DEAR BOB: In November, 1975, we bought a home funded by an FHA-issured mortgage. Within three months after purchase, the roof started leaking from heavy rain. I contacted FHA for assistance in repairing the roof, but they won't help. The realty salesmen led me to believe FHA would not insure the loan if the house didn't meet their standards. What should we do? Steven D., Hagerstown, Md. DEAR STEVEN: FHA and VA only protect mortgage lenders from loss. AN FHA or VA home loan is no guaranty the home is sound. It's up to the buyer to chech that, or to get a separate warranty from the builder or seller. If the seller or agent misrepresented the house, you may have a claim against them. Check with your attorney for further details. DEAR BOB: In 1955 I bought some land at a sheriffs sale in New Mesico. Ever since then I have been paying the property taxes. But they have tripled in recent years. I want to sell the land to my son who lives near the land. Can i sigh a quit claim deed here and be sure he is getting good title?or is there a better way? Claude F., Rockville. DEAR CLAUDE: The best way way for a property buyer to be sure he is receiving good title to a property is to get a tetle insurance policy at the time of purchase. It's cheap "peace of mind" insurance.
Almost any title incurance company in your area can bandle the transaction for you, including the dead, transfer tax, notarized signature, and recording fees. Or your son can start the procedure with a title insurer located near where he lives. Either way, through nationwide affiliations, title insurance companies can insure just about any title fransfer. DEAR BOB: I own a duplex in a part of town you would consider the wrong side of the tracks. I've had it for sale over a year with no offers. My price is fair, but I need to sell fast to raise eash to move to Florida. I've sent information on my property to every real estate broker in town, but no action so far.What should I do to get rid of this inherited property? Ethel K., Woodbridge, Va. DEAR ETHEL: MOst of the sentences in your letter start with "I" Maybe you're thinking only of yourself, and not the prospective buyer of your deplex. You're got to make the purchase attractive to that person.
Your first mistake was to send open listing statements to every realty agent in town. It's much better to give an exclusive right to sell listing to only the best agent for about 60 days. Then he can spend his time and money marketing your property. Be sure the agent you select will copperate with other local agents on the sale through the local multiple listing service.
Then be flexible when an offer is received. Maybe you'll have to take a second mortgage for part of the purchase price. Maybe the buyer will offer a lease with option to purchase later. Maybe you'll have to take a smaller property in trade for want of the sales price. If you really are motivated to sell, a good agent can ease your marketing of that duplex. DEAR BOB: We can't decide if we should renew our lease or not. My husband wants to buy a home. But I dread the thought of moving our stuff. We are in our late 20s, with no dhildren, and only about $4,000 in savings. My husband earns about $18,000 per year. Are we better off renting or buying a home? Martha M, Culpeper, Va. DEAR MARTHA: UNless your husband's job is likely to be transferred soon, by all means buy a home and start building equity instead of a pile of rent receipts.
Buying a home may cost you slightly more than your present rent per month. But you'll be ahead after considering your tax savings.
A home mortgage is really a mandatory, forced savings account. Some of us have a hard time putting money into savings, but home owners rarely fail to make their mortgage payments. Most of your early loan payments will go toward tax-deductible interest. But you will slowly increase the amount of mortgage principal layoff in each payment.
You''ll also be building home equity as the home appreciates in value. Good homes have been appreciating in value far faster than the inflation rate.
To compute your income tax savings from home ownership, add the estimated property tax and mortgage interests costs. Then multiply that sum by your income tax bracket. For example, $3,000 of deductions for a 30 per cent tax bracket taxpayer means a $900 income tax saving. DEAR BOB: I've heard the term "capital gains tax." How is it different from regular income taxes? Val E., Woodbridge. DEAR VAL: Profits from the sale of capital assets, such as your home, are called aains. If owned at least nine months (increasing to 12 months in 1978), the asset produces a long-term capital gain when sold at a profit. These profits command the lowest tax rates.
To encourage investment, long-term capital gains are taxed at half the taxpayer's regular tax rate. On the first $50,000 of long-term capital gains, 25 per cent is the maximum tax rate. But it can be lower.
For example, if your in a 30 per cent tax bracket, and you sell your home for a $10,000 long-term capital gain, you only pay tax on $5,000. At a 30 per cent tax rate on $5,000, that's $1,500 tax on $10,000 profit. DEAR BOB: (1) If we sell our home and buy a more expensive one, must we apply all our sale funds toward the purchase if we defer our profit tax computed? E.W., Rockville, Md. DEAR E.W.: Since so much reader mail askes about the "over 65 rule" and the "residence replacement rule, "I'll try to clarigy these rules.
(1)The "residence replacement rule" can benefit home sellers of any age. I f you sell your principal residence and buy a more expensive one within 18 months before or after the sale, you must defer paying profit tax.Not even $1 of sale proceeds need be reinvested in the replacement. For example, if you get 100 per cent VA financing, spend the tax-free eash as you please.
(2)The "residence replacement rule" and the "over 65 rule" can be combined. The over 65 rule makes profit from the first $35,000 of your home sale price tax-exempt. To qualigy, you or your spouse must be 65 or older and have lived in the principal residence at least five of the last eight years.
To compute your tax-exempt percent, divide $35,000 by your home's adjusted sales price (after sales costs). Next, apply that per cent to your profit. Then subtract that figure from the adjusted sale price. This is the "revised adjusted sale price." If your replacement home costs more than this amount, tax is deferred. If it costs less, any non tax-exempt profit is taxed up to the difference between the "revised adjusted sale price" and the cost of the replacement principal residence.
The report "How to Avoid Tax When Selling Your Residence" is available for 25 cents in coin plus a self-addressed STAMPED envelope sent to Robert J. Bruss, P.O. Box 6710, San Francisco, Calif. 94101.