Dear George: “My 76 year old mother recently received a $900,000 offer for her home. She has lived in it for 40 years. The buyer is the school across the street. The school plans a $50 million expansion that includes her lot plus 5 others. I assume she’s excluded from the $500,000 tax exemption since she is a widow. What can she do to protect her capital gains from extreme taxation? I am aware of the 1031 exchange option but I’m not really sure that is the way to go. I would appreciate any suggestions.” – Overwhelmed

Dear Overwhelmed: Consult an estate planning professional. Then consult a CPA or other state certified tax specialist. An attorney who specializes in estates or a tax attorney may be able to do both. The important thing is to develop a comprehensive plan that addresses all of your mother’s goals instead of a plan designed to address a single tax liability. You may also wish to review the following IRS publications: 523 Selling Your Home; 554 Older Americans’ Tax Guide; and, 950 Introduction To Estate and Gift Taxes. These can be accessed at http://www.irs.gov/forms_pubs/pubs.html.

Dear George: “My wife and I have a fundamental difference of opinion on what type of home to purchase for our first family home. We have 2 young children. She wants a Townhome in one of the newer, upscale developments in our suburban area. I want a single family home in an older, very well maintained middle class neighborhood in the same general area. The schools and proximity to services are very comparable. I want the yard space that comes with a single-family home. I also want the privacy that a single family offers. She wants the new, upscale experience that comes with the Townhome. I am aware that in a general sense, single-family homes tend to appreciate faster and drop in value slower in market fluctuations. I think the single family home is a better investment all around. What are your thoughts?” – Future Home Owner

Dear Future Home Owner: Over the long haul, residential real estate of all types and kinds has been a “good investment.” Buying a home is more than just making the best investment. It’s about seeking out the criteria upon which you and your wife can agree. It’s about valuing your differences of opinion. Most of all, it is about finding that one home (be it town home or detached) that creates a “this is it!” feeling in both of you.

Dear George: “My husband and I have recently contracted to buy our first home. However, the title search did not come back ‘free and clear.’ There is an outstanding second mortgage on the property. We have been told the mortgage has been paid but because of an attorney's mistake, the proper paperwork has not been filed. Our attorney advised us that we can still close with an affidavit from the attorney who made the mistake. The current owners are also being required to purchase a title insurance policy to cover that second mortgage. My husband and I don’t want to close. We believe that if the sellers are unable to provide us with a free and clear title then we do not want the property. Are we making the right decision? – Uncertain

Dear Uncertain: If your lender, the title company, and your own attorney are “OK” with closing the transaction, then why aren’t you?

Dear George: “I have a rental property that I wish to sell. I am considering a lease to own agreement. As a seller, what are some things to watch out for? Especially if there are problems when the buyer gets his loan. What if the property doesn't appraise out or doesn't pass inspection?” – Undecided

Dear Undecided: Your question is very similar to one I answered in this column last week. The problem areas you cite are the same ones you’d be confronting if you sold outright. What adds to the complexities, however, is that you will have a tenant occupying the premises until the sale option is exercised. I don’t like lease-option (aka, “lease-to-own”) agreements. There are too many variables, all of which should be addressed in the agreement. Last week’s advice still applies if you insist on pursuing this type of contract: Make sure that both you and the tenant/buyer are each represented by legal counsel.

Published: March 29, 2002

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George C. Stephens, CRB is the Broker of deRaat Stephens, Inc. dba ERA Stephens Properties and the Director of Compliance for eRealty, Inc. Stephens served as 1998 Chairman of the 13,000+ member Houston Association of REALTORS® and is the Vice Chairman of HAR’s wholly owned subsidiary, e-Har, Inc. He is the 2001 Secretary/Treasurer of the 50,000+ member Texas Association of REALTORS® and TAR’s 2002 Chairman-Elect. Stephens holds a Texas Real Estate Broker license as well as a Texas Mortgage Broker License.