DEAR BOB: We are two single women who have owned our home together and are thinking of selling. Each of us meet the two-out-of-last-five-years ownership and occupancy tests of Internal Revenue Code 121, which you often discuss. When we sell our home, can we each claim up to $250,000 tax-free profits (up to $500,000 total), or do we only get one $250,000 tax exemption? – Amy S.
DEAR AMY: Uncle Sam likes you so much he gives each qualified single co-owner up to $250,000 tax-free principal residence sale profits. In fact, if there were three or four co-owners who each met the ownership and occupancy tests, up to $1 million total principal residence sale profits could be tax-free.
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You each qualify because you are both on the title (unlike a married couple filing a joint tax return where only one spouse need hold title) and you each meet the two out of last five years ownership and occupancy tests. For more details, please consult your tax adviser.
CO-OWNER SPOUSE UNDER 62 DISQUALFIES REVERSE MORTGAGE
DEAR BOB: My wife and I especially enjoy your items about reverse mortgages for senior citizens. I am 68 (although I’m told I look much younger). But my young bride is just 59. I retired a few years ago, thinking we were well set for retirement. Then we both began incurring medical bills, mostly prescriptions not covered by insurance, which are substantial. You say “the older the better” for reverse mortgages. But we’re dipping into our principal about $475 per month and that can’t go on forever. However, it looks to me like we must wait three more years until my wife becomes 62 before we are eligible for a reverse mortgage on our free-and-clear home. Any other alternatives for us? – Ronald H.
DEAR RONALD: You are correct that both spouses must be at least 62 to qualify for a reverse mortgage. That is because reverse mortgage eligibility is based both on the residence’s market value and on the age of the youngest spouse.
If your young wife is willing to quit claim her interest in the residence to you, that could allow you to qualify for a reverse mortgage, which would pay you monthly income to help pay those heavy prescription costs.
To find local reverse mortgage representatives, please go to www.reversemortgage.org to compare the three major plans. More details are in my special report, “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 and instant Internet download at www.bobbruss.com.
ALWAYS GET A SURVEY WHEN BUYING RURAL ACREAGE
DEAR BOB: In 1990, my husband purchased five acres of unimproved land without the benefit of a survey. He had a well drilled shortly thereafter, based on the property boundary information supplied by the real estate agent. The well is almost 20 feet away from an existing fence. But when we recently went to sell this property, and the buyer requested a survey, we discovered our well is located 4 feet on the neighbor’s side of the boundary. The neighbor won’t agree to a variance. The well cost $7,000 in 1990 and we can’t afford to drill another one now. Any suggestions? – Marina Y.
DEAR MARINA: Your situation shows why it is so important to always obtain a survey when buying rural acreage. Although the neighbor is uncooperative, you might have obtained legal rights for you, and your buyer, to continue using that well drilled on the adjoining lot.
The situation you describe might qualify for a prescriptive easement, depending on the state where the acreage is located. The legal requirements for a prescriptive easement are open, notorious, continuous, and hostile use of a neighbor’s property without permission.
A court quiet title action will be required to perfect your prescriptive easement for the well, which is 4 feet on your neighbor’s land. For details, please consult a local real estate attorney.
WHAT RECOURSE IF LENDER DENIES HOME BUYER’S MORTGAGE?
DEAR BOB: Last July, I received an approval letter from a mortgage company. So I went out and found the house I wanted to buy. But when it came time to get my home loan, the mortgage company said sorry, you are not approved because of your credit. I paid $500 for a house inspection, plus I gave my 30-day notice at the apartment I was renting. Now I have to rent month-to-month at $50 extra per month. What legal rights do I have? – Tony G.
DEAR TONY: I wish you had included the name of that mortgage lender so I could provide the publicity it deserves.
But I suspect you didn’t really have a mortgage pre-approval letter or certificate. Before an actual mortgage lender (not a mortgage broker) issues a mortgage pre-approval letter or certificate, the borrower must fill out a loan application. Then the borrower’s credit report and FICO (Fair, Isaac and Co.) credit score are checked, as are the borrower’s employment and cash down payment.
Unless you did something to mess up your credit since July, I suspect you went to a mortgage broker who issued you a worthless pre-qualification letter. That means: “We think you can get a mortgage, based on the information you supplied, but we haven’t verified it.”
Mortgage brokers can obtain pre-approval letters or certificates from actual lenders. But no responsible lender would give you a pre-approval letter without checking your credit. If you have a mortgage approval letter from an actual lender who breached that contract, I suggest you take that lender to the local Small Claims Court for breach of contract damages.
SHOULD CONDO OWNERS BE ALLOWED TO ATTEND DIRECTOR’S MEETINGS?
DEAR BOB: I own a townhouse condo in a complex of 86 units. When I purchased about six years ago, the grounds were very well managed. Then a bunch of old rascals (average age “senile”) got elected as directors and officers. They fired the excellent professional management company and took over management themselves. Now the monthly director’s meetings are closed to attendance by the homeowners. We are only allowed to attend the annual meeting at which these “old geezers” nominate themselves for re-election. Their sole goal is to keep the monthly assessments low. The place is getting very run down. What can we do? – Ramon R.
DEAR RAMON: It sounds like your homeowner’s association is out of control. Most states have statutes requiring meetings of homeowner’s associations be open to attendance by the members.
You and other condo owners who feel as you do should first politely try to attend the monthly meetings. If you are refused, then hiring an attorney familiar with condominium law should be your next step.
I understand your situation because I own a second-home condo that had a similar situation. The newly elected association president decided to hold the monthly director’s meetings in her condo without announcing the day or time.
The rebellion among the members was so strong she was forced to re-open the monthly meetings and hold them in our “party room” where they were previously held. Needless to say, she was not re-elected.
CLEAR PAID-OFF MORTGAGE PROMPTLY, OR RISK CONSEQUENCES
DEAR BOB: About 20 years ago, I borrowed $25,000 as a second mortgage on my rental condo from my partner’s pension and profit sharing plan. After several years, the $25,000 was paid in full. I have the checks to prove it. Several years later, my investment partner expired. His pension and profit sharing plan was rolled over into his wife’s IRA. Now I want to sell that condo. But I discovered the $25,000 mortgage is still recorded against the title. I contacted my partner’s widow, who now lives in Maryland, to sign a deed of reconveyance. She refuses. What can I do to clear the title? – Joseph O.
DEAR JOSEPH: Your situation shows why it is so important for borrowers to be certain a paid-off mortgage or deed of trust is promptly cleared from the property title.
I suggest you contact a local title insurance company who will insure title for your condo sale. Most title insurers can “insure around” a situation like yours, especially when you have proof the old mortgage was paid off 15 years ago. If necessary, you might have to bring a quiet title lawsuit.
The new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” 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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