Neighbor’s plan for ‘McMansion’ may hit legal roadblock

DEAR BOB: I own a two-acre lot in an area of mostly one-acrelots. A neighbor wants to buy a half acre from me so he can build what I call a”McMansion.” He needs a larger lot to accommodate the size home heand his wife want to build. We don’t mind because it won’t be close to ourhouse and having a highly valued house next to ours should enhance our home’smarket value. However, we don’t know how to value a half-acre lot where thereare no lots for sale. Also, what legal steps must be followed to deed a halfacre? –Walter H.

DEAR WALTER: I suggest you retain an appraiser and a realestate attorney. If you proceed with the half-acre lot sale, be sure to addyour appraisal and legal costs to the sale price of the property.

Purchase Bob Bruss reports online.

As you will discover, subdividing a lot in an urban areausually is not simple. Although you have no objection, the neighbors mightprotest.

The appraiser can inform you of the market value of ahalf-acre lot in your neighborhood. But the real estate attorney will be neededto handle the legal details of obtaining subdivision approval from theappropriate local authorities. As you and your neighbor will soon discover,selling half a lot is not easy.

WHAT IS A “STARKER EXCHANGE?”

DEAR BOB: I am a relatively new real estate agent. But Ihave heard the term “Starker exchange” and am not familiar with it.What does that mean? –Beth W.

DEAR BETH: Internal Revenue Code 1031 authorizes owners ofinvestment and business property, such as apartments, rental houses,warehouses, office buildings and commercial properties, to trade their propertyfor “like kind” properties of equal or greater cost and equity sothey can defer the capital gain tax that would be due upon an ordinary sale.

A so-called Starker exchange is authorized under IRC1031(a)(3), which permits the sale of qualifying property, with the salesproceeds held by a third-party accommodator or intermediary beyond the seller’s”constructive receipt.”

The seller then has up to 45 days after the sale closes todesignate a qualifying replacement property of equal or greater cost andequity, plus 180 days to complete the acquisition. For full details, pleaseconsult your personal tax adviser.

ARE HUD COUNSELORS TRULY INDEPENDENT?

DEAR BOB: Unknown to me, my 81-year-old mother recently tookout a lifetime reverse mortgage. As her daughter, I was totally unaware she wasdoing this. The reverse mortgage lender sent a so-called “HUDcounselor” to her house to spend an hour explaining reverse mortgages.About three months after this occurred, I learned my mother paid almost $6,000in various up-front loan fees. Considering she is in declining health and willsoon have to move to an assisted-living home, I find this outrageous conduct bythe reverse mortgage company. Are the HUD counselors sent by a reverse mortgagecompany truly independent? –Sarah S.

DEAR SARAH: The three nationwide senior-citizen reversemortgage lenders all require counseling by certified HUD counselors who aresupposed to explain to the prospective borrowers the pros and cons of suchmortgages.

Of course, nobody can vouch for such counselors being trulyindependent of the actual reverse mortgage lender. If a counselor discouragesprospective borrowers from obtaining reverse mortgages, I’m sure that personwon’t be recommended by a reverse mortgage lender again.

If your elderly mother plans to stay in her home at leastfive years, that $6,000 for various fees is not excessive. Please rememberreverse mortgages pay money to the senior-citizen homeowner, without anyrepayment required until the homeowner either sells the home, vacates for morethan 12 months, or dies. More details are in my special report, “The WholeTruth About Reverse Mortgages for Senior Citizen Homeowners,” availablefor $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit cardat 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this columnare welcome at either address.

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

Copyright 2006 Inman News

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