DEAR BOB: My wife and I are in our late sixties. We have lived in our house for 33 years. But it still has a mortgage because we refinanced over the years to pay for remodeling and upgrades. We lost most of our IRAs to the falling stock market in 2000. Our biggest asset is our home equity. We are thinking of selling our house and buying in a senior mobile home community. We could buy a mobile home and still have enough money to meet our expenses. Is this a good thing to do? – Robert E.
DEAR ROBERT: If you have at least 60 percent equity in your house, you might consider obtaining a reverse mortgage to pay off your existing home loan in a lump sum so you can afford to stay in your current house. Then you would have no monthly payments.
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That would be much better than downsizing and giving up your home, which is an appreciating asset. Mobile homes usually depreciate in market value, just like your car, rather than appreciating in market value.
Before deciding to sell your house to buy a mobile home and make a major change in your lifestyle, I suggest renting for a few months in a mobile home park to see if that’s where you want to spend your future.
HOW TO TRANSFER REALTY TITLE INTO A LIVING TRUST
DEAR BOB: I am getting my paperwork together to do a living trust. How do I transfer my property title into my living trust? I presume it gets recorded with someone, maybe the registrar of deeds? – Nancy S.
DEAR NANCY: After your living trust is written the way you want, specifying who is to receive your assets after you die, and who you want to be your successor trustee, then you must “fund” your living trust by transferring your assets into it.
This is usually done by a quit claim deed. For example, you could transfer your real estate title from Nancy to Nancy as trustee of your living trust. An excellent book with sample living trust forms is “Make Your Own Living Trust, 7th Edition,” written by attorney Denis Clifford. It is available in stock or by special order at bookstores, libraries, and www.amazon.com.
FENCES AREN’T ALWAYS ON THE PROPERTY BOUNDARIES
DEAR BOB: We bought our home about six months ago. Before buying, we noticed the back yard had a chain link fence dividing our property from a street. We ordered a survey but it wasn’t ready on time so we closed our purchase without it. The survey arrived about a month later. It shows the backyard fence is outside our lot boundary, leaving our backyard much smaller. Also the property has several encroachments. We are very frustrated. What should we do? – Gabriela P.
DEAR GABRIELA: Fences are not always on lot boundaries. For example, about 10 years ago I wanted to construct a fence to keep the deer out of my garden. After consulting my neighbor, we agreed where we thought our boundary was located and that’s where the fence is now located. But without a survey, that fence might be in the wrong location.
If your predecessor owner used the area up to the chain link fence for many years, you might be entitled to a prescriptive easement to continue using that space. Please consult a local real estate attorney to review your situation to determine if you should take any legal action.
PARTITION LAWSUIT CAN FORCE PROPERTY SALE
DEAR BOB: My grandmother owns her home and three farms in joint tenancy with her twin sons. She and one son want to force the sale of the property because the other son doesn’t want to sell. He is estranged from the family. Can these two owners force the property sale, especially since grandmother really needs money such a sale will bring? – Brenda M.
DEAR BRENDA: In most states, one or more co-owners can bring a partition lawsuit to force the sale of a property. Your grandmother and “the good son” should consult a local real estate attorney about bringing a partition lawsuit to get a court order to sell the property. The sales proceeds will then be divided among the three co-owners.
SELLER FINANCING IS A GREAT WAY TO CREATE RETIREMENT INCOME
DEAR BOB: I inherited my mother’s small home, which I have been renting for many years to tenants. My current tenant wants to buy the house. Can I sell it to him in such a way that I will receive the mortgage payments? I am thinking of retiring and would like to have a guaranteed income and also be able to have the money go to my daughters after I am gone – Kathy B.
DEAR KATHY: An installment sale mortgage will be ideal for your situation. With a modest down payment from your buyer, you can carry the mortgage for your buyer.
Seller financing is a great way to obtain a quick easy sale for top dollar while also providing for your future retirement income.
Although highly unlikely, if your buyer defaults, then you can foreclose on the house and either be paid in full at the foreclosure sale or get the house back to sell for a second profit. Another advantage of seller financing is spreading out your capital gain tax over the life of the installment sale mortgage.
HOME SELLER NOT LIABLE FOR UNKNOWN DEFECTS
DEAR BOB: We sold our home in July. Now, just a few months later, we received a letter from an attorney representing the buyers. He says there were problems with the house, which we didn’t disclose involving the water and sewer pipes, as well as the roof. We were not aware of any such problems and we truthfully disclosed everything. The buyers had their own independent professional inspection. The house was built in the 1920s. What do you advise? – Elisabeth O.
DEAR ELISABETH: You honestly disclosed any defects of which you were aware and the buyers had their own professional inspection. You or your attorney should remind the attorney representing the buyers that you didn’t know of any undisclosed defects and the buyers even had their own professional inspection.
If the buyers decide to sue you, it’s then up to them to prove you knew of the alleged defects and failed to disclose them. This is usually a very difficult task for home buyers, unless the defects were obvious.
Just because the pipes and the roof are old, doesn’t mean they were defective. The buyers might just be trying to get some settlement money out of you to pay for renovating the house.
SORRY, NO I.R.S. TIME EXTENSION FOR TAX-DEFERRED EXCHANGE
DEAR BOB: We sold our rental house as an Internal Revenue Code 1031 tax-deferred exchange. As you know, we had 45 days to designate a qualifying replacement property so we could defer our capital gain tax. We designated three possible rental properties, but they all sold to other buyers for more money. Our 45 days are now gone. Is there any way we can get a time extension from the IRS? – Max and Alexandra M.
DEAR MAX AND ALEXANDRA: No. There is no provision in IRC 1031(a)(3) for any time extension of the 45 days allowed for designating your qualifying replacement property.
This problem could have been avoided if you had given the buyer of your rental property an option, or a lease with option to purchase, which could only be exercised after you found a suitable replacement investment property. It appears you will owe capital gain tax on your sale profit. For more details, please consult your tax adviser.
CAN HOME BE SOLD WITHOUT CO-OWNER’S SIGNATURE?
DEAR BOB: Two years ago, I paid the deposit on my sister and husband’s house. They put my name on the deed. Last July, the husband decided to sell the house. But my sister and her husband still have not repaid the down payment I paid for them. They will soon be retiring and leaving the country. A Realtor listed the home for sale without my signature. Can I complain about this Realtor and get her de-licensed? – Nathalie M.
DEAR NATHALIE: No. It is not illegal to list a property for sale without the signatures of all the co-owners. However, that Realtor might be wasting her time if you don’t agree to sell the home when a purchase offer is obtained.
When a purchase offer is obtained that is acceptable to your sister and her husband, if you don’t agree to sign the deed, they could bring a partition lawsuit to force the sale of the property. Since your name is on the property title, the house can’t be sold without your signature on the deed (unless the court orders a partition sale). For more details, please consult a local real estate attorney.
The new Robert Bruss special report, “24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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