Question: My wife is interested in becoming a real estate salesperson, and I would like her to take some self-defense classes. She doesn't think they are necessary. Can you provide me with any statistics on crime against brokers to help? Or point me to a good source.
Answer: There are more than 2 million people with real estate licenses and it follows that with such a large population there are instances of crime. Many brokerages have common-sense protocols regarding safety that can greatly protect salespeople against crime. As an example, when prospects know that scheduled phone call-ins from home showings are expected, you have a simple and easy crime deterrent.
Local police can provide advice regarding what's lawful in a local community in terms of protective devices. The local Realtor association can suggest safety strategies.
As to self-defense classes, one has to look at them with some balance. People who can plainly defend themselves are less likely to be attacked simply because other targets are easier. At the same time, retail outlets commonly tell employees not to fight back if a store is being robbed. Even if you have a black belt in a given fighting style, common sense is still required.
Question: Who pays closing costs? The buyer or seller?
Answer: Offer forms often have a standardized way to divide closing costs according to local custom. Common divisions are 50/50 between buyer and seller, or one side or the other may pay all costs if other factors in the offer are sufficiently attractive -- or if the marketplace greatly favors one side.
Question: I'm wondering what does "improvement value" mean in real estate? I looked up the taxes for my property and it shows an "improvement value" and the total assessed value. What is the difference?
Answer: Real estate is usually seen as having two components: There is the "land" on which a home sits and then there are "improvements" on the land -- items such as the house, garage, shed, pool, etc. Pulled together, the land and improvements equal the total value of the property.
Question: I just made an offer for my first home, a foreclosure that the bank owns. My first offer for $165,000 was rejected. The bank would not budge unless they got the asking price of $187,500. The house needs work and it's an "as is" house. I won't know exactly the work needed until I get it inspected.
I have the tools, the knowledge and the manpower to do all the work. So my dollar is worth more in my pocket than the bank's. My questions are: Do I put money down or do I use that money to fix the house? What type of loan would you recommend? Interest only? For how long?
Answer: The question of financing is far down the list of immediate issues. If you acquire the house and add in the value of your work or the work of contractors, what will be the sale or rental value of the property? Is the new value worthwhile given other investment opportunities?
Until you inspect the house you can't judge potential costs, so it's not possible to know if the bank's price is attractive or not.
As to what form of financing might be best, that will depend on such factors as your financial situation, potential rent or sale value, past experience as a developer, etc. If the pricing is right, you might want to look at FHA 203(k) acquisition and rehab financing.
Question: My parent-in-law bought a house, but instead of using her name, they let my wife be the "owner" (the reason being that they were not qualified for the loan). Now they want to sell their house with a profit. Will the IRS see that as another income for me and my wife?
Answer: Your parent-in-law has no house to sell. It's not his or her house. Your wife is the owner of record and she is the mortgage borrower.
Have you been deducting mortgage interest and property taxes? Have you been reporting the receipt of a fair market rental income? Have you been depreciating the property?
Before considering the tax implications of selling the property, you first need to consider how it has been treated -- or should be treated. For details see a tax attorney, CPA or enrolled agent.
Question: Is the two-out-of-five year rule valid today? That is, if a person has lived in a house for two out of the last five years before it is sold, the person can exclude up to $250,000 (single) or $500,000 (joint) of any profit made on the sale?
We're moving into a new house this summer, and are undecided on what to do with our current house. Do we sell it, or rent it? The answer may lie in whether we have to pay capital gains tax on the house or not.
Answer: Generally, if you have used a property as your prime residence for two of the past five years you are entitled to the capital gains exclusion -- $500,000 for married couples and $250,000 for singles.
As the IRS explains : "To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The ownership and use periods need not be concurrent.
The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use, but longer breaks, such as a one-year sabbatical, do not. The taxpayer also must not have excluded gain on another home sold during the two years before the current sale."
For details, speak with a tax professional such as a CPA, enrolled agent or tax attorney.
Question: How can a person best learn about investing in real estate? Where should a person start?
Answer: The best way to start, by far, is to take the basic course required to get a real estate license in your jurisdiction. When passed, this course will qualify you to take the test to get a real estate sales license. Equally important, it will introduce you to a host of ideas, standards and requirements whether or not you get a license. With this information you can then have a better idea of where to start.
Question: I plan to buy a condo. Do I need to hire a lawyer, or would the services of a title company be sufficient?
Answer: What you first need is a buyer broker to locate a property which best meets your needs. Because state rules and customs vary extensively, the broker can explain how attorneys, title companies and other options are used in the jurisdiction where you're purchasing.
Question: I have lease option on a property. Last March I received a loan that would satisfy the full payment of the asking price of $425,000 through refinancing. My lender took into consideration the monthly payment that I paid to the landlord on time every month.
When I went to the closing table the owner decided that he will not sign the closing documents because he had to wait three days for his money because of the three-day right of rescission. The title company that he used also informed him not to sign the documents because we cannot refinance a home that we did not own. If we refinance a lease-purchased home will the lender take into consideration the rent that we have paid?
Answer: The idea of the three-day rescission period is to protect the borrower when re-financing. Since you are the buyer, what is there to refinance? Is the idea for the seller to finance the property and then for you to instantly assume the loan? If yes, why would that appeal to a lender? Why not just get an acquisition mortgage for yourself?
Before going further, please contact a local real estate attorney to determine what the lease-option requires from the seller -- and from you.
Question: We've been living in an area which is considered very desirable because of the recognized school district, nice parks and proximity to a major airport.
We were planning to sell our home to move closer to my husband's job and my son's school. We tried to do this move two years ago, when our house was on the market about four months at a competitive price, but the offers we had were rather disappointing.
Since it's an 18-year-old house, people were expecting us to fix up every single detail or lower the price. If we lowered the price, however, we would have had to sell the property at the price we paid three years before even though we put it new wood floors, changed several windows, painted it, etc.
In the past two years we've been trying to fix up everything else we thought important, adding about $10,000 or more in upgrades. However, we talked to a broker recently, telling her about our plans to put the house on the market again, and the selling price she suggested this time was $5,000 less than two years ago.
Should we go ahead and sell the house at this new low price or should we try to keep on fixing things, and expect the market conditions to get better and sell it at a higher price in the future?
Answer: Your experience illustrates several important points.
First, real estate is a commodity. Prices do not always rise. While real estate values in most places and in most years have increased during the past decade, that is not the case everywhere.
Second, the definition of a "disappointing" offer is surely flexible -- today you might be elated to get an offer equal to the ones you rejected a few years ago. In real estate, as in baseball, you can't always get a home run. Sometimes you have to settle for less.
Third, it's impossible to know if market conditions will "get better." No one knows that the future will bring -- just think of all the bright Wall Street analysts who recommended Enron shares.
Fourth, it's possible to over-improve a home, to make it so much better than like homes that it's difficult to sell. Remember the old real estate rule: Buyers seek the least expensive home in the most expensive neighborhood they can afford.
Fifth, the fact that you've invested more in the property through improvements does not guarantee that the value will rise. You are a captive of local marketing conditions. If the market generally improves the value of your house will increase. If the market generally declines, it will be difficult to get a higher price. The tide that lifts all boats can also drag them down.
Before going further, why not speak with several local real estate brokers. Also, why not determine what you really want to do? Is it best to enjoy your home and stay where you are -- or is it better to take a loss now and move to a community that would offer more of the lifestyle benefits you seek? These are questions of both economics and personal preferences that only you can answer.
Have a real estate question? Send your inquiry to Ask Realty Times . Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here . For past columns, please press Ask Realty Times .
This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought. 
