Date was Wrong by Jim Woodard on Creators.com

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Date was Wrong

Dear Edith: Has there been a change to the existing tax credit? I purchased a repeat principal residence in June 2009. According to your article, I would qualify for the $6,500. My tax agent said that the dates posted in your article are currently not eligible for the $6,500. — e-mail

Answer: Please give my apologies to your tax agent. I wrote the item you're referring to on the day after New Year's, and absentmindedly typed "2009" when it should have been "2010."

That kind of early-January error doesn't matter so much when one is writing a check. Putting it in the newspaper, though, can make for all kinds of trouble. I do hope that didn't mislead too many readers, and I am so sorry I got your hopes up.

The repeat-buyer tax credit is available for contracts signed after Nov. 6, 2009 and before May 1, 2010.

SELLER TAKING BACK

Dear Edith: Please comment on the pros and cons of taking back a mortgage. My husband is attempting to sell his deceased father's house and was asked to take back a mortgage. It appears the house may not sell otherwise. If we proceed, what steps should we take to protect ourselves? — C.D.

Answer: Why won't the house sell? Perhaps it's not in good enough condition to qualify for a bank mortgage? If so, one solution is to fix the place up. If that's not feasible, the property might be priced really low for an all-cash buyer. Or yes, your husband could take back financing, holding a mortgage and collecting the purchase price over a period of years.

In that case, the big question is: Will the buyers make their payments?

To protect themselves, well-run banks like a 20-percent cash down payment from the borrowers, an excellent credit report and proof of enough dependable income to handle the payments comfortably.

Given today's record low interest rates, buyers who could meet those standards would probably be going for a regular bank mortgage. As they aren't, we have to assume they fall short. Then your husband should consider whether he's willing to lend that much money to strangers when a bank wouldn't.

He must analyze their income, credit rating and bill-paying history as an institutional lender would do.

He can take the documents and figures to his own accountant for advice. It would also help to visit their current home and see how they take care of it. Their housekeeping might matter if some day he found himself with the house back in his hands.

Getting a good cash down payment represents some safety. With little or no money of their own invested, buyers might later feel free just to walk away and abandon the property.

Rates are so low these days that your husband probably can't charge too high of an interest rate. Is he ready to have his money tied up at that rate for many years to come?

Every situation is different, and sometimes seller-take-back financing works just fine. Sometimes a rent-to-own arrangement, where they start out just as tenants, is preferable. Whatever is decided, you'd want your own lawyer's help in drawing up any contract and documents.

But when you say the house can't be sold any other way, I'll guarantee it can be, if the price is low enough. Your husband might prefer selling for less money right now, having the cash immediately, and not having to worry about potential problems.

DETERMINING DEPRECIATION

Ms. Lank: Would you please explain to me how to determine depreciation for tax purposes on a rental home, including how long I can take that deduction? — W.

Answer: I can't really explain depreciation without using a blackboard. As a real estate investor, you should have your own accountant. Your CPA will set up a depreciation schedule for you.

GETTING OFF THE LOAN

Dear Ms. Lank: I am currently on the title of my parents' house, along with my cousin who helped us purchase it. My brother, my cousin and I are on the mortgage loan. It is an FHA loan that was signed in July 1997. If I want to purchase a new home and not have this affect me, should I remove myself from both places or just the title? I would like to apply for a new FHA loan for my immediate family now that I am married. — J.B.

Answer: It's easy to remove yourself from the title of the property. All it takes is signing a new deed. That won't relieve you of responsibility for the mortgage, though. For that, you must consult your lender. With an FHA loan, if the others can prove financial qualification to carry the debt themselves, there's a procedure to free you of any further liability.

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.