Why contacting lender could be a mistake
Robert J. Bruss
Inman News
DEAR BOB: My daughter and another teacher co-own a townhouse. The other teacher is leaving to get married. My wife and I are going to buy her out so our daughter can avoid selling and trying to purchase again in an expensive area. To remove the other teacher’s name from the deed and mortgage (preferably leaving only our daughter’s name or substituting our names for the departing teacher) do we need an attorney? Or can we sign something in a government office to get her name off the deed? –Dan W.
DEAR DAN: The departing co-owner’s name will always remain on the mortgage obligation until the loan is either paid off or refinanced. If you contact the lender, the lender might demand a stiff assumption fee, or even demand payment in full because of the title transfer. If I were in your shoes, I would not contact the lender.
Purchase Bob Bruss reports online.
To remove the departing co-owner’s name from the title, when she receives your payment for her equity share, she should sign a quitclaim deed to you and your wife. I suggest you handle the transaction at a local title insurance or real estate attorney’s office because you should obtain an owner’s title insurance policy. The title insurer or attorney will then record the quitclaim deed.
The reason you need an owner’s title insurance policy for the half interest you are acquiring is you don’t want to get stuck with the departing co-owner’s liens (if any), perhaps for unpaid income taxes or judgments, etc., which might have attached to her half of the property. An owner’s title policy is your best protection. For more details, please consult a local real estate attorney.
PROS AND CONS OF SELLING AN “AS IS” HOUSE
DEAR BOB: I have decided to sell my home so I can afford to move to a very nice, nearby assisted-living residence. My two-bedroom home, built in 1938, has become a bit run-down. However, it is in a very good neighborhood where most homes have been remodeled or completely rebuilt. My real estate agent suggests I spend about $50,000 to renovate the kitchen and bathrooms before listing my house on the market for sale. My son says I should just have the house painted inside and outside. He and his pals have offered to do the painting in a weekend or two. I can afford the $50,000 renovation cost, but then I read your article about selling “as is” and wonder if that’s the way to go? –Anne C.
DEAR ANNE: Listen to your smart son. There is no sense spending $50,000 to renovate an older house just before sale. Your buyers will either like your charming older house the way it is and be thankful for a reasonable price in a desirable neighborhood, or they will want to remodel to their taste after purchase.
Save your $50,000 and the inconvenience of renovation, which might not even return the $50,000 in the form of a higher sales price.
Let your son and his pals paint your house inside and outside. Also, check the landscaping to be sure it is attractive. Perhaps plant some spring flowers to make the front yard especially inviting.
When you sell your home “as is,” that means the seller must disclose all known defects (such as a leaking roof) but the seller won’t pay for any repairs. However, if an obvious defect can be repaired at minimal expense, such as a dripping faucet, get it fixed.
In addition to the real estate agent you already consulted, after the house is painted and ready to sell, I suggest you interview at least two more agents.
The reason is you need to compare their evaluations, especially their CMAs (comparative market analysis). These forms will show you recent sales prices of comparable nearby homes, asking prices of neighborhood homes currently listed for sale (your competition), and even the asking prices of recently expired similar home listings. Then you can correctly set your asking price.
HAPPY ENDING TO VETERAN’S RENTAL STORY
DEAR BOB: I read your recent item about the Iraq War veteran in a wheelchair who wanted to rent an apartment but it had four steps and he needed an access ramp. You correctly informed the landlord he does not have to pay for the ramp. But the Americans with Disabilities Act (ADA) requires allowing the tenant to install the ramp at his expense. However, you and your readers might not be aware of the Home Improvement and Structural Alterations (HISA) program available to veterans through most Department of Veteran Affairs Medical Centers. Information is available in VHA Handbook 1173.14 and on the Internet at www.va.gov/vhapublications. If the veteran is eligible for VA Medical care, he should qualify for financial assistance with the ramp. –Ivan R.
DEAR IVAN: Thank you for your valuable information and to the dozens of other readers who e-mailed and mailed suggestions. Fortunately, the landlord and the veteran’s mother reached an agreement.
The four steps have been removed, and there is now a ramp with a nice railing to the public sidewalk so the wheelchair veteran can take the nearby bus to a local college.
But there’s more. I received a nice e-mail from a resident of the apartment building who reports one of the residents, an older woman, is teaching the “quite charming” veteran how to cook, and another “young female resident” takes him shopping on Saturdays in her sport utility vehicle. I’m just reporting the facts. Is this reality TV material?
CONFUSION ABOUT MEDIATION AND ARBITRATION
DEAR BOB: In a recent article, you said it is not wise to sign a binding arbitration clause in a real estate sales contract. But I am confused how a person can agree in the contract to mediation of disputes, as you suggest, but not agree to binding arbitration if a dispute later arises. What alternative do you suggest to expensive court action? –Richard F.
DEAR RICHARD: A buyer or seller cannot be required in a real estate contract to agree in advance to binding arbitration, giving up their constitutional right to a jury trial, right to appeal, and court rules of evidence, without initialing or signing an arbitration clause in the sales agreement.
But many printed real estate sales contracts include mediation of disputes clauses, which do not require signing by the parties. However, mediation does not forfeit any legal rights, as does binding arbitration. If a party does not want to mediate disputes, which might arise, he can just cross out the printed mediation contract clause.
As I have often said, agreeing in a real estate contract to mediate future disputes is a good idea. It often saves costs, compared to court litigation, and mediation usually succeeds or fails within a day or two.
However, I recommend realty buyers and sellers not forfeit their legal rights by agreeing in advance to binding arbitration of future conflicts that might arise. If a dispute later arises, such as a home buyer discovers a serious defect that the seller allegedly failed to disclose, after the buyer sues the seller and mediation doesn’t work, then the parties can agree to binding arbitration rather than a court trial.
DOES STEPPED-UP BASIS RULE APPLY TO LIVING TRUSTS?
DEAR BOB: You often emphasize the advantages for a couple holding title to their home in a revocable living trust. I know when a couple owns title to the home jointly, after a spouse dies, the survivor gets a stepped-up basis to market value. Does the same rule apply when title is held in a living trust? –Philip H.
DEAR PHILIP: Holding title to your real estate (and other assets) in your revocable living trust has no effect on the tax aspects after an owner dies. The same stepped-up basis rules apply to living trusts as to other title holding methods.
When a husband and wife hold title to the home and other real estate in their living trust, after a spouse dies and the living trust provides the survivor receives the asset, in common-law states, the survivor then receives a new stepped-up basis to market value for the inherited half of the property.
The survivor’s basis for the other half of the property remains as before (half of the purchase price plus half the cost of capital improvements added during ownership). The property’s market value when the living trust was created is irrelevant.
However, in community property states, the surviving spouse receives a new stepped-up basis to market value on the entire property. I know that’s not fair, but I didn’t write the tax laws. For more details, please consult your tax adviser.
The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar With or Without a Real Estate Agent,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 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.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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Copyright 2006 Inman News
Bounced check raises red flag
Robert J. Bruss
Inman News
DEAR BOB: I had a contract to sell my home. I gave the buyer seven days to bring me an acceptable mortgage letter from a bank, but he presented a letter from a mortgage broker indicating final approval of his loan was subject to “underwriting.” His bank returned his $1,000 deposit check for insufficient funds. Can I legally terminate his contract? –Jorge S.
DEAR JORGE: From your description, it sounds like your buyer is in breach of the sales contract. That letter from a mortgage broker indicating his mortgage approval is subject to “underwriting” is worthless.
Purchase Bob Bruss reports online.
Today’s smart home buyers get pre-approved in writing by an actual lender before shopping for a home. If your buyer had done that, and shown you the lender’s approval letter or certificate, you could feel confident he will obtain a mortgage.
Although mortgage brokers can obtain such pre-approvals for their borrowers, because they are not the actual lenders, mortgage brokers can only issue pre-qualification letters, which are non-binding on actual lenders.
Especially because your buyer’s $1,000 deposit check bounced, if I were in your shoes, I would feel confident canceling that sale for breach of contract. For full details, please consult a local real estate attorney.
