DEAR BOB: When my husband and I got married four years ago we bought a one-bedroom condominium. We like it very much but are thinking of selling it and buying a house since we are expecting our first baby in August. My father says we shouldn't buy now because mortgage interest rates are so high. But I dread living in a small one-bedroom condo for very long after the baby arrives. Do you think now is a good time to buy? What about selling? -- Joan C., Alexandria
DEAR JOAN: We're in a "buyer's market" today, due to high mortgage interest rates. That means more homes are for sale than there are potential buyers.
The result is that buyers have a wide choice of homes and competition from other buyers isn't too keen. The smart buyers bypass getting new high cost mortgages. They use seller finance terms at reasonable interest rates.
The simplest is to make a modest down payment, take over the existing first mortgage, and give the seller a second mortgage for the balance. If the old first mortgage has a legally enforceable due-on-sale clause, many buyers use land contracts (called contracts for deed in some states) or long term lease-options to retain the old low interest rate.
Most home sellers now realize that cash sales are few and far between. To get a home sold today usually requires the seller to help finance the sale. This means it's a great time to buy a home without paying high interest rates.
But it's not a good time to sell a home for cash. Perhaps you can structure your condo sale so you can use the buyer's cash down payment to buy your house. If you take back a second mortgage for your condo buyer, the payments on it can be used to make the payments on the house you'll be buying. Work with a good realty agent to sell your condo as well as to find and finance the house you need to buy.
DEAR BOB: In February, 1980 we sold some land and made almost $90,000 profit. We are carrying a 10-year mortgage for the buyer. By mistake, we received 33 percent of the sales price instead of the 30 percent allowed for an installment sale. The result was that we had to pay all our profit tax in 1980. Then I read about the 1980 Installment Sales Law in your article. You say it abolished the 30 percent maximum limit. By any chance is that law retroactive? -- Lora D., Takoma Park.
DEAR LORA: Yes. The 1980 Installment Sales Revision Act was signed by President Carter on Oct. 19, 1980. For most taxpayers that means it is retroactive to deferred payment sales closed after Jan. 1, 1980.
The happy result is that you can amend your 1980 federal income tax returns, pay tax only on the sale profit received in 1980 and receive a refund of the excess tax you paid. Use IRS Form 1040x to claim a quick refund. Ask your tax advisor to assist you.
Further information on installment sales is in my new report "How the New Installment Sales Law Can Increase Your Realty Profits." To obtain a copy send a 42 check payable to "Newspaperbooks" for Report 80109 to The Washington Post, P.O. Box 259, Norwood, N.J. 07648.
DEAR BOB: What can we do to get our home sold? It has been listed for sale over four months with an excellent broker. Almost every weekend she advertises it and holds an open house. She's even offered other agents 60 percent of the sales commission. We are at our wits end since we're making mortgage payments on two houses and it's costing us dearly. Any ideas? -- Evelyn A., Silver Spring.
DEAR EVELYN: Here's a checklist to make your home stand out from the crowd of other home listings for sale.
(1) Is my home in top physical condition with no need for painting, cleaning or repairs? (2) Is my home's asking price not over 5 percent above its true market value? (3) Is my realty agent fully cooperating with other local agents through the multiple listing service? (4) Am I offering attractive seller financing terms so my home is affordable by most potential buyers? (5) Is my agent aggressively marketing my home through newspaper advertising (where most home buyers shop)?
If you honestly answered "yes" to all these questions, your home is a "red-ribbon deal" which should sell. But if you answered "no" to any of these questions, then make appropriate changes.
Lack of seller financing is the cause of most homes not selling. Just last week, for example, I saw a newspaper want ad for a $225,000 house which said "With $117,000 cash down payment seller will carry two-year first mortgage." That's not my idea of attractive financing and apparently buyers agree since the house has been for sale many months.
Be sure your realty agent understands creative finance ideas. Ask her how she arranged financing on her last few sales. If they didn't involve innovative finance, maybe your agent isn't as sharp as you think.