Question: My daughter is trying to buy a house and the mortgage broker she is dealing with told her the closing cost would be between $4,000 to $5,000 on a $113,500 house with a $10,000 down payment. This seems a little bit on the high side. Is this a normal charge or is she being ripped off?
Answer: The closing costs paid by your daughter reflect the requirements of the sale contract, transfer costs and loan expenses. Whether these amounts are reasonable or not depends on how the agreement was negotiated, transfer costs for the local jurisdiction and loan expenses. For instance, is your daughter paying additional points up front to get a lower interest rate? At the very least, why doesn't your daughter speak with other lenders to see what alternative financial options are available.
Question: I bought a one-bedroom condo in September 2003 and sold in August 2005. The reason I sold before two years were up was due to a pending marriage August (28th). A one bedroom condo was not big enough for two adults and pets (that were pre-existing). Am I able to claim unforeseen circumstances?
Answer: The idea of making marriage a specific safe harbor that would entitle someone to at least some capital gains relief if they sold a prime residence in less than two years was considered -- and rejected. As the IRS explains:
"Marriage and adoption are voluntary events that typically lack the degree of unforeseeability common in the other unforeseen circumstances safe harbors, and bankruptcy of the taxpayer's employer unaccompanied by a change in employment status of the taxpayer does not impact the taxpayer's current ability to pay housing costs. However, these events may still qualify for the reduced maximum exclusion under the facts and circumstances test if, as a result of such an event, the taxpayer's primary reason for the sale or exchange is a change in place of employment, health, or unforeseen circumstances."
For details, speak with a tax professional.
Question: I'm interested in investing in real estate, but the only way I can do it right now is to locate properties that an individual or company would be interested in purchasing. How can I find these people or companies?
Answer: In essence, you seek to help others buy, sell and manage real estate in exchange for a fee or other consideration. This is an activity for which you need a real estate license, so the first thing to do is to take the course to get a real estate sales license. Once you have a license and work under the authority of a broker you will be in a position to meet potential investors -- and to collect a fee for your work.
Question: If I sell my mobile home for $38,000 do I have to pay taxes on the sale?
Answer: If the mobile home is used as real estate then the sale would be treated as a property transaction. If the mobile home is used as personal property, then different rules would apply. To pay taxes in either case you would need to show a profit. For details, see IRS Publication 523 , Selling Your Home and speak with a tax professional.
Question: We purchased a home owned by the sister of our broker. The sister is also in the real estate business. The homeowner represented herself, our broker represented us and we used a home inspector recommended by our broker.
After living in the property less than a year we have found mold, asbestos and termites. What can we do?
Answer: This is one of those situations where brokers are best served by sending the buyer to an outside party, say a buyer broker or attorney, for independent advice. The advice may not be any better, but it would at least be perceived differently and could forestall potential discomfort, whether justified or not, against the broker.
Asbestos may well be in the home and it may not be a problem if left undisturbed or encapsulated. Mold is typically a by-product of dampness -- and a leak could have developed after the home was purchased. Termites can be readily removed from a property, but you also need to see if there is damage as well as an infestation. Termites, also, may not have been in place at the time of the inspection.
You want to have the property inspected by appropriate professionals. As to the broker, you did receive disclosures. If you have questions, you can contact the state real estate commission to see if all applicable standards were followed. They may elect to have an inspector review the transaction. A list of regulators by jurisdiction can be found at ARELLO.com .
Question: If a person owned a rental property for a long time and would be subject to a high capitol gains tax, would it be possible to borrow as much as possible from the equity in the property and then let the property foreclose. Knowing that credit would be ruined, would a person be responsible for capital gains? Get sued? Get liens on other properties? Be incarcerated? I'm curious about this scenario when I get frustrated by being a landlord.
Answer: In essence, the property would be refinanced to remove cash and then the lender purposely would not be paid. That would lead to foreclosure. In such circumstances, the lender would no doubt sue to recover every dime and it might pursue claims of mortgage fraud.
Rather than such a perilous and costly approach, why not just sell the property and pay the taxes?
Question: How long should I stay with my broker? I believe he's really trying. My house has been up for sale for five months and has not sold. I have had a minimal amount of people come through but no offer. My broker does open houses and I'm listed in the local multiple listing service. My asking price is comparable to other local houses. To help spur a sale, my broker has recommended that we offer a $1,000 extra payment to any broker who brings in a buyer.
My house has a beautiful appearance and is kept immaculately. Is there more he should be doing?
Answer: Let's say that your listing will soon terminate. If you were to consider another broker once the current listing ends, what would they do differently?
Do similar houses in your neighborhood sell? How long does it take to sell a like house? How are such properties different from your home? Are they marketed differently?
The bottom line is this: Despite good efforts by the broker, a well-kept and attractive property is not selling at the current price. Change the price or terms. Instead of a sales spiff to brokers, perhaps offer a "seller contribution" to help buyers at closing.
Question: We bought a condo. If we sell the property a month after we move in is there a penalty?
Answer: You are surely free to sell at any time -- that's not a problem. What may be a problem is the mortgage.
By any chance, are you an investor? Did you underwrite the purchase with residential instead of investor financing? Did you tell the lender that you intended to occupy the property as a residence within 30 days of closing?
If you have a plain, logical reason for quickly moving no one will care -- say a sudden job change to a distant community or an abrupt change in circumstances such as a job loss, medical emergency, divorce, etc.
If you are really an investor who bought with residential financing then you should sit down with an attorney before going further.
Question: Suppose broker "A" shows a listed property to a prospective client. Then, 30 to 60 days later, broker "B" is contacted by the prospective client, does an extensive search of the MLS and shows the prospective client several homes, including the listed property originally shown by broker "A."
Should broker "B" secure a contract acceptable to the seller on the listed property, is broker "A" or broker "B" entitled to the commission?
Answer: The train gets to Chicago at 8:11 PM -- central time.
Let's go back to that term prospective client. Did broker "A" have a buyer brokerage agreement with the buyer? If yes, did it include a "protection period" that would cover homes shown to the buyer but purchased after the buyer brokerage agreement ended? If so, how long was the protection period? Does it end automatically if the buyer entered into a buyer brokerage agreement with another broker?
Without an appropriate buyer brokerage agreement, broker "A" is likely out of luck if the relationship was dropped weeks or months ago. With a buyer brokerage agreement with broker "A," one would have to see what it actually says. If broker "B" has a buyer brokerage agreement, then presumably it will apply because broker "B" has done the job assigned.
Here's what should happen: Both brokers should sit down and review what relationship, if any, they have with the buyer. This should be set straight without getting the purchaser involved.
Question: I purchased a home a little over a year ago. I want to refinance and have two choices: The first is an ARM, no balloon, with a 5.75 percent start rate. The second is a home equity line of credit (HELOC) at 11 percent and rising. Which should I choose?
Answer: Neither. You are plainly concerned about rising rates and thus rising monthly payments. The ARM has a 5.75 percent "start" rate, but what happens after the initial rate ends? As to an 11 percent rate, that makes no sense at a time of low inflation.
At the very least look at fixed-rate loans.
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