DEAR BOB: Our 25-year-old daughter has just landed her first job in New York City. Her pay is dismal, but she has about $80,000 for a down payment on a condominium or cooperative apartment in Brooklyn. My husband and I want to help her out. But we don’t think co-signing a mortgage is a good idea. Can we be her mortgage company and loan her the mortgage money at market rate? I fear she won’t qualify for a loan as she earns only $32,000 annually. –Susan K.
DEAR SUSAN: Yes, you can become the world’s best mortgage lender, The Bank of Mom and Dad, to finance your daughter’s purchase of a condominium. But I strongly suggest she avoid buying a co-op because there are so many drawbacks, especially the required buyer approval by the co-op board of directors. That’s why co-ops usually sell for less than comparable condos.
Purchase Bob Bruss reports online.
Although your daughter’s interest payments to you will be tax-deductible interest for her, that interest will be ordinary taxable income for you. Be sure the mortgage is recorded against the condo title so she can deduct the mortgage interest. She and you will need a New York real estate attorney to be certain everything is properly handled.
DID DAUGHTER GET SWINDLED BY SISTER OUT OF INHERITANCE?
DEAR BOB: My mom has Alzheimer’s disease and I have her power of attorney. However, my older sister lived with mom her entire life and kept her at home until nursing-home care became necessary. Prior to the nursing home, my sister took mom to an attorney and had the deed to mom’s home put into the sister’s name. My mom called me crying to report my sister took the house. My mom’s will gives her a life estate in the house and upon her death the home is to be sold with the profits divided among the five siblings. Do I have legal means to ensure my mom’s will is done? –Linda L.
DEAR LINDA: A will has no effect until the testator dies. Until then, a will can be changed or the assets mentioned in the will can be sold or given away by the testator. As only a prospective heir, you have no legal rights until the terms of your mother’s will.
I suggest you and your siblings immediately contact an attorney who specializes in elder law. The situation you describe occurs far too frequently where a person exercises extreme influence over an elderly person.
ALTERNATIVE SUGGESTION TO PAYING 7 PERCENT SALES COMMISSION
DEAR BOB: I read several items in your recent articles about raising the sales commission to 7 percent to give the realty agents an extra incentive to sell a listed home in a slow buyer’s market. As an active real estate investor, I would argue a different approach. I listed my property for sale with a Realtor at a 5 percent sales commission. It didn’t sell. So I suggested increasing the commission to 6 percent. But I required the listing agent reduce his share to 2 percent with the buyer’s agent getting a whopping 4 percent. The property then sold very quickly. Bringing a buyer in this market deserves extra commission and a 2 percent commission to the listing agent is fair. –Mitch McC.
DEAR MITCH: Thank you for your alternative sales commission suggestion. My only comment is that in a buyer’s market, a 2 percent commission share to the listing agent doesn’t provide much incentive for that agent to aggressively market the property.
LATE DELIVERY OF NEW CONDO ISN’T A VALID REASON TO CANCEL
DEAR BOB: About six months ago we put a $30,000 deposit on a new luxury condominium under construction. We were promised a July move-in date. That was changed to August, then September and now October. The delays are causing us inconvenience and expense. Also, there was a promised high-end restaurant at the street level, which now turns out to be a hamburger chain. Is there any way to get our $30,000 back? The developer says “no.” –Jim K.
DEAR JIM: I suggest you consult a local real estate attorney to review the details of the purchase contract. Unless the developer promised in writing a specific completion date and a specific upscale restaurant, your chances of getting out of the purchase contract are slim to zero.
LACK OF DUE DILIGENCE IN LISTING IS HARD TO PROVE
DEAR BOB: I signed a listing contract with a real estate broker. It included a $3,000 repair credit for the investment property. The broker agreed to list the property on his Web site, in the MLS (multiple listing service), and other venues. He has failed to include a picture of the house, and neglected to include the $3,000 repair credit in the MLS or newspaper advertising. Can I sue for nonperformance damages as I’ve had to pay the mortgage payment twice, soon to be three times, since signing the listing? I’ve made several attempts via e-mail and through my property manager (who just happens to be an agent working for the broker who had the listing since late April 2007). Can I sue the broker? –Claude R.
DEAR CLAUDE: Pick up the telephone and insist on speaking with your listing agent. Failure to include a photo and mention the repair credit in the MLS listing is possible evidence of lack of due diligence, entitling you to cancel the listing.
However, you are unreasonable for expecting the broker to immediately get your house sold so you won’t have to make any more mortgage payments. Rather than talk about a lawsuit, your best alternative is to discuss with the listing broker how to get the house sold, even if it means transferring the listing to a more effective agent.
TITLE INSURANCE USUALLY NOT AVAILABLE FOR FORECLOSURES
DEAR BOB: What is your opinion on purchasing a foreclosure property at auction and receiving a quitclaim deed with a title insurance policy? –Brad R.
DEAR BRAD: If you plan to buy at the mortgage lender’s foreclosure auction, my experience has been title insurers won’t insure such deeds because they have no control to be certain the foreclosure auction was properly conducted.
However, if you are referring to buying at an auction held by the lender if there were no bidders at the mortgage foreclosure sale and the lender acquired title, that is called a REO or real estate owned sale.
In an REO situation, which really isn’t a foreclosure auction, some title insurers will insure the title obtained when buying REO property from a lender. Before bidding, be sure such title insurance is available. Otherwise, don’t bid.
PAYING DOWN MORTGAGE BALANCE IS NOT A TAX-DEFERRED EXCHANGE
DEAR BOB: I own two investment condominiums in different states. Can I sell one and use the proceeds to pay down my mortgage balance on the other one so I can qualify for an Internal Revenue Code 1031 tax-deferred exchange? –Bill S.
DEAR BILL: No. An Internal Revenue Code 1031 tax-deferred exchange requires the sale of one investment property and the acquisition of another qualifying investment property of equal or greater cost and equity.
Paying down the mortgage balance on a property you already own won’t qualify. For more details, please consult your tax adviser.
NO TITLE TRANSFER WHEN PROPERTY OWNER IS IN A COMA
DEAR BOB: My friend is in a coma. He is the only owner of a property. Can we transfer the title to his wife? –Raul G.
DEAR RAUL: Not unless your friend holds title to the property in his living trust or unless someone holds a power of attorney to represent him. However, my experience with a power of attorney where the grantor is unavailable has been title insurers will not insure such titles.
This situation shows why it is so important to hold real estate titles in a revocable living trust so the alternate or successor trustee can take over in a situation such as you describe. All that is usually required is a physician’s written statement saying the trustor is incapacitated.
The only other way I am aware of transferring title when the property owner is in a coma is to petition the local Probate Court to have a conservator or guardian appointed to make key decisions such as this. More living trust details are in my special report, “24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 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.
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