Where to stash short-term cash?

Q: I have a question about a short-term investment. I'm saving for a down payment on a new house and my goal is to save $24,000 within the next two years. Where is the best place to keep that money? Traditional savings accounts are paying around 1 percent in interest. Because I am contributing twice monthly, it doesn't make sense to put in my account at the investment company. It'll cost me $300 in trading fees over two years.

So I'm kind of at a loss as to where to keep short-term cash. Do you have any ideas?

A: Unfortunately, there is no great place for short-term cash at the moment. If you shop around, you can find some Internet banks that are offering savings rates of 2 to 4 percent in money market accounts. To start your search for these, check out Bankrate.com. But be sure to read the fine print. Some of these Internet banks require minimums to get their advertised rates, and there may be other sticking points as well.

Some mutual fund companies have accounts that you can set up whereby you deposit funds into the account without paying brokerage fees or trading fees.

Q: My friend wants to leave his apartment to me in his will with the lowest tax liabilities possible if I decide to sell it. What is the best way to do it? My husband and I are not planning to live in it.

A: If you inherit the property, you'll probably be able to turn around and sell it immediately without paying any taxes. That's because you'll inherit this property at the then current market value on the day of your friend's death. If you turn around and sell it, you'll be selling it for what is considered the new cost basis for the property, and so you would not pay any federal income taxes on the sale.

If your friend's estate is larger than the current amount that he can pass down tax-free, the estate would pay any taxes owed, not you.

Q: I am a buyer and signed a purchase contract for a four-year-old house. The inspection was done and a structural issue (bowing crack in the plaster wall) was found in the basement.

The problem was further reviewed by my certified structural engineer and he also confirmed the same issue. It can be fixed/cured, but I do not want to buy this house due to this deficiency and want to terminate the contract.

The seller is not willing to terminate the contract, as he is willing to fix this issue and the house is still "habitable." He is going to get it reviewed by his structural engineer from his house warranty company.

My attorney thinks it will not be possible to get out of the contract if the seller is willing to fix the issue. According to the contract, I can terminate the contract only if seller does not fix any issues found in the inspection.

But I still want to terminate the contract. I am not comfortable with this issue, as this is not a small cosmetic problem but a structural issue. Can I still terminate the contract based on this structural issue/deficiency in the house? I have already given two deposits for a total of $26,000.

A: What does your contract say? Does it say you can cancel if the seller refuses to fix an issue and also get your money back? Or does it say that if the inspector finds something and the seller fixes it and you decide not to close on the purchase, you lose your earnest money?

It's all about how the contract is written. Since you have an attorney, you should sit down and discuss with him why he thinks you cannot cancel the deal and get your cash back if the seller refuses to fix a structural problem with the house.

You should also consider the seller disclosure laws in the state in which you are located. In some states, if you find a significant issue that was not disclosed in the seller disclosure report and the seller knew about the issue, you would have reason to terminate the contract and get your money back. Unfortunately, in other circumstances, if the seller disclosure laws don't give you the right to terminate the deal and the seller fixes the problem, you might have the obligation to buy the home.

One additional thought: If the seller fixes the problem, you might have the right to make sure that the problem is truly fixed and is fixed to the reasonable standards of the industry.

If the seller tries to make a low-cost repair to the home, you may have the right to say that the problem hasn't truly been fixed because the repair does not meet the customary repair standards for your type of issue.

You might want to investigate further to determine how the problem should be repaired and then see what solution the seller is offering.

If the seller offers to make the repairs in the same manner as you have found to be reasonable, your contract might require you to buy the home or lose your deposit.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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