while we hired another contractor for thousands of dollars to replace the units. What recourse do we have? -- Mary Ann B.

DEAR MARY ANN: Home warranty companies are notorious for denying legitimate claims like yours. Most homeowners don't need to do anything to maintain modern furnaces or heating units except to change the filters every few months. The claim denial was ridiculous.

Now that you have heat, send copies of the furnace bills to the warranty company by registered mail demanding full payment within 10 business days. Politely explain there was nothing you could have done to further maintain the furnace, which, after 15 years, became defective.

If you don't receive payment within 10 days, it's then time to sue that nasty warranty company in your local court.

DEAR BOB: My wife and I are in the market to buy our first home. We have been visiting weekend open houses where we have met many listing agents. They all want to become our buyer's agent. One agent keeps e-mailing and phoning us to spend several hours looking at houses. When we had an appointment at her office last Saturday, she said before she could show us any houses we had to sign a 60-day buyer-agency contract. It would tie us up to buy only through her. We hardly know this agent. My wife refused to sign and we walked out. Should we have signed that contract? -- Kevin G.

DEAR KEVIN: No. Unless that agent came highly recommended by a trusted friend or business associate, there is no reason to get tied up with an agent you don't know. Most agents are glad to show you homes without requiring any buyer's agency contract, especially one for a long 60-day period.

DEAR BOB: I am 67 and single, and I want to sell my primary residence. Can I avoid or defer capital gains tax? What costs am I looking at when I sell? -- Joan T.

DEAR JOAN: If you owned and occupied your principal residence at least 24 of the last 60 months before its sale, thanks to Internal Revenue Code 121, up to $250,000 (up to $500,000 for a qualified married couple filing a joint tax return) will be tax-free. If you own the home and carry back an installment-sale mortgage for your buyer, you can defer tax on any profit exceeding the exempt amount. Ask your tax adviser to explain further.

As for sales costs to expect, your major expense will be the real estate sales commission. Interview at least three successful local agents before selecting the best agent to receive a listing not exceeding 90 days. There will be additional minor sale costs, such as transfer and recording fees. Each agent should show you how much you will net approximately from your home sale.

DEAR BOB: I am fascinated with the topic of "stepped-up basis" to market value for inherited properties, which often comes up in your articles. Now I see why you constantly advise parents not to add their adult children to their home titles because doing so would deprive them of the new stepped-up basis. Two questions: (1) does stepped-up basis apply to properties held in a revocable living trust, and (2) is there a limit to the number of properties that can be inherited with a new stepped-up basis?-- Marvin G.

DEAR MARVIN: Stepped-up basis to market value on the date of the decedent's death applies to inherited properties and other assets held in a revocable living trust. There is no limit to the number of inherited properties where the heirs will receive a new stepped-up basis.

DEAR BOB: When I read one of your articles about a partition lawsuit to force the sale of a property, I thought I would never need that information. But now I do. About six months ago my two brothers and I inherited some land from an uncle. Unknown to me, title was taken by the three of us in joint tenancy with right of survivorship. I thought we all agreed to sell the land. But now one brother refuses to sell. He thinks we should hold the land for five or 10 years. It is vacant and is not suitable for rental as farmland so we would have to pay the property tax each year. Can two of us bring a partition lawsuit to force the sale of this joint tenancy land? -- Karen V.