Q: My husband and I are looking for a house in the Washington Metropolitan area, and we are often told that the law requires a 10 per cent deposite to show "good faith." What is the law in this area?
A: There is no law on this subject, and the amount of your deposite should be arrived at by negotiation between you and the seller. As the buyer, you want to put down as little as possible. Inf fact, if your seller trusts you, you do not even have to put any money down. Obviously, the seller wants as large a deposit as possible, because if you default on your contract usually permits the seller to keep the deposit. If there is a real estate agent, the deposite is usually split in the event of a forfeit.
Here ae some tips:
You can earn interest on the deposit unil settlement. The contract should state: "The deposit will be placed in an interest-bearing account, with interest to accrue to the benefit of the buyer at settlement."
IF you are dealing directly with the seller, it's not a good idea to let the seller hold the deposit. Select an independent third party, such as a bank, or an attorney, to hold the money in escrow until settlement.
Q: We are planning to move from this area in late summer, and are giving some thought to renting our house. It is a large house in North Arlington convenient for people employed in Washington or at the Pentagon. It is close to all schools.
We have just received our real estate assessment, and it is a little over $83,000. Is there a rule of thumb regarding the amount to charge for rent for such a house? Do you think renting such an expensive house would be practical?
A: There is no question in my mind but that this area is good for rental properties. In determining how much rent to charge, much depends on your needs. Are you looking for income from the property, or are you looking for tax benefits? If you want your property to show a profit for you, needless to say the rent should be more than the expenses, which include your mortgage payment, taxes, insurance, and maintenance charges. You must keep in mind that you may have unexpected expenses to keep the property in good repair, even though you haven't had any problems to date.
If you are seeking a tax advantage, you might consider bringing your mortgage up through refinancing, and setting your rent so that it just covers your expenses. Under this approach, you will show little if any rental income profit, and you will be able to depreciate your house for tax purposes.
Look at rental ads in the newspaper; you might want to consider using the services of a professional real estate agent to assist you in determining the amount of the rent, collecting on your behalf, and property management.
You should also contact the Arlington County Landlord-Tenant Commission (558-6600) to determine waht laws and regulations govern your rights and responsiblities as a landlord.
Finally, you should be able to obtain a standard form lease from a stationery store or from your attorney, and make sure that it is signed by all of the tenants who will be living in your property.
Benny L. Kass, a Washington attorney, answers questions through this column. Write him in care of the Real Estate Section, The Washington Post, 1150 15th St. NW, Washington 20071.