DEAR BOB: My parents are avid readers of your articles and have become quite the experts on reverse mortgages for senior citizens. But they live in a small town that has one bank, owned and run by an “old geezer” who has been there for 100 years. At least he seems that old. I know he charges high interest rates but he is so charming that most of the “locals” don’t bother to go to the nearest city about 50 miles away to compare loan terms. Where is the best place for my parents to get a reverse mortgage? Are reverse mortgages available at small-town banks? –Marsha W.
DEAR MARSHA: Yes, reverse mortgages are available everywhere, even in small towns. However, there are minimum property standards.
Purchase Bob Bruss reports online.
Perhaps you remember the angry West Virginia homeowner whose reverse-mortgage application was rejected because her only drinking water source is a cistern (for some reason she didn’t want to drill a well). Frankly, I don’t blame the reverse-mortgage lender for rejecting that loan.
Your parents will discover most banks do not originate reverse mortgages for senior citizens. But a major exception is Wells Fargo Bank.
The easiest place to find reputable reverse-mortgage lenders for your parents in their area is at www.reversemortgage.org. They should consider the FHA (HECM), Fannie Mae and Financial Freedom Plan reverse mortgages.
More details are in my special report, “The Whole Truth About Reverse Mortgages for Senior Citizen Homeowners,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant delivery at www.BobBruss.com.
NOTHING ILLEGAL OR UNETHICAL ABOUT CHARGING LOW RENT
DEAR BOB: I recently remarried. My new wife and I each own our own homes. We are going to move into her home when I retire next summer. My adult son recently moved back in with us and is now re-enrolled in a local college. Rather than sell my home, I am considering renting it to my son. Knowing his financial limitations, I would be willing to rent to him at a bargain low rent. But my wife thinks that is somehow unethical or illegal. I don’t see it that way. However, I’ve never been a landlord. Is there anything wrong with renting my house to my son at a low rent? –John C.
DEAR JOHN: No. You can charge your son any rent you wish. There is nothing unethical or illegal about charging him a low rent or even no rent.
However, after you and your wife move out, you might suggest he rent out one or two of the bedrooms to his college pals to increase his income. Many parents do that to teach their college kids the responsibilities of being a landlord.
Also, then you could charge him a higher rent if he has sufficient rental income — just a suggestion.
You must report rent received on Schedule E of your income tax returns. This is also where you deduct applicable expenses such as mortgage interest, property taxes, insurance and repairs.
But the IRS does not allow you to deduct additional expenses exceeding the rent, thus creating a tax loss, if you charge a below-market rent to a relative. That means you probably won’t be able to claim a depreciation deduction. For exact details, please consult your tax adviser.
GET YOUR TENANTS OUT BEFORE SELLING RENTAL HOUSE
DEAR BOB: Please give us guidelines to inform our rental-house tenants we plan to sell their rental house. We are prepared to offer them an incentive to stay in the house until it is sold, such as a rent-back after the house is sold. What do you suggest? –Kathleen and Chuck N.
DEAR KATHLEEN AND CHUCK: Most experienced real estate agents will tell you it is much more difficult to sell a house with tenants than to sell a vacant house.
If you offer the tenants a rent-back after the sale closes, you further hurt your chances of selling because most buyers want to move in immediately and they don’t want to deal with tenants.
Presuming your tenants have a month-to-month rental agreement, I suggest you give your tenants a 60-day notice to move. After they are out, then you can paint and clean the house to get it into first-class condition to sell.
The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Must Ask to Avoid Overpaying in a Buyer’s Market,” 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 delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).