DEAR BOB: I enjoy your creative ideas on financing home sales, but none of them seem to apply to our problem. Our home has been on the market more than four months. Agents keep bringing interested buyers, and four offers have materialized so far. However, all expect us to carry a big second mortgage. We can't do this because we need to buy another house in New Orleans where my husband's job was transferred. We've cut out listing price by $4,000, but still no cash offers. Any ideas? Mrs. David L., Rockville.
DEAR MRS. DAVID L.: There's a real estate maxim "If you can't finance it, you can't sell," which was never truer than today. Currently new home mortgages cost 14 percent to 16 percent. That's too expensive for most potential home buyers to qualify for a mortgage. The result is that homes aren't selling unless the seller will help finance the sale.
Have you found a home to buy in New Orleans yet? If not, when you do, structure your purchase offer for a minimal down payment with the seller helping to finance your purchase. The days of all-cash home sales are almost gone. Sellers are expected to help finance their buyer's purchase, just as you must to get your old home sold.
When you know how much down payment you require to buy your New Orleans home, you can structure your old home's sale to give you that cash. Then you can finance the balance of your buyer's purchase price on a second mortgage, with him taking over your old mortgage. The payments to you from your buyer's second mortgage can be used to make the payments on your New Orleans home.
DEAR BOB: We are considering buying a two-family duplex as an investment and for possible future occupancy. It is a 19-year-old building. The sellers says he is selling because he has run out of depreciation. Does this mean we shouldn't buy that duplex because we can't depreciate it? Dwayne W., Washington.
DEAR DWAYNE: No. The previous owner's depreciation deductions are irrelevant to the new owner's depreciation schedule. You get to start fresh.
Your first step is to allocate the purchase price among the non-depreciable land value, depreciable building value, and depreciable personal property value, if any.
The second step is to estimate remaining useful life for the building and any personal property. Your tax advisor can help you set up your depreciation schedule. Ask him about "first-year, 20 percent bonus depreciation" if your purchase price includes personal property such as furniture or appliances.
DEAR BOB: Several years ago I sold my house and took back a $30,000 second mortgage at 9 percent interest. It will be due in three more years. I would like to raise some cash, but the best I can get if I sell this mortgage is $16,000. Should I sell or can i get more someplace? Mrs. Larry C., Silver Spring.
DEAR MRS. LARRY C.: Don't sell. Hypothecate that mortgage. That means you pledge it as security for a loan. Not all lenders will hypothecate second mortgages. But many banks, mortgage brokers, and finance companies will. Shop around for the best terms.
You'll probably be able to borrow about 50 percent of the mortgage's balance. When its balloon payment is due in three years, you'll get the $30,000 less the amount needed to pay off your hypothecated loan secured by this mortgage.
DEAR BOB: I am considering buying a condominium. How can I be sure I'll be buying in a good complex? Evelyn S., Arlington.
DEAR EVELYN: Most condominium owners are happy with their purchases. But some have been very disappointed. So it pays to closely investigate before buying a condo.
As a former condominium dweller, let me make a few suggestions. Once you find a condo you would like to own, talk to the neighbors. Ask what they like most and least about the building. Find out if there are any significant defects with the building. Pay special attention to the soundproofing, which is the number-one complaint of condominium owners. My poorly soundproofed condo was underneath an owner with a loud TV set, so I had to listen to the programs he enjoyed.
If the condo passes these tests, ask for a copy of the owner's association by-laws and the CC&Rs (covenants, conditions and restrictions). Check these carefully to be sure there aren't limitations you don't like. Watch especially for pet restrictions, prohibition against occupancy by children and rules against renting your condo to tenants. Also consider the effect of any restrictions on resale value.
DEAR BOB: My husband and I own two small apartment houses. I just completed our income tax returns for these buildings and find the tax shelter isn't as much as I was expecting. Almost every weekend my husband works on the properties painting or fixing them up. Instead, he should be home with our family. There is plenty of cash flow from the buildings to hire someone to do this work. Do you think it pays to not hire the repair work? Belva G., Rockville.
DEAR BELVA: Some property investors have no choice but to do repair work themselves. I recall that when I first started out in real estate I painted all nine apartments in one building I owned. It was a great learning experience and excellent exercise, but I'll never do it again.
I received no income tax deductions for the value of my work. Taxwise and profitwise, I would have been better off hiring workers to get the job done quickly. However, if your husband enjoys the work it may be best to let him continue. It could be valuable relaxation for him.