DEAR BOB: My wife and I separated in April 2003. She moved out and rented a house. We filed for divorce in May 2004. The divorce will be final in January 2005. We own a house together. It is my principal residence where I live with one of our children. The house has appreciated in market value at least $400,000 since we bought it together. The divorce agreement says when the house is sold, within the next five years, the net sales proceeds will be divided 50-50. How far ahead can we sell the house and still both be entitled to claim that $250,000 tax exemption? – Vic S.
DEAR VIC: There is no time limit for the Internal Revenue Code 121 principal residence sale tax exemption in a divorce situation. Many divorce agreements specify the family home shall be sold when the youngest child becomes 18 (or 21).
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As long as the “in spouse” living in the home (that’s you) qualifies for the IRC 121 exemption (principal residence ownership and occupancy for at least two of the five years before sale) up to $250,000, your “out spouse” ex-wife not living in the home also qualifies. For full details, please consult your tax adviser.
WHAT RECOURSE DOES DIVORCED SPOUSE HAVE WHEN EX-SPOUSE FAILS TO PAY THE MORTGAGE?
DEAR BOB: I have been divorced for three years. As part of the settlement, my ex-wife received the house and was to refinance it under her name alone. She never did this. The house and mortgage are still in both names. My ex-wife got into a dispute with the mortgage company. She hasn’t made a payment since last October. I just learned of this default about a month ago. Since I have my own obligations, including child support, I cannot afford to bring this mortgage current or pay the monthly payment. How can I get out of this mess? My credit rating is destroyed. If she doesn’t pay up, the house is scheduled for foreclosure sale. What can I do as the mortgage company won’t help me? – Calvin A.
DEAR CALVIN: Your divorce lawyer messed up. The agreement for your wife to refinance the mortgage in her name alone should have been implemented before the divorce was final.
Unfortunately, there is no easy solution if you can’t afford to save the house from foreclosure loss by paying the amount in default.
Your ex-wife has not only ruined your credit, because your name is still on the mortgage, but you are likely to lose your equity in the house. Perhaps your divorce lawyer can suggest a solution, but I don’t see any easy answer. Hopefully, readers will learn from your mistake.
WHAT CAN NEIGHBOR DO ABOUT OVERHANGING TREE?
DEAR BOB: On both sides of our backyard our neighbor’s trees overhang our property. Do we have any legal rights to trim these trees, which have become nuisances by dropping leaves and debris into our yard and pool? The neighbors refuse to take any action. When we phoned the city for help, we were told to “consult a local real estate lawyer.” What can we do? – Brady B.
DEAR BRADY: Gosh, we haven’t had a good tree question like yours for at least a month.
The general rule for trees growing on a neighbor’s property is an adjoining owner has the right to trim the tree back to the boundary line at the trimmer’s expense. This same general rule applies to roots.
However, a “rule of reasonableness” applies. That means you’re liable if you trim the overhanging branches or cut the roots so severely the tree dies.
That’s what happened in the famous California Court of Appeal case of Booska v. Patel (24 Cal.App.4th 1786). Patel cut the intruding roots of his neighbor’s tree so severely the tree died. The neighbor sued Patel for damages due to the dead tree.
The court ordered Patel to pay Booska damages for the lost value of the tree. In addition, the court’s opinion said Patel should have hired an expert, such as an arborist, before trimming branches or roots of the neighbor’s tree.
But there’s nothing you can do to force your neighbors to trim their trees or cut them down. For more details, please “consult a local real estate lawyer.”
DOES HOME BUYER HAVE RECOURSE FOR MISSING 186 SQUARE FEET?
DEAR BOB: We are buying a 36-year-old home. It is listed by the Realtor as having 2,600 square feet. He told us the asking price is based on the age of the home and its square footage. Our purchase offer was accepted by the seller. We are now two weeks from closing. But we discovered the actual square footage is only 2,414, according to city tax records. We did a quick exterior measure of the home confirming about 2,400 square feet. While 186 missing square feet might seem minor, we feel cheated. Do we have any recourse? – Jack K.
DEAR JACK: Listing information for homes usually contains a disclaimer such as “Information deemed reliable, but not guaranteed.” The city records might be wrong. Even experienced appraisers measuring the same house often come up with different square footage.
Unless you can prove you made your purchase offer based on the house’s square footage, such as $100 per square foot, you’re out of luck. If the square footage turned out to be 2,600 square feet, would you volunteer to pay the seller more money? I doubt it.
It’s not worth arguing about the missing 186 square feet unless you can prove a substantial intentional misrepresentation by the seller and/or Realtor. For more details, please consult a local real estate attorney.
WHEN A SPOUSE DIES, HOW WILL HOUSE BE DIVIDED?
DEAR BOB: Ours is a second marriage. My husband deeded his house to both of us as tenants in common. How will the house be divided with his son and my three children when one of us dies? – Geraldine H.
DEAR GERALDINE: Because title to the house is now held as tenants in common, the terms of your wills control who receives title to each half after a spouse dies.
If your husband dies first, his half of the house passes according to the terms of his will, presumably to his son. Will you enjoy owning half of the house while your late husband’s son owns the other half?
If you die first, your half of the house passes under the terms of your will, presumably to your three children. Will your widower husband enjoy owning his half of the house with them?
Worse, if either or both of you die without valid wills, the state law of intestate succession determines who owns the deceased spouse’s half of the house.
Your situation is a classic example why, especially in second marriages, holding title as tenants in common is usually not wise.
To illustrate, did you know that a tenant in common can file a partition lawsuit to force the sale of the house? Those nasty “kids” might, after one spouse dies, force a sale of the house.
You and your husband should consult a local estate-planning attorney immediately. The best solution to your situation might be a joint living trust where you can specify what happens to the house title after one spouse dies. A major living trust advantage is probate court proceedings are avoided and property partition rules don’t apply.
WAS IT DISCRIMINATON FOR HOME SELLER TO REJECT FULL PRICE PURCHASE OFFER?
DEAR BOB: Several months ago we submitted a full-price purchase offer for a home listed at $439,999. But we lost out as our realty agent said there was an offer higher than ours. The only contingency in our purchase offer was a professional inspection clause. However, recently the house sale closed to another buyer at the same price we offered. Since we now know the sales price, my buyer’s agent thinks we were discrimination victims and says we should sue the listing agent. He wants to take the issue to the local Realtors association. Is there anything we can do to help us get that house, which we liked very much? – Raj V.
DEAR RAJ: I notice by your name you appear to be from India. If you have any specific evidence of illegal racial or religious discrimination, you might have a cause of action against the seller and/or listing realty agent.
However, a home seller does not have any legal obligation to accept a purchase offer at the full asking price or even at the highest price offered.
Just like a newspaper advertisement, an asking price for a home is legally just an invitation for a buyer to purchase at the specified price. Of course, if merchants failed to sell at their advertised prices, they would quickly be out of business.
That’s why, for example, some home sellers list their homes for sale at abnormally low asking prices without any intent to accept a full-price offer. Their desire is to create a “buyer frenzy” to create bid competition among buyers to sell the home for far above the asking price.
I think this is unethical. But it is, unfortunately, perfectly legal.
The sellers of the home you wanted to buy might have had other reasons for selling to the buyer who purchased their home. To illustrate, maybe their offer had no contingencies or contained a closing date that met the seller’s schedule.
There’s no way a court would “undo” a completed home sale to the legitimate bona fide buyer. However, you might have a cause of action against the seller and/or listing agent if you can prove damages. For more details, please consult a local real estate attorney.
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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