Question: I was wondering about a paper we signed when purchasing a new home. It basically said that there were not to be any lawsuits or lawyers involved if there were problems during or after the building process. Are we allowed to seek legal advice? They originally told us the closing date would be in February and now March, but we think that it might finally be in mid-April.

Answer: What the language may say is that you will first (and perhaps only) engage in mediation or arbitration rather than file a lawsuit in the event of a dispute with the builder. And surely to know the meaning of the language you would want an attorney to take a look.

As to the delay with closing, it is a common practice for builders to have a clause which allows them to suspend settlement because of such factors as bad weather or the unavailability of materials and labor. Such a clause can be reasonable -- but it may also be abused. For details, speak with your attorney.

Question: I'm fairly sure you don't get questions like mine often. How can I see the inside of old houses before they are condemned or torn down? I live in a fast-growing area and this whole place is having other things built on every scrap of land. Even though I don't think there is much I can do about these things, I would like to see these houses before they go.

Answer: You can ask the current owners of each property for permission to visit and make photographs. Offer to donate the photos to the local historical society and to provide a copy for the owners. The owners might like to see their properties included in such collections.

Question: We signed a contract to sell our home contingent on the buyer getting a loan approved and closing by a given date. The buyer did not get the loan and the deal was off.

We started showing the house again but have now found out that the buyers got financing through a different bank and they can close by original deadline. Are we still obligated to close or can we change the contract to better represent our position?

Answer: Whoa. Go back to the part about the "deal was off." Did the buyers agree the transaction was finished? Did they get their deposit back? Or did they simply find a financial bump in the road?

Their offer was fair and acceptable -- otherwise you would not have had a contract. The offer from the buyers may be the best you'll ever get. Instead of seeking advantage from their difficulty, congratulate them for trying to meet the terms of the agreement and enjoy your check at closing.

Question: My mother died and now my stepfather has possession of everything, because on the deed there is a right of survivorship. But before my mother passed they both signed a notarized will stating how the land would be divided up and since she has passed he has went back on his word. What ground do we have to get what was stated in the will?

Answer: The signed document you have may or may not have value, depending on the rules in your state.

It may, for example, be that your mother has willed the property to you -- and also provided a life estate for her husband so that he will not be homeless upon her passing. Also, the will you saw may not be the last one she made. Speak with a local attorney for details.

Question: We are currently renting a single-family home. Recently, we smelled gas coming from the valve that shuts off the fireplace. When the gas company representative came out, he said the pipes are old, and the valve needs to be capped off under the house. A plumber was sent by the management company, and claims to have done such, but after three days, we still smell gas.

If the gas company determines there is a gas leak, the plumber will have to shut off our gas. What are our rights as renters if they have to redo the entire gas line under the house -- we won't have heat, warm water or be able to cook until they finish. What is the management company obligated to provide for us, while the house is "uninhabitable?"

Answer: Natural gas is invisible and has no smell. In the right concentrations it can be explosive and lethal. What you are smelling is an "odorant" which is added to natural gas specifically to warn people of its presence. Take this warning seriously.

The central issue here is your health and safety. Get the gas company or a licensed plumber out to the property immediately to determine if there is a leak. If yes, they will shut off the gas.

The matter of compensation is of minor importance when compared with the possible health and safety issues which may immediate require attention. Take care of the big issues first, and then work out a reasonable accommodation with the owners. For details, consult with a legal clinic or local community group.

Question: We have a condo unit that we rent. The condo association now wants to bar all rentals. Can they do that?

Answer: Changing the rules of the game after the first play is not a good idea. Will your unit be "grand-fathered in? What about renting your unit for a short period? What about hardships? What about the rights of investor-owners?

Before anyone does anything, ask whether appropriate condo by-laws and other documents need to be amended -- and whether a super-majority is required. The likelihood is that an instant ban on rentals will go no further once legal advice is sought.

Question: I was told by a real estate agent I know that it's a normal practice to make an offer 20 percent lower than the asking price. Is this true?

Answer: Do you live in a depressed area? If so, it may be that bids well below the asking price would be welcome. However, in many communities prices have been rising steadily for the past few years and a low-ball offer would only draw laughs.

Try this: If you have an interest in real estate speak with several local buyer brokers and get their opinion on the market.

Question: We are thinking about selling our house. This is the second home we have purchased. I have heard that you can only deduct the interest on your first two home purchases. Is this true or can you deduct the interest on your third, and fourth home purchases? Or is there a limit to how many times you can buy and sell a house before you cannot deduct the mortgage interest?

Answer: The rules basically work like this: You may deduct the interest on financing worth as much as $1 million on a first and second home, plus the interest on as much as $100,000 in home equity financing.

If you sell one home and acquire another, you simply have a new prime residence. If you sell the second prime residence and buy a third, you again have a new prime residence. Thus the number of homes you buy and sell is not an issue.

However, taxes being taxes, there are many related questions -- such as how long you must hold a home to get a capital gains write off, your marital status, whether money secured by a personal residence is actually business financing and thus subject to different rules, etc.

For details, speak with an enrolled agent, a CPA or a tax attorney.

Question: My broker and I plan to buy my brother's house and then turn around to sell right away. In the listing contract my brother agreed to let my broker list his house. If we cannot sell his house in 60 days, we will process the loan to buy his house and then re-sell it.

If we can sell this house in 60 days, do I just pay tax on the profit selling the house as regular income tax or that is capital gain?

The profit will be split 50/50 between myself and my broker after deducting all the escrow cost and my broker promised me he will split his profit with me (50/50) from listing after a deduction for his broker. My question is: Should we offer a fixed amount to his broker instead of percentage of whatever my friend broker's made.

Answer: As I understand your note, depending on various circumstances the agent is potentially representing you as a buyer, your brother as a seller and himself as a potential co-purchaser with you. There is an enormous potential for conflict here.

Ask yourself: If you buy the home and can quickly re-sell at a profit, then why wouldn't your brother simply sell the property to the final purchaser at the market price you hope to get? How does your brother benefit from your purchase of the property at a low price and then its re-sale at a higher price?

Is the salesperson allowed to split a commission with someone who is not licensed in your state? Will there be two commissions -- one on the sale from your brother and one on the sale you make? If your brother sells to you and you sell to someone else, will there be a requirement for two closings and two sets of transfer taxes?

Why is it necessary to sell in 60 days? Do most homes in the local market sell in 60 days? Do you intend to occupy the property -- if not, have you told the lender that you need investor financing?

If the broker has a potential buyer, then the buyer can simply purchase from your brother and the broker can act as a buyer representative while your brother has his own broker or attorney.

What you propose seems both complex and costly. Please speak with a tax professional and a local real estate attorney before going further. Local brokers can arrange for the sale of the property to a final buyer.

If the idea is to sell the property and for your brother to provide you with a gift, that's fine. But there would be more to give with fewer taxes and fees.

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Published: January 27, 2006

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