The Truth About Negative Amortization

However, you and she can't qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $500,000 because she hasn't owned the house at least 24 months (although you both clearly meet the 24-month occupancy test).

DEAR BOB: About five years ago, my aunt died. She left everything to me, including a worthless lot. I consulted several nearby real estate agents, and they wouldn't even list it for sale as it is worth only about $5,000. However, the county keeps sending me property tax bills, which I haven't paid. It has tried to sell the property at a tax sale but nobody will buy it, even for the amount of unpaid property taxes. Now the county reported to the credit bureaus that I owe the unpaid taxes, and this is hurting my credit rating. What can I do? -- Ralph R.

DEAR RALPH: It is unfair for counties to report unpaid property taxes to the credit bureaus, especially when someone inherited worthless property he doesn't want.

Perhaps you can contact the county tax collector to see whether he will accept your quitclaim deed in return for canceling the property taxes. Then you can tell the credit bureaus that the property taxes have been canceled so the adverse information can be removed from your credit reports.

DEAR BOB: I live in a condo complex where one owner has four barking dogs. The neighbor has never walked the dogs and keeps them in a tiny fenced patio. The smell is unbearable in hot weather. The condo homeowner association refuses to act, even though the CC&Rs (covenants, conditions and restrictions) only allow one small pet. What can be done? -- Dorothy J.

DEAR DOROTHY: Shame on your ineffective homeowner association board of directors and officers for refusing to enforce the CC&Rs. However, your city or county health department or the local humane society can take action to abate this nuisance, which is also a health problem. A few phone calls should solve the problem.

DEAR BOB: About six years ago, three of my college fraternity brothers and I agreed to invest in single-family rental houses. They put up the cash, and I managed our six houses, arranged for fix-up and repairs, and obtained tenants. We have done very well. The houses have all appreciated handsomely, and we each get some annual tax deductions, too. All went very well until recently, when one of the "brothers" got married. His wife is not keen on his further investing. In fact, she sweet-talked him into demanding to be bought out. His equity is about $175,000. We can't afford to buy him out without selling or refinancing several houses. Unfortunately, she is a real estate lawyer, and she threatens to sue us for a partition sale if we don't come up with the $175,000. Can she do this? What should we do? -- Jeff R.

DEAR JEFF: Congratulations to you and your fraternity brothers for making such profitable investments. However, you should have had a written partnership agreement to prevent problems like this.

If you hold title as tenants in common, just one co-owner can bring a partition lawsuit to force the sale of all the properties.

The co-owners should have a meeting to resolve the problem before a lawsuit develops. Maybe one or two of the investment rental houses will have to be sold or refinanced to buy out the "bad brother."

Your situation shows why I advise against group real estate investments whenever possible. Sooner or later, especially without a well-drafted partnership agreement, problems usually develop.

DEAR BOB: Almost a year ago, I made the worst mistake of my life. I paid more than $425,000 cash to buy into a relatively new retirement residence. The place looks beautiful, and I like my apartment very much. However, the property is run by a bunch of crooks. They have already raised my monthly fee by $370, and the quality of the service and meals has declined greatly. We are treated like prison inmates. That's almost our situation because there is no way I can sell and get my cash back. Now I know I should have taken the finance option where I could have moved in for as little as $75,000 upfront. You should warn retirees.

-- Lucy R.

DEAR LUCY: Now you know why I do warn against paying all cash for any property, especially a retirement home. The situation you describe shows the risk of paying a large amount of cash for retirement housing, especially a new facility.

Consult a local lawyer who specializes in elder law to see whether you have recourse against the owners of your retirement residence.

DEAR BOB: We plan to sell our home, and want to close by the end of summer. Our niece is a new real estate agent in a town about 25 miles away. She has made only one home sale in her first three months after obtaining her sales license. We would like to help her gain confidence by selling our home. She says she can put our listing into the local multiple listing service. However, friends and neighbors advise against giving her our listing. What do you suggest? -- Helen H.

DEAR HELEN: You have smart friends and neighbors. Listing a home for sale with a relative is always difficult, but it can be especially bad for any home seller to list with a novice out-of-area real estate agent. Putting a listing into the local MLS alone is not enough to get your home sold.

My suggestion is to interview several local real estate agents about listing your home for sale. Include your niece, but also interview two or three successful nearby agents.

Listen to their listing presentations, which should each include a comparative market analysis (CMA) form and written marketing plans for your home.

Compare these valuable CMAs, which will show recent neighborhood home sales prices, the asking prices of nearby homes now listed for sale (your competition) and even recently expired listings that didn't sell. Each agent will include his or her opinion of your home's market value.

Evaluate your niece's listing presentation and her CMA against the other agent CMAs. If she did a good job, I would give her a 30-day trial listing. Explain that you expect her to perform like a champion, performing all the services the other agents promised.

If she gets your home sold within 30 days, that's great. But if she does a terrible job, you lost only 30 days and can then list with a better local agent.

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