'Funding' a Living Trust

DEAR DAN: No. As a CPA, your son should know that he is entitled to deduct the itemized property tax and mortgage interest deductions he pays on his tax returns if his name is on the condo title. His name does not have to be on the mortgage obligation to claim the interest deduction.

DEAR BOB: When a tenant-buyer goes to a mortgage lender to get a loan to exercise a lease option, does the bank look at the option consideration money and the rent credit earned during the tenancy as part of the down payment? I am told that the loan-to-value ratio will be based on the option purchase price rather than the current fair market value. -- Joel D.

DEAR JOEL: Having been involved in many home lease-option purchases and sales, my experience has been that each mortgage lender treats lease options differently.

When a lease-option buyer obtains an adjustable-rate mortgage, I've found, the mortgage lenders are the most flexible, giving full down-payment credit for the buyer's option money and the rent credit earned during the tenancy period.

The buyer should consult at least a half-dozen mortgage lenders to obtain their specific mortgage terms for exercising a lease option. This is a situation in which I highly recommend consulting an experienced mortgage broker, who should know which lenders are the most flexible in such situations.

DEAR BOB: I plan to sell my home. Should I stay in my home while trying to sell it? We could move into our new home and leave the one we are trying to sell vacant. Which scenario will help sell our home faster? -- Dana P.

DEAR DANA: Your real estate agent is in the best position to advise you whether to stay or move during the sales process.

The answer depends on whether your home shows well with you and your furniture still in the house. Or maybe it will show better if you move out and spruce it up with fresh paint and perhaps new carpet.

As a buyer, I like vacant houses because then I can easily spot most defects. As a seller, I prefer to sell vacant houses after painting and cleaning them, usually installing new wall-to-wall carpet. Vacant rooms look bigger than rooms occupied with furniture.

DEAR BOB: To help us buy our first home, my wife's parents lent us $50,000. We have been faithfully repaying them monthly, including interest. They are retired, and they need the income. However, when we were audited by the IRS, our interest deduction for this loan was denied. The IRS agent said the interest is not deductible because the $50,000 loan is not secured by a mortgage on our home. Is this correct? -- Gerry T.

DEAR GERRY: Yes. For home mortgage interest to qualify as an itemized tax deduction, the loan must be secured by a mortgage on your property. To qualify for an interest deduction, you should give your wife's parents a mortgage or deed of trust to secure their promissory note. Then you can deduct the interest you pay each year to them.

DEAR BOB: I just sold my house. The buyer had it professionally inspected. All went well, but the buyer asked me to replace a couple of windows that have condensation, probably because of a bad seal. My home is 12 years old and in beautiful condition. I just put more than $20,000 into it with a new roof, siding, appliances and professional paint job throughout. I think the buyer is being unreasonable, asking me to fix the one and only thing wrong with my home. Am I being unreasonable in not wanting to pay for the windows? -- Joe McC.

DEAR JOE: If the buyer's purchase offer is acceptable, especially if the local home sales market is slow, why risk losing him over a few hundred, or even a few thousand, dollars?

Better than replacing those windows, however, is to offer your buyer a repair credit at the closing, such as $500 or $1,000. Chances are the buyer won't even replace those windows, but then you won't risk losing the sale over a petty item.

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