Can mortgage lender seek more money after payoff?

DEAR BOB: After a mortgage lender has given a loan payoffamount and cleared the title, is the lender allowed to come back months laterand ask for more money, saying it made a mistake? –Pam N.

DEAR PAM: Presuming that happened to you, if the amountinvolved is large I would refuse to pay. The lender can beg you for the money.But the lender’s only legal recourse is to sue the borrower, claiming amistake. That would be a very weak lawsuit.

Purchase Bob Bruss reports online.

I’ve had this happen to me over small amounts less than$1,000. I just ignored the lender’s requests. After one or two letters, which Iignored, the lender “went away.”

If your mortgage was marked “paid in full” and thelender recorded a mortgage satisfaction or a deed of reconveyance, the lenderhas no further security. Lenders should live with their payoff demands, whichshould be correct. For further details, please consult a local real estateattorney.


DEAR BOB: My son and I bought a condominium in May 2003,close to the university, so he can live there during the school year. Hegraduated in 2006. We hold title as joint tenants. I live in a differentlocation. We plan to sell the condo, which has about $80,000 equity. Will weowe any capital gains tax? He is now a student in law school. –Celia B.

DEAR CELIA: Congratulations on making a smart investmentwith your son while he attended college. Because your son’s name was on thetitle, if he owned and occupied the condo as his principal residence at least24 of the last 60 months before its sale, up to $250,000 of the capital gainsprofit will be tax-free, thanks to Internal Revenue Code 121.

The amount of equity is irrelevant. What counts is the netprofit. That is the difference between the condo’s adjusted cost basis and theadjusted (net) sales price. If this sales profit is less than $250,000, nocapital gains tax will be due. For full details, please consult your taxadviser.


DEAR BOB: My mother signed a deed conveying her home to mybrothers and me for the sum of $10. Then we conveyed a life estate in the hometo her for $1. She recently moved to an assisted-living residence and we soldthe house. What is our cost basis? Is it the $10 we paid? Do we qualify for anycapital gain tax exclusion? I called the IRS representative who said this is socomplicated we should talk to a tax accountant. Is our cost basis the price mymother and father paid in 1953, plus any money they put into remodeling it?–Tom S.

DEAR TOM: Because you and your brothers received theproperty as a gift, as the donees your cost basis is the same as your donormother’s basis. Presuming your father died before the gift, she received apartial “stepped-up basis” to market value on the date of his death(if the house is in a community property state, it was probably a 100 percentstepped-up basis to market value).

In other words, your basis is the same as her basis,including any capital improvements she added.

But your capital gain above her basis is fully taxablebecause you don’t qualify for the Internal Revenue Code 121principal-residence-sale tax exemption up to $250,000, as you didn’t live inthe house as your primary home at least 24 of the last 60 months before itssale. For full details, please consult your tax adviser.

The new Robert Bruss special report, “The 10 KeyQuestions Smart Home Buyers Ask to Avoid Getting Ripped Off,” is nowavailable for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, or bycredit card at 1-800-736-1736 or instant Internet delivery at Questions for this columnare welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2007 Inman News

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