By Robert J. Bruss
Saturday, March 10, 2007
Q: DEAR BOB: About two years ago, I helped my daughter buy a one-bedroom condo by cosigning her mortgage. She was just out of college with a good job at an accounting firm. About 18 months ago, she quit that job because she didn't like her boss. Since then, she hasn't been able to find another job that pays as well. She is now three months behind on her mortgage payments, plus the monthly condo fees. I didn't know about this until I recently applied for a car loan and the dealer told me I was three months late on my mortgage payments and my FICO credit score is now about 600. This was news to me, as I always had a good FICO score of more than 700. Now I learned from my daughter the mortgage lender has started foreclosure. What can I do? How can I get my name off the title?
-- Andrew S.
A: DEAR ANDREW: If your daughter is now working and has enough income to make the monthly mortgage payments, she should contact the mortgage lender to work out a forbearance agreement to stop the foreclosure. If that is not possible, she should sell the condo to pay off the mortgage. Let the lender know when it is listed on the market for sale with a real estate agent.
Your situation shows the sometimes-bad results of cosigning a mortgage for an irresponsible relative. Your daughter not only ruined her credit, but also ruined yours. Even if you sign and record a quitclaim deed to your daughter to get your name off the title, you are still obligated on that mortgage. There is no way for you to get out of that. If it goes to foreclosure, then you will have a foreclosure on your credit report.
DEAR BOB: What can I do with a real estate agent who refuses to cancel my listing? The reason to terminate is that my agent is hard to get in touch with and she doesn't respond to my phone calls. -- Delia F.
DEAR DELIA: There is no valid excuse for your listing agent not to return your phone calls or e-mails within 24 hours. However, that alone is not a reason to cancel your listing. Lack of due diligence is the most valid reason to cancel a listing. For example, if she didn't put your listing into the local multiple listing service, failed to put it on the national Web sites and didn't properly market your home, that would be lack of due diligence.
But rather than trying to prove lack of due diligence, a better alternative is to contact the listing agent's supervising broker and ask to transfer your listing to a better agent within the same brokerage firm.
Presuming you still want to sell your home, your home will then be properly marketed, the listing agent will get a referral fee after your home sells and everyone should be satisfied.
DEAR BOB: My parents have a quitclaim deed on their home, naming all seven of their children. Their home is worth $250,000; they paid $40,000 many years ago. Four of the seven children live out of state. Two brothers live close by and would probably take occupancy as their primary residence after mom and dad die. Can tax be avoided if the two brothers take title as their residence? Should it be put in their names now? -- Mary Beth U.
DEAR MARY BETH: Forget about that quitclaim deed idea. I hope it wasn't recorded. Ask your parents to tear it up. Instead, they should put the title to their home into their revocable living trust to avoid probate after they are both gone. Also, if one becomes incapacitated, such as by Alzheimer's disease or a severe stroke, the other can still manage the property, even selling it if necessary.
After they both die, presuming the living trust leaves the house and other living-trust assets to all seven children, you all will inherit it at the fair-market, "stepped-up value" on the date of the last co-owner's death.
Then you can sell the house to the two brothers and owe little or no capital gains tax. Putting the brothers' names on the title now would be a major mistake that could have costly tax implications. Consult a lawyer specializing in living trusts.
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.
DEAR KAREN: As far as I am aware, the law of every state allows a partition lawsuit to obtain a court order to force the sale of property held in joint tenancy with right of survivorship.
If for some reason the law of the state where the land is located does not allow a partition sale of joint-tenancy property, you and the brother who wants to sell can break up the joint tenancy by deeding your shares to yourselves as tenants in common. Consult a lawyer for details.
DEAR BOB: Some time ago you explained that a "short sale" means the mortgage lender agrees to accept as payment in full a sale for a home's market value even if it is below the mortgage balance. That's what we did in late 2006 to sell our house in Ohio. It was worth less than our mortgage balance and we had to move to obtain a job. The lender agreed to accept a short sale for $183,785 although our mortgage balance was about $210,000. However, we received an IRS Form 1099 from the lender showing we had taxable "debt relief" income of $26,215. Is this right? How can we be taxed on money we didn't receive? -- Ron D.
DEAR RON: As an alternative to foreclosure when a mortgage borrower stops making payments, some lenders will accept a short sale of the property for less than the mortgage balance. They realize it is better for the lender to accept a short sale than to go through a foreclosure sale and lose even more money.
However, the IRS says debt relief is taxable. That's why your mortgage lender had to send you that 1099 form showing the exact amount of your taxable debt relief.
DEAR BOB: In February I closed on the "as is" purchase of a condo, which was a foreclosure sale by Fannie Mae. At the closing, I was surprised by a $600 debt due to the condo homeowners association. I thought Fannie Mae should have paid this. The lawyer who handled the closing agreed with me, but it had to be paid or I wouldn't receive title. I reluctantly paid. When I protested to the condo association, I was told to hire a lawyer because it is my responsibility to pay. What is your opinion? -- Ken M.
DEAR KEN: When buying an "as is" foreclosure property from the foreclosing lender, it is customary to deliver marketable and insurable title. Frankly, I am surprised Fannie Mae refused to pay that $600 condo association lien. The sale term "as is" refers to physical condition, meaning the seller will not pay to make any repairs. It does not mean the seller will surprise the buyer with undisclosed liens that the seller refuses to pay.
Thankfully, the amount is small. I suggest you write a polite demand letter insisting Fannie Mae reimburse you $600 for the unexpected cost you had to pay at the closing. Ask for payment to be received within 10 business days. Send it by registered mail.
If you don't receive payment, bring a local small claims court action. Chances are a Fannie Mae representative will not show up and you will win a default judgment.
DEAR BOB: We bought a rental house "as is" but with the understanding it had no water leaks. That is what the written disclosure said. However, since purchase we have been fixing roof leaks for months now. My tenants told me the past landlord knew of the leaks but would not fix them. What can I do to make him pay for the repairs? -- Kevin C.
DEAR KEVIN: Your "understanding" doesn't matter. Did the seller's written disclosure statement say there were no material defects in the house, or no leaks? If so, you might have recourse for misrepresentation if you can prove the roof leaked at the time of the sale.
Depending on your cost of the roof repairs or replacement to stop the leaks, you might want to take the seller to the local small claims court. If you can get your tenant to testify as a witness that the landlord knew the roof leaked before the sale but he refused to repair it, that is excellent evidence for you.
However, if the cost of repairs or roof replacement exceeds the local small claims court jurisdiction, then you can either reduce your claim to that maximum amount or hire a lawyer to sue the seller in a formal court proceeding.
DEAR BOB : There are numerous properties in my city that are owned by government agencies and are not being used. Is there any way I can gain title by adverse possession to put these properties to use?-- Rodger A.
DEAR RODGER: Sorry. Adverse-possession laws do not apply to real estate owned by any government agency, public utility or railroad.The reason is these landowners cannot periodically inspect their many properties to see if someone like you might be adversely possessing them without permission, such as by planting a flower garden for the required number of years.
DEAR BOB: In August 2004, I bought a junior one-bedroom condo, advertised as "approximately 551 square feet." A week ago, I receive a list of recent sales in my building from the real estate agent who sold my unit. It listed the condo like mine three floors above me, which sold at 523 square feet. That is 28 square feet smaller than I was led to believe. If my math is correct, based on my purchase price I overpaid by $11,180 in square-foot value. Is "approximately" a common wording agents use to inflate the square footage and price? Should buyers be responsible for verifying this? The appraisal didn't evaluate size. What advice do you have on recouping the misrepresented square footage and associated value? -- Daniel R.
DEAR DANIEL: Have you measured the square footage of your unit? Maybe the upstairs unit is different. Unless you can prove you paid on the basis of the advertised square footage, such as $200 per square foot, you would have a weak case to prove misrepresentation.
Most real estate listing information includes disclaimers such as "Information deemed reliable but not guaranteed." You said your condo was advertised as "approximately" 551 square feet, indicating there was no specific representation.
Your chances of finding a lawyer to take your case on a contingency are slim.
DEAR BOB: Last year I took out a mortgage to help my son buy a house. The house is titled in my name. How can I re-title the house to him so he can benefit from the mortgage interest and property tax deductions? He makes all the payments. -- Jesse H.
DEAR JESSE: Sign and record a quitclaim deed transferring title from you to him. Then he can deduct the mortgage interest and property tax he pays. Your name will then be off the title. However, your name will remain on the mortgage obligation. Be sure your son pays the mortgage on time or your credit will be harmed.
DEAR BOB: I hired a licensed, insured contractor to do some renovation work on my property several years ago. We agreed he would obtain all the required permits, do the work, and have the work passed by the building inspector. The work was completed and paid in full. But I am not sure the permits and inspections were obtained. The contractor is now out of business. Will this renovation work affect the sale of my property in the future? What should I do? -- Gregg R.
DEAR GREGG: Pay a visit to city hall to see what building permits have been obtained on your property. You don't have to tell the clerk what you really want to know. Most building departments maintain records by the property address. The file will include copies of all building permits issued for your property, plus copies of all completed inspections.
If you discover either that a building permit was not obtained or that the work was not inspected upon completion, when you sell the property you must disclose those facts to your buyer. The result might be a diminished market value for the property. Or the buyer might not care.
Readers with questions should write Robert J. Bruss at 251 Park Rd., Burlingame, Calif. 94010, or contact him via his Web page, http://www.bobbruss.com.
© 2007, Inman News Service
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