DEAR BOB: Is selling a house or condo “as is” a good or bad idea? I’ve heard arguments both ways – Tony J.
DEAR TONY: Great question. An “as is” real estate sale means the seller (1) must disclose known defects, but (2) will not pay for any repairs.
Purchase Bob Bruss reports online.
However, if the residence suffers damage after the buyer’s purchase offer is accepted by the seller in writing, the seller is still responsible for making repairs to restore the property to its “as is” condition as of the date of the sales contract.
But there is a more important consideration with “as is” home sales. When a prospective buyer, or his/her buyer’s agent, sees an “as is” listing, that raises a big red flag. “What’s wrong with this home?” is the obvious question.
There might be nothing wrong with a home listed for sale “as is.” Or it could be in very bad condition.
Every house and condo buyer should always include in his/her purchase offer a contingency clause for a professional home inspection report. This is especially important when the home is offered for sale “as is.”
INHERITED PROPERTY RECEIVES A NEW STEPPED-UP BASIS
DEAR BOB: My mom has a living trust that leaves her house to my brother and me. It is worth about $500,000. She and my late father paid around $67,000 for it many years ago. Will we owe capital gains tax on that huge profit? – Aaron H.
DEAR AARON: No. When a property owner dies, the inherited property receives a new stepped-up basis for the heirs.
Your new stepped-up basis will be the home’s market value on the day your mom dies so you won’t owe any capital gains tax at the time of inheritance.
However, if your mom sells her house today, she might owe a capital gains tax. I say “might” because she received a new partial or full stepped-up basis to market value when she presumably inherited your late father’s share of the house.
Of course, if she sells now, the generous Internal Revenue Code 121 $250,000 principal residence sale tax exemption applies. That presumes she owned and occupied her home at least two of the prior five years. For full details, please consult your tax adviser.
WHAT IS A MORTGAGE JUNK FEE?
DEAR BOB: As I am in the process of buying my first home, I have been religiously reading all your articles to avoid making a costly mistake. But the mortgage maze has me very confused. My wife and I are working with a mortgage broker. She speaks Spanish so we feel very comfortable with her. But I think she might be swindling us as she translates the documents. Many times in recent weeks you have mentioned mortgage “junk” and “garbage” fees. We are being asked to pay charges for a loan fee, document preparation, underwriting, notarization, tax servicing, appraisal, credit report, wire transfer, loan review, underwriting, administration fee, and miscellaneous. Are these junk fees? – Carlos P.
DEAR CARLOS: Yes. Many of those charges are negotiable junk or garbage fees.
If the fee was not disclosed on your “good faith estimate,” which the mortgage lender was required to provide within three days after receiving your loan application, you should dispute it.
The mortgage loan fee, usually called “points,” is the lender’s fee for originating your mortgage. One to two percent of the amount borrowed is reasonable.
The definition of a junk or garbage fee is a charge that is not paid to a third party for a legitimate service. On your list, the appraisal fee, tax service fee (to be sure you pay your property tax on time), credit report, and notary fee (unless inflated) appear to be legitimate.
All the other fees appear to be junk or garbage fees, which go directly into your lender’s profit pocket. The lender’s loan fee should be sufficient to provide the lender’s profit. Question those junk fees, especially the administration and miscellaneous fees, which are 100 percent pure profit for your lender.
The new Robert Bruss special report, “Pros and Cons of Earning Big Profits from Foreclosures and Bargain Distress Properties,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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