Dear Edith: We plan to sell our home in 2015 to move to a retirement community. I have a good agent we will use. She gave us a sample sales contract to look over — many, many pages compared to when we bought the home in 1998.
Friends of ours are selling and they received an inspection report of 30 pages, listing everything he found, including nail holes. I am freaking out and thinking if we get a report like that, how would we be able to afford to fix everything on the report ... or would we be expected to? We have new roof, new air and furnace, but the house is still 22 years old. Please advise, so I can calm down and be my usual sensible self. — G.
Answer: First off, yes, you're right about the length of today's sales contracts. When I had a real estate license, back in the Dark Ages, we used a one-page sales contract. Since then all sorts of provisions have been added, disclosures and protections, and now a residential contract can easily run to a dozen or more pages. Houses are getting sold with that contract every day, though, so there's no need to freak out. Your agent will guide you through — that's part of her service.
As for the home inspector's report, which is also more widely used than in the past: Some sellers get their own inspector beforehand, and others wait for the buyers to hire one. There's something to be said either way. You must disclose any significant problems you know about. Buyers may want to re-negotiate, though, if their inspector finds an important problem of which you were unaware.
You might as well relax. No house is perfect, not even a brand-new one. Nobody expects every nail hole to be repaired. Procedures may be more complex than you recall, but again — houses are still changing hands every day. I'll bet your sale will work out just fine.
Not Yet Two Years
Dear Edith: My son bought his first house in January of 2013. After fixing it up, he is putting the house up for sale, and he anticipates a profit, even with an increase in the cost basis due to the improvements. I told him my understanding of the tax implications is that one must own and live in the house for two of the last five years in order to take advantage of the $500,000 capital gains exemption.
He told me on the phone that an accountant told him there was an "exclusion of up to 75 percent of the gain for first-time homeowners." Have you ever heard of this?
We'd sure like to see son and family move closer to us ... they had a baby boy born December 25, 2013. — D. C. A.
Answer: Congratulations on your Christmas grandson, but I've never heard of anything like what your son reports for first-time owners. That "75-percent exclusion" sounds so specific that it must refer to something. Perhaps the accountant was citing the possibility of using part of the exclusion even before two years' occupancy, if the move is dictated by an unexpected development like a job transfer or health requirements.
Dear Ms. Lank: Sometime ago, someone asked you about mortgage involved with divorce. The mortgage company doesn't care about what you agreed to in the divorce decree. If both your names are on the mortgage, even if you sign a quit-claim deed and you no longer own the home, they will come after you if the owner fails to make payments.
This happened to me. My ex-spouse put a death benefit to his girlfriend on the home, but I would have had to pay off the mortgage if he deceased. Then he did a deed in lieu settlement agreement with the mortgage company giving them the house back. Shortly after that, he took bankruptcy against the property. The mortgage company sent me a 1099C which would have caused me to have the lot added to my income for that year and an extreme tax burden.
I hired a lawyer who showed them that I was not to have the 1099C, and they retracted it. Tell people getting a divorce to be very careful how they proceed. Please print this for others' knowledge on the subject. — via askedith.com
Answer: Thanks for sharing your experience. It's true; lenders don't have to obey divorce decrees. Sometimes, for example, one spouse is keeping the house and agrees to refinance the mortgage, thereby releasing the other from liability. Or they promise to sell, paying off the loan. If that doesn't happen, then yes, the ex who no longer owns the place is still bound by that old promise to be personally responsible — and for the entire debt, by the way.
Edith Lank will respond personally to any question sent to www.askedith.com or to 240 Hemingway Drive, Rochester NY 14620.