DEAR BOB: Our home is of unusual architecture. There isn't another one like it in this area. As we are getting ready to sell it, we are unsure how to price it. Several real estate agents have given us market value estimates, but these vary by about $23,000. How can we determine what our house is really worth? Olice M., Fairfax.
DEAR OLIVE: Hire a professional appraiser who is experienced appraising residential property. Your bank or saving association can probably recommend such a person.
Since your home is of unique design, the appraiser will probably use the "replacement cost" appraisal method, rather than the more frequently used "market data comparative" method used for most homes. Money spent getting your appraisal will be worthwhile because that appraisal will be a very impressive sales tool to show to prospective buyers.
DEAR BOB: Some times ago you answered a question from the owner of a worthless lot who wanted to know about the tax advantages of abandoning it since he couldn't find a buyer. You cited Internal Revenue Code section 165C a authority for taking an abandonment loss. I phoned the IRS and they said that code section deals with casualty loses. Please give me more information. Bill C., Bethesda.
DEAR BILL: My answer suggested the reader contact his tax advisor for more details. That's what you should have done, too. IRS agents often give confusing information to taxpayers. Your situation was a classic example of that.
The abandonment tax loss code section is 165C, subsection 1, but the casuality loss is covered in subsection 3. Abandonment tax losses are only available if the property was purchased for use in a trade or business. Please see your tax advisor for full details.
DEAR BOB: I enjoyed your recent article about that once-in-a-lifetime "over 55 rule" $100,000 tax exemption. But I have several questions. (1) To meet the ownership time length requirement, is it sufficient if I own and live in my home three years before I sell it? (2) I used the old "over 65 rule" just before this new exemption became law in July 1978. Does this disqualify me from using the $100,000 exemption? (3) If I can use the rule and remarry (I'm a widow now, age 69), can my new husband use the rule to sell his condominium? Trisha M., Alexandria.
DEAR TRISHA: (1) the "over 55 rule" requires the qualified seller to have owned and lived in the principal residence any three of the five years before the sale. It is sufficient if you only own and live in your home for the three years before its sale. In other words, you need not have owned it for five years before the sale.
(2) Use of the old, now repealed "over 65 rule" won't bar your eligibility to use the new "over 55 rule" $100,000 home sale tax exemption.
(3) if you use your $100,000 exemption, this disqualifies any person you marry from later using the rule too. If your future husband is thinking of selling his principal residence, assuming he is 55 or older and otherwise qualifies for this tax break, he should sell before he marries you since your use of the rule would profit him from using it after the the marriage. Your tax advisor can explain further.
DEAR BOB: We're desperate. My husband just got a big job promotion and has already started his new job, 1400 miles away. The problem is I'm stuck here until we can find a buyer for our house. We've got it listed for sale with the top realty saleswoman in the area. But she tells us it is virtually impossible today to get an all-cash sale because nobody can qualify for a new mortgage due to the high interest rates. We need the cash from the sale of our house so we can buy another one at our new location. What should we do? Daisy M., Rockville.
DEAR DESPERATE DAISY: Unfortunately, housing finance is the area of our economy most severely affected by high interest rates. While this is creating excellent buying opportunities for property buyers, necessitous sellers like you who need all-cash sales are not in such a good position.
The only hope I see anytime soon for home mortgage money to become available again at reasonable interest rates is if Congress will exemp savings account interest from taxes. This would help home buyers, the construction industry, and savings associations, but you know how slowly Congress works.
In the meantime, to get your house sold, offer it on creative finance terms.
My favorite for today's lease with option to buy. The buyer's "consideration for the option" is the same amount as a down payment would be. When mortgage money becomes available, the tenant-buyer simply gets a new mortgage and exercises his purchase option. The option money is credited toward the purchase price. All or part of the rent paid can be credited, too, if desired.
With a healthy non-refundable option payment, perhaps $20,000, you can be sure the tenant won't let his option expire. In the meantime, you can use the option money for the down payment on your next house. Or you might want to use the same lease-option technique to "buy" it in 12 months or so when mortgage money should be more readily available at your new location. P.S. Option money received isn't taxable until the option expires or is exercised.
DEAR BOB: You recently said today's real estate market offers bargains. Properties still look overpriced to me. How can I find these bargain properties you mention? Greta M., McLean.
DEAR GRETA: Starting making purchase offers. Although there haven't been big widespread price reductions due to the mortage money shortage, sellers are often willing to bargain on terms.
By putting terms in your offer which you want, such as accumulating interest on the purchase money mortgage the seller takes back for you, you're given the seller his price but you get terrific terms. If you have lots of cash for the down payment, of course, you can often get a big price reduction. Until you make a written purchase offer, you'll never buy a bargin property. The more offers you make, the better your chances of buying a bargain.
DEAR BOB: Is it true that I can trade the equity in my land as down payment on an apartment house without paying tax on my profit of over $35,000? Danial M., Reston.
DEAR DANIEL: Yes. It's called a taxdeferred exchange, as authorized by Internal Revenue Code section 1031. This is a great way to keep Uncle Sam's tax-grabbing hands out of your pocket. Any property held for investment or for use in a trade or business can qualify. In other words, your personal residence can't qualify for such a trade.
Your trade will be tax-deferred if you trade up to a more expensive property without receiving any taxable "unlike property", called "boot" (such as cash or net mortgage releif). This is called a "like kind" exchange. Your tax advisor or real estate attorney can explain further.
DEAR BOB: Please tell me which Sun Belt states do not require real estates exams to get a real estate sales license. I would like to retire there and sell real estate on a parttime basis. Evan M., Silver Spring.
DEAR EVAN: All states require examinations to get a real estate sales license. For detailed license requirements, write to the real estate commissioner at the state capital of the state which interests you.
DEAR BOB: When I retire in two years, I would like to move to Florida and buy a condominium. Since I will be living off Social Security, a pension, and stock dividends, will this preclude me from getting a mortgage then? Stella McG., Bethesda.
DEAR STELLA: No. Mortgage lenders approve mortgages on the basis of (1) ability to make the monthly payments and (2) value of the secured property. The fact you are retired is irrevelent. Your age is also irrelevant. Many retired people in their 70s and 80s get 30-year mortgages even though it is highly unlikely they will live to pay off the loans.
DEAR BOB: I am "over 55" ad used that $100,000 tax break when I sold my house last November. But I save the $43,000 remainder of my entitlement if I should decide to buy another house and eventually resell it at a profit? Victor M., Reston.
DEAR VICTOR: No. Any unused portion of your $100,000 "over 55 rule" home sale tax break is wasted. This tax rule can be used only once. Your tax advisor has more information.
DEAR BOB: When we can afford to buy a home, how big a deposit does the law require us to make with our purchase offer? Also, what is the minimum cash down payment required? Vance S., Silver Spring.
DEAR VANCE: There is no minimum earnest money deposit required by law. The purpose of such a deposit is to show the buyer's good faith. The larger the deposit, the greater the probability the buyer will complete the purchase as agreed.
Large earnest money deposits, by the way, often influence sellers to accept purchase offers substantially below the asking price.
While there is no minimum required cash down payment on a home purchase, most mortgage lenders require at least 10 percent but, in today's market, 20 to 30 percent is common. But if you aren't going to get a new mortgage (smart buyers avoid doing so by taking over exising financing on a house), your down payment can be whatever the seller is willing to accept. For information on buying with little or no down payment, read Robert Allen's excellent new book "Nothing Down," just published by Simon and Schuster.