DEAR BOB: Next month I will write my final mortgage payment check and want to be sure all the related details of paying off the mortgage go smoothly. What steps should I take? –Daphne M.

DEAR DAPHNE: Congratulations on writing your final mortgage payment check. Many readers are very envious.

Purchase Bob Bruss reports online.

Be sure to phone the lender a few weeks in advance to determine the exact amount of your final payment (it may be slightly more or less than your regular payment).

Ask how long the lender usually takes to process a final payment and send you either the deed of reconveyance (for a deed of trust) or a mortgage satisfaction (for a mortgage payoff). This timeframe should not be longer than 30 days after the lender receives your payment.

Inquire if the lender will record the document clearing your title or if it will be sent to you so you can record it in the county where the property is located.

Follow up in 30 days to be certain you received the promissory note you signed years ago marked “paid in full” and make sure the documentation was properly recorded. Lenders have no financial incentive to take care of clearing titles promptly so it’s up to you to get it done correctly.

You can hold a symbolic mortgage burning party, but never burn or destroy your actual mortgage documents. Instead, you might want to frame them.


DEAR BOB: I’m confused about this $250,000 deduction for a house sale. I thought you had to own it for at least 60 months and live in it at least 24 months to qualify. But you recently told another reader he could live in his house for a year, rent it for a few years, and then move back in for a year to claim the sales deduction. What does the 60 months refer to? Can I sell my house, get the $250,000 deduction, buy another house, live in it for 24 months, sell it and get the deduction again? –Anne G.

DEAR ANNE: To be entitled to the principal-residence-sale exemption up to $250,000 (up to $500,000 for a qualified married couple filing a joint tax return), you must own and occupy your principal residence at least 24 of the last 60 months before its sale. The 24-month occupancy time need not be continuous and can be interrupted by rental or non-occupancy periods.

You can qualify if you bought and occupied your principal residence as recently as 24 months ago. This tax break of IRC 121 can be used over and over again without limit, but not more frequently than once every 24 months.

Sixty months of ownership is not required, with one exception. The only time you must own your principal residence at least 60 months before qualifying for the IRC 121 exemption occurs if you acquired the property as a rental in an Internal Revenue Code 1031 tax-deferred exchange, later converting it into your main home.

Then you must meet the 24-month occupancy test and own the property at least 60 months before qualifying for the exemption. For full details, please consult your tax adviser.


DEAR BOB: My oldest sister and another sister with her husband bought a house together. The oldest sister’s credit was not too good so her name was left off the title. Then, due to unexpected job changes, my other sister and her husband couldn’t move in so my oldest sister has been making the mortgage and property tax payments. Is there any way she can claim the tax deductions for her payments although her name is not on the title? Or do my other sister and her husband get the deductions? –May M.

DEAR MAY: Nobody is entitled to the mortgage interest and property tax deductions in the sad situation you describe. Your oldest sister can’t claim them, although she paid the expenses, because her name is not on the title. That means, in the eyes of the IRS, she was a “volunteer.”

Neither can the other sister and her husband claim those deductions, although their names are on the title, because they didn’t actually make those payments.

But they can add the oldest sister to their title by use of a quitclaim deed so she will be entitled to the deductions for her future mortgage interest and property tax payments. Please consult a tax adviser for further details.


DEAR BOB: We purchased our house 12 months ago. When getting a professional survey, in conjunction with a remodeling project, we learned the fence separating us from a neighbor is on our side of the boundary by about 2 feet. What rights do we have, if any? –Ben A.

DEAR BEN: If the fence is on your side of the true boundary, it’s your fence. If you wish, you can tear it down and rebuild a new fence just on your side of the true boundary.

But before doing that, have a friendly conversation with your neighbor to discuss the survey and explain why you need to move the fence to have enough room for the remodel. Perhaps you can get the neighbor to pay half the cost of an attractive fence you will both enjoy.

Although I don’t recommend bringing this issue up, if the fence has been there for many years and the neighbor has used that 2-foot strip of land, perhaps for a garden or lawn, he might have acquired a prescriptive easement to permanently use that land strip. To qualify, he must prove open, notorious, continuous and hostile use for the required number of years and bring a quiet title action in court. The hostile test usually defeats most prescriptive easement claims. You could argue his use was with permission. For details, please consult a local real estate attorney.


DEAR BOB: My mother passed away last year. We, her sons, have had the condo listed for sale more than 12 months now without a buyer nibble. It is located in South Florida, near Fort Lauderdale where real estate has been painfully slow since the 2005 hurricanes. There are more than 100 condos for sale in the large complex. We have it listed for sale with a Realtor who lives in the same complex. Our condo is priced a bit less than the competition. The unit is furnished, in decent condition, with OK appearance (not great, but not awful). We tried advertising, lease to own, Realtor incentives, closing-cost incentives and even took it off the market a while. The Realtor phones every few weeks to tell us how slow the local condo market is. Since we don’t live nearby, changing agents would be a hassle. Any suggestions? –David K.

DEAR DAVID: Ask the professional property manager of the condo complex how many condos have sold in the complex within the last six months. If so, get the names of the listing and selling agents. Those agents probably know what it takes to sell condos in that difficult complex.

When your current listing expires, hire a more effective listing agent. When a real estate agent can’t sell a condo within a year, something is seriously wrong. Perhaps your asking price is still too high. Or maybe you have an ineffective agent.

Since you inherited the property, and it didn’t cost you anything, it’s costing you money each month it is unsold. Get it sold even if you radically slash the price. If you have tenants living in the condo, get rid of them. Any realty agent will tell you the most difficult homes to sell are those occupied by tenants.


DEAR BOB: Thanks for the recent explanation of “stepped-up basis” when a spouse dies. I live in a common law state. It doesn’t seem fair that a surviving spouse in a community property state gets a 100 percent stepped-up basis to market value for inherited property whereas in my state a surviving spouse gets only a 50 percent stepped-up basis. Is there any way I can switch to the community property rules? –Linda N.

DEAR LINDA: No. If the state where a property owned by a husband and wife is not a community property state, there is no way to own property there as community property. Perhaps you might talk with your state governor and legislators about switching to community property benefits, as Wisconsin did a few years ago.


DEAR BOB: My sister and I want to sell the home we inherited from our mom. We want to sell it to my niece (my sister’s daughter). Do we have to sell it for the current market value? Or can we sell it for whatever price we want? It is worth about $233,000 (that’s our market value “stepped-up basis” when mom died). We are willing to sell it for $185,000, giving the niece a “family discount.” But my sister’s lawyer says we should get $50,000 cash down payment and then carry back a mortgage from the niece which my sister and I would hold. Do we have to get a down payment? –Carol M.

DEAR CAROL: You can sell for any price and any terms you wish. There is no law requiring you to sell for full fair market value or to demand a cash down payment.

Because you inherited the house at its “stepped-up basis” of market value on the date of your mother’s death, if you sell for less than that basis you will have a zero capital gain. However, you won’t have a deductible loss either.

There is no requirement you receive any cash down payment. But you should insist your niece pay for her owner’s title insurance and closing costs.

While it is commendable for you to carry back the mortgage financing for your niece, if she has good income and good credit, you might put a relatively short due date, such as five years, so you don’t have to carry the mortgage for many years (unless you want to). You should be aware the interest you receive will be taxable to you as ordinary income.

The brand-new Robert Bruss special report, “2007 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

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