For Sale By Owner

If that happens, she can either pay an assumption fee, typically 1 percent of the mortgage balance, or refinance with another lender. However, that is highly unlikely if she makes the monthly payments on time.

She should notify the insurance agent to add her name to the homeowner's insurance policy as an additional insured in case the house burns down or there is a liability claim.

DEAR BOB: A friend lives in a home where her son holds title. But he is delinquent on the mortgage payments, and foreclosure is pending. What recourse does the mother have? She quitclaimed the title to her son when she was disabled. Now the son won't give the title back. -- Art D.

DEAR ART: Unfortunately, your friend's situation happens far too often. Her obvious mistake was deeding the title to her son while she was disabled.

A far better alternative, if she thought she was going to die soon, would have been to create a revocable living trust, naming her son to receive title after she died. The primary advantage is to avoid probate costs and delays, with a secondary advantage of management of her assets if she is unable to do so.

At this point, there is nothing the mom can do to force the ungrateful son to deed the title back so she can cure the foreclosure default. She should consult a local real estate attorney.

DEAR BOB: Is there any way to carry over IRS Schedule E losses to the next tax year? Why can't I defer expenses to offset future taxable income? -- Claude R.

DEAR CLAUDE: If your Schedule E tax loss is from operating your rental property, probably due mostly to the non-cash depreciation deduction, you can carry over "suspended" tax losses to future tax years.

Or you can use suspended tax losses to offset your capital gains profit when you sell your rental property. It sounds like you should consult a new tax adviser to be certain you are maximizing your real estate investment property tax benefits.

DEAR BOB: About five years ago, I co-signed a home mortgage for my niece so she could buy a condominium. All went well until about four months ago. She lost her job and refuses to take a job that doesn't pay as much. She is now four months behind on her mortgage payments. Frankly, there is no way she can catch up, even if she does find the perfect job. However, I have a 723 FICO score, which I don't want to lose. Other than paying the missing mortgage payments, which now are about $14,000, how can I protect my good credit? -- Fred G.

DEAR FRED: You can't. You probably now realize it was a major mistake to co-sign on your niece's mortgage. I'm sure you wanted to help her and you trusted her to make the monthly payments. But when she defaulted, it not only hurt her credit rating, but also hurt yours as a co-signer.

Your situation is a classic example of why not to co-sign on a mortgage obligation.

Legally, you are liable for the missing mortgage payments. However, if there is sufficient equity in the condominium, the lender will probably foreclose and either be paid in full by a bidder at the foreclosure auction or receive title to resell the condo.

Chances of the lender suing you for a deficiency loss are not great, but it could happen.

DEAR BOB: My late mother battled cancer for five or six years. Three years ago, she deeded her house to me to avoid probate and a possible claim by her ex-husband. She died about four months ago. I have decided to sell the house, but my tax adviser says that because I received a lifetime gift, I took over my mother's very low cost basis of $160,000. Today, the house is worth at least $550,000. Since I did not own and occupy the house as my primary residence, is there any way I can avoid capital gain tax on this profit of about $390,000? -- Paula W.

DEAR PAULA: No. If you didn't inherit the property, you don't get a new "stepped-up basis" to market value on the date of the decedent's death. Because you received a pre-death gift deed to the house, as the donee you took over your donor's low adjusted-cost basis.

However, the current maximum federal capital gains tax rate is only 15 percent, plus any applicable state tax. Your tax adviser can provide full details.

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.

Copyright 2007, Inman News Service