Will canceling mortgage insurance boost my property taxes?

DEAR BOB: Thank you for the article on your Web site aboutgetting rid of PMI (private mortgage insurance). Upon my request, my mortgagelender sent me the paperwork to cancel my PMI payments of $72.56 per month. Ihave owned my home about eight years. However, I am concerned the lender’sappraisal will cause my property taxes to go up. Or should I leave everythingalone and continue paying PMI? –Geri S.

DEAR GERI: You are worrying about nothing. A mortgagelender’s professional appraisal of your home has absolutely nothing to do withyour property tax assessment. Go ahead and get your home appraised by thelender’s appraiser.

Purchase Bob Bruss reports online.

Only the local tax assessor — not a licensed appraiserhired by your mortgage lender — can reassess your property. If you have been payingPMI on your mortgage for eight years, you probably have at least the required20 percent equity to get rid of that nasty and expensive PMI premium.

AFTER DAD DIES WITHOUT A WILL, PROBATE COURT DISTRIBUTESASSETS

DEAR BOB: Our father passed away without a will. Among hisassets, he left 18.56 acres in his name free and clear. My brother and I agreedthat I should buy him out. With whom do I speak to get this done? –Jeanna F.

DEAR JEANNA: To transfer title to a property when there wasno will left by the deceased owner, the estate must be probated by the localProbate Court where your father was a resident.

The agreement with your brother is irrelevant. Only theprobate judge can order the 18.56 acres and other assets distributed accordingto the state law of intestate succession. For details, please consult a localprobate attorney.

DOES NEW-HOME BUYER NEED A BUYER’S REAL ESTATE AGENT?

DEAR BOB: I know you recommend home buyers have their ownbuyer’s agents, but when buying a brand-new house in a new subdivision that hasmodel homes and a sales staff, should the buyer still have a buyer’s agent? Myfather said he typically just deals direct with their sales staff. I presumethe on-site sales people get the full 6 percent commission and if I have a buyer’sagent, the commission would be split. Is this correct? –Dave D.

DEAR DAVE: No. Some home builders refuse to cooperate with abuyer’s agent. But in today’s “buyer’s market” for homes in mostcities, smart home builders are thrilled to pay buyer’s agents a salescommission, which is typically 2 percent or 3 percent of the sales price.

You definitely need a buyer’s agent when buying a brand-newhome. A savvy buyer’s agent can advise you the pros and cons of a subdivisionand the specific homes, including the builder’s reputation. That’s somethingyou won’t hear from the builder’s salespeople who represent the builder.

DON’T BLAME INSPECTOR IF FURNACE BREAKS 16 MONTHS LATER

DEAR BOB: My husband and I bought our first home 16 monthsago. But our furnace just went out. We purchased a 12-month warranty and itexpired after a year. Then we bought from a different company the sameinsurance for all our major appliances. But this insurance company refuses tohelp us because they say the furnace is rusted and has been “meddledwith.” Should our professional home inspector we hired at the time ofpurchase have told us the furnace was rusted? Should I inquire about why ourinspector didn’t tell us the furnace was in disrepair and rusted? Or should weforget it and try to come up with the large cost of a new furnace? –Susan P.

DEAR SUSAN: A professional home inspector usually checks afurnace for obvious problems such as a cracked heat exchanger and other majorcomponents. If the furnace operated well for 16 months, you can’t say theinspector didn’t do his job.

Although the 12-month home warranty obviously expired anddoesn’t apply, perhaps that major appliance policy you later purchased includesthe furnace if specifically mentioned. That second company wouldn’t have sentan inspector out unless there is possible coverage.

The fact the furnace is rusted is irrelevant if it worked onthe day you bought that second policy. Home-warranty companies are notoriousfor refusing to pay for replacements by saying it is a “pre-existingcondition.”

I suggest you send a written demand to the second insurer(if your policy includes coverage for the furnace) demanding the companyreplace the furnace within 10 days. But don’t threaten because that’sextortion!

If the company doesn’t replace the furnace within 10 days,then it’s up to you to replace the furnace and later sue the second insurer inlocal Small Claims Court (presuming the furnace costs less than the court’smaximum jurisdiction amount). For more details, please consult a localattorney.

DEFERRED PROFIT FROM HOME SALE MIGHT NOT BE A TAX PROBLEM

DEAR BOB: We bought our third and current home in 1987. Iunderstand the present law about the $500,000 principal-residence-sale taxexemption for a married couple selling their home. However, my question isabout our two previous home sales. I thought I read somewhere, because of thenew tax law, I didn’t need to keep records from our previous two homes so Idestroyed them. Do they pertain to the basis for our current home? –Roger S.

DEAR ROGER: You obviously know now you should always saveall records from previous home-sale transactions. Under the previous tax law(Internal Revenue Code 1034 which was replaced in 1997 by Internal Revenue Code121), you “rolled over” your capital gain tax by purchasing areplacement principal residence of equal or greater cost.

The adjusted cost basis of your third home is not itspurchase price. It is your purchase price, minus the deferred gains on thesales of your two previous homes, plus any capital improvements you addedduring ownership.

If your capital gain on the sale of your current home willexceed $500,000, I suggest consulting your tax adviser now to reconstruct yourdeferred gain to establish your adjusted cost basis. However, if your gain(including the deferred gain) is less than $500,000, then you won’t have anyprincipal-residence-sale tax to worry about. Of course, this presumes you andyour wife both meet the 24-out-of-last-60-month occupancy test.

WHO IS “MOST GUILTY SUSPECT” FOR DEFECTIVEINSPECTION?

DEAR BOB: We bought our house in May 2006. Before we bought,a professional home inspector noted a crack in our block wall but he didn’tmention anything about the foundation or the slope. After moving in, werealized the house slopes 5 inches from the front door to the back door. Now weunderstand the foundation is actively sinking in the back. A structuralengineer we hired before purchase said whatever happened to the foundation wasdone and there was nothing to worry about. Now we are facing $30,000 inrepairs. The engineer admits he was wrong. But he blames the real estate agentwho only showed him one part of the house. The realty agent says to blame theengineer. Do we have recourse with anyone to help pay for this? –Kelvin G.

DEAR KELVIN: Congratulations on doing your best to have thehouse thoroughly inspected before purchase. The “most guilty suspect”looks like the structural engineer. I hope you kept his written report to provehe said there was nothing to worry about.

The professional home inspector noted the crack in the blockwall. Perhaps the slope wasn’t noticeable. I suggest you consult a local realestate attorney about suing the structural engineer for professionalnegligence. Chances are he carries E&O (errors and omissions) insurance sothe loss won’t come out of his pocket.

WHEN YOU SELL YOUR HOME, VACANT-LOT SALE MIGHT BE TAX-FREE

DEAR BOB: I enjoy your weekly articles and I have a questionabout having two vacant lots adjoining my house. Where can I find informationon selling one lot tax-free? My accountant and attorney can’t seem to find thistax law. –Robert R.

DEAR ROBERT: If you sell a vacant lot within 24 monthsbefore or after the sale of your adjoining principal residence, then you caninclude the lot’s capital gain along with the home sale as if it were one sale.

When your total principal-residence-sale capital gain isbelow $250,000 ($500,000 for a qualified married couple filing a joint taxreturn), and you meet the other Internal Revenue Code 121 ownership andoccupancy tests, then your lot-sale profit won’t be taxable. However, thisprovision applies only to one adjoining lot sale, not two. For details, pleaseconsult 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 www.BobBruss.com. 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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