DEAR BOB: Like many of your readers, we are frustrated home buyers. You keep saying "Buy that isn't easy. We've made purchase offers on seven different houses. None have worked out. The problem is the sellers want to "cash out" and we haven't enough income to get a new mortgage.
With the recent jump in home loan interest rates, I know we can't qualify now. We desperately want and need to buy a home -- we have outgrown our apartment. What should we do? DeWayne D., Annapolis.
DEAR DeWAYNE: Be persistent. Don't give up. Home-hunting can take many months to find the right house you can afford and can finance.
Work with an experienced real estate agent who understands "creative financing." That means "seller financing." You'll find a good agent by (1) going to weekend open houses advertised in the newspaper, (2) phoning agents advertising homes for sale in the newspaper want ads and (3) asking for agent recommendations from friends who recently bought houses.
To buy a home in today's market, you'll need to buy from a seller who will help finance your purchase. For example, your agent can probably find you a suitable home with an existing assumable mortgage. With your cash down payment of 10 or 15 percent of the purchase price, the seller may be willing to take back a second mortgage to fill the finance gap.
P.S. Homes that have been for sale two months or longer make especially good candidates for seller financing.
DEAR BOB: Recently, you said that a married couple gets only one $100,000 tax exemption on the profit when a home is sold. But you failed to warn that, regardless how title to the residence is held, each married person is considered to have utilized this tax break. In the event of later remarriage, after a death or divorce, this utilization carries over to the new marriage and the new spouse can't use the $100,000 tax exemption. This is often overlooked until too late. Pat W., Gaithersburg.
DEAR PAT: Thank you for your warning. People age 55 or older who are considering marriage should ask their future spouse, before they march down the aisle "By the way, honey, have you used up your $100,000 home sale tax exemption yet?"
If the answer is "yes," and the person asking the question wants to sell his or her current residence, it should be done before the marriage to claim the $100,000 tax exemption. Further details are available from your tax adviser.
DEAR BOB: We have just $6,000 toward a down payment to buy a small house. One real estate agent showed us a house we like very much. She said she can get us a mortgage for the rest of the purchase price. But we will have to sign a "phoney" purchase offer and loan application showing a higher purchase price than on our real offer which the seller will accept. Isn't this illegal? Agnos M., Washington.
DEAR AGNOS: Yes. It's called "kiting." That means inflating the purchase price above the real purchase price for the purpose of misleading the mortgage lender. Don't do it.
DEAR BOB: Two other women want to buy an office building with me. As we are all quite wealthy, limited liability is very important. We're buying for future value appreciation plus tax shelter. I prefer a corporation but the other two women want a limited partnership. Which is best? Maxie T., Chevy Chase.
DEAR MAXIE: Consult your attorney. There are major disadvantages of forming a corporation to own real estate!
They are (1) double taxation of profits (once to the corporation, again to the stockholders), (2) no pass-through of tax losses from the depreciation deductions and (3) no availability of Sub-chapter S election for small corporations if over 20 percent of the income is from rents, interest or dividends. A limited parnership is usually better because it gives limited liability and pass-through of tax losses to the partners without the corporate disadvantages.