The final house payment

DEAR BOB: Next month I will write my final mortgage paymentcheck and want to be sure all the related details of paying off the mortgage gosmoothly. What steps should I take? –Daphne M.

DEAR DAPHNE: Congratulations on writing your final mortgagepayment check. Many readers are very envious.

Purchase Bob Bruss reports online.

Be sure to phone the lender a few weeks in advance todetermine the exact amount of your final payment (it may be slightly more orless than your regular payment).

Ask how long the lender usually takes to process a finalpayment and send you either the deed of reconveyance (for a deed of trust) or amortgage satisfaction (for a mortgage payoff). This timeframe should not belonger than 30 days after the lender receives your payment.

Inquire if the lender will record the document clearing yourtitle or if it will be sent to you so you can record it in the county where theproperty is located.

Follow up in 30 days to be certain you received thepromissory note you signed years ago marked “paid in full” and makesure the documentation was properly recorded. Lenders have no financialincentive to take care of clearing titles promptly so it’s up to you to get itdone correctly.

You can hold a symbolic mortgage burning party, but neverburn or destroy your actual mortgage documents. Instead, you might want toframe them.


DEAR BOB: I’m confused about this $250,000 deduction for ahouse sale. I thought you had to own it for at least 60 months and live in itat least 24 months to qualify. But you recently told another reader he couldlive in his house for a year, rent it for a few years, and then move back infor a year to claim the sales deduction. What does the 60 months refer to? CanI sell my house, get the $250,000 deduction, buy another house, live in it for24 months, sell it and get the deduction again? –Anne G.

DEAR ANNE: To be entitled to the principal-residence-saleexemption up to $250,000 (up to $500,000 for a qualified married couple filinga joint tax return), you must own and occupy your principal residence at least24 of the last 60 months before its sale. The 24-month occupancy time need notbe continuous and can be interrupted by rental or non-occupancy periods.

You can qualify if you bought and occupied your principalresidence as recently as 24 months ago. This tax break of IRC 121 can be usedover and over again without limit, but not more frequently than once every 24months.

Sixty months of ownership is not required, with oneexception. The only time you must own your principal residence at least 60months before qualifying for the IRC 121 exemption occurs if you acquired theproperty as a rental in an Internal Revenue Code 1031 tax-deferred exchange,later converting it into your main home.

Then you must meet the 24-month occupancy test and own theproperty at least 60 months before qualifying for the exemption. For fulldetails, please consult your tax adviser.


DEAR BOB: My oldest sister and another sister with herhusband bought a house together. The oldest sister’s credit was not too good soher name was left off the title. Then, due to unexpected job changes, my othersister and her husband couldn’t move in so my oldest sister has been making themortgage and property tax payments. Is there any way she can claim the tax deductionsfor her payments although her name is not on the title? Or do my other sisterand her husband get the deductions? –May M.

DEAR MAY: Nobody is entitled to the mortgage interest andproperty tax deductions in the sad situation you describe. Your oldest sistercan’t claim them, although she paid the expenses, because her name is not onthe title. That means, in the eyes of the IRS, she was a “volunteer.”

Neither can the other sister and her husband claim thosedeductions, although their names are on the title, because they didn’t actuallymake those payments.

But they can add the oldest sister to their title by use ofa quitclaim deed so she will be entitled to the deductions for her futuremortgage interest and property tax payments. Please consult a tax adviser forfurther details.


DEAR BOB: We purchased our house 12 months ago. When gettinga professional survey, in conjunction with a remodeling project, we learned thefence separating us from a neighbor is on our side of the boundary by about 2feet. What rights do we have, if any? –Ben A.

DEAR BEN: If the fence is on your side of the true boundary,it’s your fence. If you wish, you can tear it down and rebuild a new fence juston your side of the true boundary.

But before doing that, have a friendly conversation withyour neighbor to discuss the survey and explain why you need to move the fenceto have enough room for the remodel. Perhaps you can get the neighbor to payhalf the cost of an attractive fence you will both enjoy.

Although I don’t recommend bringing this issue up, if thefence has been there for many years and the neighbor has used that 2-foot stripof land, perhaps for a garden or lawn, he might have acquired a prescriptiveeasement to permanently use that land strip. To qualify, he must prove open,notorious, continuous and hostile use for the required number of years andbring a quiet title action in court. The hostile test usually defeats mostprescriptive easement claims. You could argue his use was with permission. Fordetails, please consult a local real estate attorney.


DEAR BOB: My mother passed away last year. We, her sons,have had the condo listed for sale more than 12 months now without a buyernibble. It is located in South Florida, near Fort Lauderdale where real estatehas been painfully slow since the 2005 hurricanes. There are more than 100condos for sale in the large complex. We have it listed for sale with a Realtorwho lives in the same complex. Our condo is priced a bit less than thecompetition. The unit is furnished, in decent condition, with OK appearance(not great, but not awful). We tried advertising, lease to own, Realtorincentives, closing-cost incentives and even took it off the market a while.The Realtor phones every few weeks to tell us how slow the local condo marketis. Since we don’t live nearby, changing agents would be a hassle. Anysuggestions? –David K.

DEAR DAVID: Ask the professional property manager of thecondo complex how many condos have sold in the complex within the last sixmonths. If so, get the names of the listing and selling agents. Those agentsprobably know what it takes to sell condos in that difficult complex.

When your current listing expires, hire a more effectivelisting agent. When a real estate agent can’t sell a condo within a year,something is seriously wrong. Perhaps your asking price is still too high. Ormaybe you have an ineffective agent.

Since you inherited the property, and it didn’t cost you anything,it’s costing you money each month it is unsold. Get it sold even if youradically slash the price. If you have tenants living in the condo, get rid ofthem. Any realty agent will tell you the most difficult homes to sell are thoseoccupied by tenants.


DEAR BOB: Thanks for the recent explanation of”stepped-up basis” when a spouse dies. I live in a common law state.It doesn’t seem fair that a surviving spouse in a community property state getsa 100 percent stepped-up basis to market value for inherited property whereasin my state a surviving spouse gets only a 50 percent stepped-up basis. Isthere any way I can switch to the community property rules? –Linda N.

DEAR LINDA: No. If the state where a property owned by ahusband and wife is not a community property state, there is no way to ownproperty there as community property. Perhaps you might talk with your stategovernor and legislators about switching to community property benefits, asWisconsin did a few years ago.


DEAR BOB: My sister and I want to sell the home we inheritedfrom our mom. We want to sell it to my niece (my sister’s daughter). Do we haveto sell it for the current market value? Or can we sell it for whatever pricewe want? It is worth about $233,000 (that’s our market value “stepped-upbasis” when mom died). We are willing to sell it for $185,000, giving theniece a “family discount.” But my sister’s lawyer says we should get$50,000 cash down payment and then carry back a mortgage from the niece whichmy sister and I would hold. Do we have to get a down payment? –Carol M.

DEAR CAROL: You can sell for any price and any terms youwish. There is no law requiring you to sell for full fair market value or todemand a cash down payment.

Because you inherited the house at its “stepped-upbasis” of market value on the date of your mother’s death, if you sell forless than that basis you will have a zero capital gain. However, you won’t havea deductible loss either.

There is no requirement you receive any cash down payment.But you should insist your niece pay for her owner’s title insurance andclosing costs.

While it is commendable for you to carry back the mortgagefinancing for your niece, if she has good income and good credit, you might puta relatively short due date, such as five years, so you don’t have to carry themortgage for many years (unless you want to). You should be aware the interestyou receive will be taxable to you as ordinary income.

The brand-new Robert Bruss special report, “2007 RealtyTax Tips: Eight Chapters of Tax Savings for Homeowners and RealtyInvestors,” is now available for $5 from Robert Bruss, 251 Park Road,Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instantInternet delivery at for this column are welcome at either address.

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

Copyright 2007 Inman News

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