DEAR BOB: About two years ago, I helped my daughter (then age 23) buy a one-bedroom condo by co-signing with her on her mortgage. She was fresh out of college with a good job at an accounting firm. About 18 months ago, she foolishly quit that well-paying job because she didn’t like her boss. Since then, she hasn’t been able to find another job paying as well. As a result, she is now three months behind on her mortgage payments, plus the monthly condo fees. I didn’t know about this until I recently applied for a car loan and the dealer told me I was three months late on my mortgage payments and my FICO score is now only about 600. This was news to me, as I always had a good FICO score over 700. Now I learned from my daughter the mortgage lender has started foreclosure. What can I do? How can I get my name off the title? –Andrew S.
DEAR ANDREW: If your daughter is now working and has enough income to make the monthly mortgage payments, she should contact the mortgage lender to work out a forbearance agreement to stop the foreclosure.
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However, if that is not possible, she should sell the condo to pay off the mortgage. Let the lender know when it is listed on the market for sale with a realty agent.
Your situation shows the sometimes-bad results of co-signing a mortgage for an irresponsible relative. Not only did your daughter ruin her credit, but she also ruined yours.
Even if you sign and record a quitclaim deed to your daughter to get your name off the title, you are still obligated on that mortgage. There is no way for you to get out of that. If it goes to foreclosure, then you will have a foreclosure on your credit report.
TRANSFER HOME-SALE LISTING INSTEAD OF CANCELING IT
DEAR BOB: What can I do with a realty agent who refuses to cancel my listing? The reason to terminate is my agent is very hard to get in touch with and she doesn’t respond to my phone calls. –Delia F.
DEAR DELIA: There is no valid excuse for your listing agent not returning your phone calls or e-mails within 24 hours. However, that alone is not a reason to cancel your listing.
Lack of due diligence is the most valid reason to cancel a listing. For example, if she didn’t put your listing into the local MLS (multiple listing service), failed to put it on the national www.Realtor.com Web site and didn’t properly market your home, that would be lack of due diligence.
But rather than trying to prove lack of due diligence, a better alternative is to contact the listing agent’s supervising broker and ask to transfer your listing to a better agent within the same brokerage firm.
Presuming you still want to sell your home, your home will then be properly marketed, the listing agent will get a referral fee when your home sells, and everyone should be satisfied.
IT’S BETTER TO INHERIT HOUSE THAN PUT NAME ON TITLE NOW
DEAR BOB: My parents have a quitclaim deed on their home, naming all seven of their children’s names. Their home is worth $250,000. They paid $40,000 many years ago. Four of the seven kids live out of state. Two brothers live close by and would probably take occupancy as their primary residence after mom and dad are gone. Can tax be avoided if the two brothers take title as their residence? Should it be put in their names now? What should we do? –Mary Beth U.
DEAR MARY BETH: Stop worrying about nothing. Forget about that quitclaim deed idea. I hope it wasn’t recorded. Ask your parents to tear it up.
Instead, they should put the title to their home into their revocable living trust to avoid probate after they are both gone. Also, if one becomes incapacitated, such as by Alzheimer’s disease or a severe stroke, the other can still manage the property, even selling it if necessary.
After they both pass on, presuming the living trust leaves the house and other living-trust assets to all seven children, you all will inherit it at the fair-market, “stepped-up value” on the date of the last co-owner’s death.
Then you can sell the house to the two brothers and owe little or no capital gains tax. Putting the brothers’ names on the title now would be a major mistake. For details, please consult an attorney specializing in living trusts.
WHAT RECOURSE AGAINST WARRANTY COMPANY THAT WON’T PAY?
DEAR BOB: We bought our 15-year-old house in June 2006 and purchased a $500 one-year home warranty policy. Last month, our heaters began acting strange, turning on and off rapidly within seconds. So we called the home warranty company. We paid a $45 service fee to either repair or replace it. A local contractor came out and said both units are unsafe and needed to be turned off until replaced. He collected our $45 while he got approval from the warranty company. That left us without heat over a very cold weekend. The next week the warranty company rejected our claim because we couldn’t prove we properly maintained the units. We were completely without heat for 10 days while we hired another contractor for thousands of dollars to replace the units. What recourse do we have? –Mary Ann B.
DEAR MARY ANN: Home warranty companies are notorious for denying legitimate claims like yours. Most homeowners don’t need to do anything to maintain modern furnaces or heating units except to change the filters every few months. The claim denial was ridiculous.
Now that you have heat, send copies of the furnace bills to the warranty company by registered mail demanding full payment within 10 business days. Politely explain there was nothing you could have done to further maintain the furnace, which, after 15 years, became defective.
But don’t threaten. If you don’t receive payment within 10 days, it’s then time to sue that nasty warranty company in your local court. Please contact a local attorney for details.
DON’T SIGN BUYER-AGENCY CONTRACT WITH AGENT YOU DON’T KNOW
DEAR BOB: My wife and I are in the market to buy our first home. We have been visiting weekend open houses where we have met many listing agents. They all want to become our buyer’s agent. One agent keeps e-mailing and phoning us to spend several hours looking at houses. When we had an appointment at her office last Saturday, she said before she could show us any houses we had to sign a 60-day buyer-agency contract. It would tie us up to buy only through her. We hardly know this agent. My wife refused to sign and we walked out. Should we have signed that contract? –Kevin G.
DEAR KEVIN: No. Congratulations on walking out. Unless that agent came highly recommended by a trusted friend or business associate, there is no reason to get tied up with an agent you don’t know who could turn out to be a “dunce.”
Most agents are glad to show you homes without requiring any buyer’s agency contract, especially one for a long 60-day period.
AGE IS IRRELEVANT WHEN AVOIDING HOME-SALE TAX
DEAR BOB: I am a single 67-year-old and want to sell my primary residence. Can I avoid or defer capital gains tax and what costs am I looking at when I sell? –Joan T.
DEAR JOAN: Your age is irrelevant. If you owned and occupied your principal residence at least 24 of the last 60 months before its sale, thanks to Internal Revenue Code 121 up to $250,000 (up to $500,000 for a qualified married couple filing a joint tax return) will be tax-free.
If you own the home and carry back an installment-sale mortgage for your buyer, you can defer tax on any profit exceeding the exempt amount. Ask your tax adviser to explain further.
As for sales costs to expect, your major expense will be the real estate sales commission. Interview at least three successful local agents before selecting the best agent to receive a listing not exceeding 90 days. There will be additional minor sale costs, such as transfer and recording fees. Each agent should show you how much you will net approximately from your home sale.
The new Robert Bruss special report, “Everything You Need to Know About Reverse Mortgages for Senior Citizens,” 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 www.BobBruss.com. Questions for this column are welcome at either address.
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