Dear Edith: I am going to buy my first home for all cash with money from a recent inheritance. Anything special I should watch out for? — N. R.
Answer: All cash means a prompt, trouble-free sale, which — depending on the state of your local market — may be worth a price concession on the seller's part. Be sure to sign the contract with the words "subject to my lawyer's approval." You'll want assurance that you're receiving a clear, trouble-free title; the taxes are paid to date; and the property is free of liens.
Without the protection of a mortgage lender inspection, you might also make the contract subject to a satisfactory report from a building inspector. You could always say it's satisfactory if you want to, and at least you'd know what you are getting into.
Ms. Lank: In our residential closing, the buyers are maintaining that the washer and dryer should have been left in the home, as the contract has the words "all appliances included."
Our research (the Trulia website) shows that a washer and dryer are not considered appliances but rather personal property. It was our understanding that we (the sellers) would be taking them. There is no specific language regarding the washer and dryer in the contract. Could you clarify? — J.
Answer: Your mistake was signing that contract without crossing out the appliances sentence if you meant to take the washer and dryer. Otherwise, what did you think it meant — your toaster and the electric mixer?
Most buyers would assume appliances means what are sometimes designated as major appliances. It's true the laundry equipment started as personal property, not real estate. That's why it's specifically mentioned in your contract as being included in the sale.
I don't think you have much of a case for taking them with you when you move. I hope it will all be sorted out amicably as you settle up with your buyers.
How Much to Borrow
Ms. Lank: I would like to build a home for me and my elderly dad. I have a builder I like and have found a lot I like. The builder has agreed to carry the construction loan. I have cash I can apply to the down payment or an outright payment for the lot (or both).
What I'm struggling with is knowing how much house I can afford, what kind of mortgage I should have and how much cash I should put toward the house. I feel like any lender I talk to is going to want to sell me something or make money off me, so I don't really know who to ask. — askedith.com
Answer: Yes, mortgage lenders are in business to make money, but they also avoid letting borrowers get in over their head. They are, in fact, legally required to watch out for that.
It's common to place a building loan that will convert to a mortgage once the house is built. An institutional lender wouldn't OK you unless you could handle the payments. Don't be afraid to talk to them. They'll analyze your financial situation and give you reliable information about how much you can or should borrow — and how to do it.
Or you could start with your own bank. Tell whoever is in charge there that you need advice about placing a mortgage. Trust me; you can trust them.
Income Tax Mix-up
Edith: My stepson was recently transferred from South Carolina to another state because of his work. He lived in the South for exactly one year. He sold his home for a significant capital gain. This year, he filed his tax return through TurboTax, which indicated that the total gain was tax-free because he moved more than 150 miles. Is there really a cutoff point in the tax law based on miles moved? — J. H.
Answer: Yes, there is, but it's not clear whether it applies exactly as you report. The basic rule is that if you have owned and occupied your home for at least two years of the last five before you sell, you can take a gain of up to $250,000 free of federal income tax (twice that for a married couple filing jointly). The two-year requirement can be shortened if you must move more than 50 miles because of a job change (or because of divorce, death of a spouse or multiple births).
I believe that your stepson having had that house for one year instead of two makes him eligible to take half his profit free of federal capital gains tax.
Looks like there's a misunderstanding somewhere along the way here.
Contact Edith Lank at www.askedith.com, at [email protected] or at 240 Hemingway Drive, Rochester NY 14620.