House Calls by Edith Lank

Ms. Lank: We have accepted an offer on our home, but our agent wants us to continue to show our house. So, does that mean we can accept another offer if a higher bid comes in? — T.C.

Answer: Your agent knows some deals fall through and is trying to protect you in that event.

Whether you'd accept a second offer is up to you. It would have to be from buyers who knew there was already a binding contract, and who liked your house so much they were willing to wait around to see if the first deal failed. Wording in the second contract would provide for that.

CO-SIGNING TROUBLE

Dear Ms. Lank: My son wrote you about co-signing a mortgage note for a friend and his family. Well, the house is now in foreclosure, due to be sold in three weeks. When it is sold, will the balance of what's owed go to my son and the rest of the co-signers to pay the difference?

My attorney has retired and his partner in that office says not to worry. He's only seen one time in 20 years where the bank went after the difference.

Keep on telling "Don't co-sign!" — J.G.

Answer: I can only repeat what the lawyer told you: If the foreclosure auction doesn't bring enough to pay off the loan, the lender may ask for a "deficiency judgment" against your son and anyone else who signed that promise to repay the loan. They may not, but in most states, with some exceptions, they could. And, of course, the foreclosure will appear on your son's credit record.

So as you requested, here's my standard warning: When you co-sign a note, you're taking on personal responsibility for the whole debt. And you're being asked to do it because a lending institution judges that your friend or relative is a poor risk.

You don't do anyone a favor by helping them get in over their heads.

HAS A HUNDRED GRAND

Dear Edith: I am a college student. I have a separate bank account my parents made for me that has a bit over $100,000 in it. I was wanting to invest in buying a foreclosed two-bedroom apartment in Florida, probably Miami, to most likely rent out.

Would that be wise or not? — e-mail

Answer: Buying real estate is not like buying stocks or bonds — where all you have to do is read the financial pages to see how you're doing, and where you can get out at a moment's notice if you need the money for grad school or starting a business. Being a real estate investor is a career, and you can't do it off-hand. Do some studying first. Go to the library or book store and start now.

Here are just a few things you'd need to know before you bought an apartment. How healthy is the financial situation of the overall apartment complex you're considering? Are nearby apartments also in foreclosure? What's the rental market like in that neighborhood? Would you be looking for seasonal or year-round tenants? How much could you reasonably expect in rental income? How does that compare with the amount you'd invest? What would other expenses total? Would you be paying for professional management or will you be living nearby? Have you run the figures past an accountant?

WILL THEY CALL THE MORTGAGE?

Hello: Both my Mother and Father are deceased. I have been willed everything. I am an only child. I and my family are living in the house my parents left me. There is a mortgage. I can and have been making the mortgage payments, but due to past credit problems, I can't qualify for a loan.

Is it likely that they will call the loan in and foreclose, or let me continue to make the payment until I can straighten my situation out? Also, how should I go about transferring the home into my name? — J.

Answer: Lenders don't call a mortgage loan when a family member inherits property. But when anyone dies, a lawyer should always be consulted, no matter how simple the estate, just to make sure nothing needs doing. You may not need much of anything, but do double-check with an attorney to save bother in the future.

DEDUCTING THE INTEREST

Ms. Lank: If my son provides mortgage financing to me, is the interest I pay him a tax deduction acceptable to the IRS? — D.M.

Answer: Yes. If the mortgage is entered in the county's public records in the normal fashion, you can deduct the interest you pay. Your son, of course, will declare it as income.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

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