Question: There's a piece of property I want to purchase. The last known owner passed away. The taxes on the land have not been paid since the owner passed away. I have been unable to locate her will or estate papers to validate any heirs, the land was actually willed to the last owner from an uncle. The tax assessor's office has advised that I can pay the taxes and receive a "conditional deed" and after seven years could get full deed to the property. Is there any other way around this as I would not want to invest the money to have someone come up and claim, although I really don't think that will happen, or what are the repercussions to putting a home on the land now?

Answer: Imagine if a long-lost niece shows up in six years. What happens to any improvements placed on the property? Do you get your property tax payments back?

Essentially, this property can be yours in seven years -- but there's a chance that ownership could fall through. The assessor has explained how you can get a conditional deed in the interim -- in other words, something other than good, marketable and insurable title. If you want the property, don't build on it for seven years until you have full ownership and don't pay the taxes unless you know what will happen to your payments if a relative is found. A local real estate attorney can provide more information.

Question: I recently purchased my first house. It was a very inexpensive home in an up and coming area. My plan is to keep the house for a short period of time then sell and "buy-up" so to speak.

How do you show a lender that the house can be self sufficient with a renter if you're still living there, etc? Also, if you can show a future dated lease that does cover the entire cost of sustaining the property, will the lender for the second home still consider it a full obligation?

Answer: The first house need not be self-sufficient. If rented, the property will generate a certain income. A lender will typically count three-quarters of that income when qualifying you for a loan. Why three-quarters? Because the lender wants to have a provision for vacancies and repairs.

The lender will then take the income from the property as well as your income from wages and other sources to determine what you can afford and not afford. You want to speak with as many lenders as possible regarding financing options. A signed lease is necessary or if a letter from a local real estate broker could be used to establish a fair-market rental rate.

If you're getting a stated-income loan, ask your lender if 75 percent of your projected rental income can be included as "income" in your loan application. Ask by e-mail -- so that you have a response in writing.

Question: My wife and I purchased a home five years ago. The broker who sold us the house said that it had a "shared driveway." About two years ago our neighbors put up a fence that runs down the center of the driveway blocking our access to our carport. We did not have the land surveyed when we bought because we did not know any better. The houses have been here for over 30 years and so have the driveway and our carport. Is there any kind of "right of way" rule where we could have the fence removed without it costing us a fortune in attorney fees?

Answer: Why have you waited two years? Given that the homes and driveway have been in place for 30 years, you both likely have an "easement by prescription" giving each property equal access to the driveway.

Stop saving money on legal fees and get this resolved. If not resolved, the value of your home will be substantially reduced.

Question: For various reasons, we listed our home with a broker last week and now we have cold feet and decided we're not ready to move. We have a three-month written contract. Can we cancel our listing? What will owe our broker? I can not find a cancellation clause in our contract. I hate to tell him.

Answer: There is a cancellation clause -- the agreement will end in three months. It can end earlier if both seller and broker agree.

Why not speak with the broker, now, before his costs for advertising and marketing increase? The betting here is that he will graciously terminate the listing because part of the way brokers obtain business is by having good relations with the local community. It would surely help if you offered to pay for his hard costs -- advertising and such -- to date.

Question: Two years ago we signed a land contract agreement with the owner of our house. My credit was not sufficient to get traditional financing at the time.

Several things happened unexpectedly since then. First, I had a major medical setback, lost almost my entire hearing and my job. I just received my VA pension and I'm looking good now for SSI. I placed $10,000 down on this house. If we cannot get traditional financing, can we opt out of this contract and find another home? The owner said we could continue the land contract for another year but we are not sure we want to now. Will we lose the $10,000 as well?

Answer: Your health and job problems are not within the responsibility of the property owner. He has generously agreed to extend your option, a nice thing to do.

Was the $10,000 to create the land contract, or is it intended as a down-payment if you go through with a purchase? The reason why you put up the money will determine what, if anything, you get back.

Speak with local lenders and community groups. As an individual with a disability, and as a veteran, you may qualify for low-cost financing that will allow you to buy the property. Also, call the VA -- they will do everything possible to assist a disabled vet.

A huge problem with land contracts is that there is no standardized form. To find out what your agreement really says, have it reviewed by an attorney or legal clinic. In this case, the owner seems to be exceptionally helpful as evidenced by the lease extension.

If your market has changed, if sales have slowed, you may have more choices than in the past. Still, you don't want to lose $10,000.

Question: My mother retired, sold her home, rented under a one-year lease and then the landlord sold the home. The new landlord said he would give her 60 days to move out, and would help her move.

What are my mother's rights with regard to the severed contract, the deposit, and if 60 days is not enough time to find a home she is happy with? Should she even pay rent to the new owner?

Answer: When a leased property is sold the new owner must honor the existing lease. In effect, the property must be sold "subject to" the lease. The new owner cannot require your mother to leave, change the rent, or do anything else until the current lease expires. The tenant must continue to pay rent in full and on time for the use of the property.

Question: We are buying a property with a small home on it, knocking it down and building our own home. We owe $130,000 on our existing home valued at $500,000 and have stocks and savings worth $470,000. This new home will cost approximately $900,000. What are our best options. Do we stay in our existing home until the new one is built? Do we sell our home ASAP and rent? Do we try to buy home outright or as close to it as we can, leaving us with no savings and starting from scratch? We earn about $150,000 a year.

Answer: Let's say that house number #1 sells for $500,000 and that after all costs you pocket $350,000. You then buy home #2 and pay $900,000. Subtract $350,000 from $900,000 and you will have a $550,000 mortgage. At 7 percent interest your monthly payments for principal and interest will be $3,659.16. With a gross monthly income of $12,500 you may not qualify for a fixed-rate conventional loan once taxes and insurance are thrown in.

However, because you would have a lot of equity in the new house (39 percent) and significant assets, I have little doubt you can finance the purchase under various loan programs.

The real question is this: What if house #1 does not sell quickly, sells at a big discount or never sells? Then the economics of what you propose could become a burden.

What you propose is both possible and a stretch. Before going further, you need to speak with local brokers to determine the salability of the first house. If it's not readily salable at $500,000 you may want to re-think your plans.

Question: My boyfriend and I are thinking of purchasing either a condo or a townhouse for around $450,000 in. We both will be first time homeowners. We have average credit scores (690 to 720) and have saved about 5 percent down payment plus closing costs in cash ($35,000). We both would only consider taking a 30-year fixed-rate loan. If we take the plunge and purchase a condo/townhouse, the monthly payment will pretty much equal to 40 to 50 percent of our total monthly incomes, which will make the money situation pretty tight for the both us.

With the direction of our local real estate market is going right now, should we wait until we save up at least 20 percent of the down payment to purchase for condo/townhouse? It will take us another year and half or more to do so. Or should we just bite the bullet and buy a place right now.

Answer: None of the above.

If local prices are softening, then you may have 20 percent down quicker than you think. However, a down payment is not the core issue.

You are considering the purchase of a huge invest, one that will absorb much of your income. If you feel the market is declining, why rush to purchase if asset values are falling? Why not keep saving and buy when prices are better or inventory is larger and you have more choices?

Moreover, as long as you and your co-buyer are not actually married you need formal, written documents to govern any joint ownership as well as wills and living wills. Such paperwork may sound dull and boring, but couples do break-up, accidents happen and it's relatively cheap to get such paperwork up-front -- and often very costly to resolve problems without it.

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Published: September 1, 2006

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