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Ask Realty Times
Question: My ex-boyfriend and I own a house as tenants in common but our relationship ended more than two years ago. What"s the best way for the house to be placed solely in his name so that I am no longer responsible for the loan? He has a title company asking me to sign a "deed of gift," claiming that there are no tax consequences for me. Everything I have read indicates that I would have to pay taxes if I sign a gift deed. The house was originally purchased for $230,000 and was recently appraised at $700,000. Answer: What is your goal? Do you have any interest in getting compensation for your interest in the property? First, even if you remove your name from the title you are still responsible for the loan unless released by the lender. Imagine that I owed $500,000 to a lender on a property and sold the house for $17 to a passerby on the street. Even though title has changed you can bet the lender will still hold me responsible for repaying the $500,000 loan. Generally a lender will not release someone from a loan because doing so would increase the lender"s risk: If something goes wrong it"s better to have two borrowers to chase instead of just one. Second, the property was bought for $230,000 and is now worth $700,000. That"s a difference of $470,000 plus any loan amortization and money used to make a downpayment. What part of the equity in this property belongs to you as a co-owner? Third, you can give a gift of up to $12,000 a year to another person without facing a gift tax. You can give larger amounts and not pay a gift tax -- however you will limit your ability to give tax-free gifts in the future. What is the value of your interest in the property if you use a "gift deed"? Rather than giving up your interest in the property for "good" consideration ("love and affection"), why not sell to your ex-boyfriend? By selling title will change so the old loan will have to be paid off or replaced. You would get money for your interest in the property. Do not sign anything with anyone until you have spoken with your own attorney and tax professional. Question: I have a partnership with my brother. We have eight rental properties. Of those eight properties we have three that need of major repairs. Is it possible to refinance and pay off the balance we owe on the three and attain some working capitol. If so what would be the best route to take? Answer: How much equity do you have in your properties? For instance, you may only need to refinance one property to raise enough cash to pay for all improvements. Make a chart showing how much cash you need to repair each property and what improvements each requires. Then make a second chart showing all eight properties, their fair market values and their current debt levels. It may be possible to have one contractor do work on all three properties and get a discount for volume. As to refinancing, try not to get any more cash than you need for repairs -- and when you"re done either rent the improved properties or peel off some of the eight to reduce your debt load. Question: I recently purchased a home that was approximately 30 years old. After we moved in, the first day, our sewer backed up. Come to find out the pipes are broken underneath our split level home. I am a single mother on a very limited budget. I have homeowners insurance but they will only pay $500 towards repairs. We are going to have to bust up our newly installed floor that my homeowners policy will not cover. Do you know of any kind of help or action I can take? I have this unlivable home and no place to go! Answer: Do you have a statement of condition provided by the sellers and their broker? Had the pipes been broken before? Were repairs made? Did you get a professional home inspection? By any chance, did the pipes simply break when you moved in? That seems like awful luck but such things happen. If it turns out that the condition of the pipes was known to be bad prior to your purchase and the condition was not disclosed, then see a local attorney. Since the insurance policy will only pay $500, ask your insurance broker is filing such a relatively small claim will set off a premium increase. Question: Three brothers purchased a home as a joint venture. The primary purchaser before entering the joint venture wants all three wives to quit claim the property to the joint venture. Is this a beneficial thing to do for the wives? I don"t want to sign a quit claim if it will deprive me of any benefit of ownership since now my husband and I have a large one-third portion of the mortgage payment. Answer: A "quit claim" deed means that someone gives up whatever interest they have in the property. What interest do the wives have in the property if it was bought by the three brothers? Will you be paid for giving up your interest? By any chance, was this property financed with the wives as co-signers? By changing the title to the property could the loan become immediately due and payable? Be aware that if you co-signed the loan but give up title to the property you are still responsible for repaying the debt -- not one-third of the debt, or one-sixth, but the entire debt. Alternatively, not being on the title might be a good idea to limit liability. The first rule for title changes is do nothing until you have spoken with a local real estate lawyer. Be sure to ask about tax and estate issues in addition to real estate matters. A quit claim deed is easy to create -- and often incredibly expensive to undue. In addition, all owners and spouses should see attorneys for another reason: Everyone should have wills and living wills to protect their assets. Question: If I want to make a slight modification to my purchase contract can I do so myself or do I need a lawyer to do it? How much would it cost? Answer: You cannot modify an existing contract in any way without written approval of all parties to the agreement. As to whether or not you require an attorney that depends on the "slightness" of your change. For instance, will your change impact the purchase price or financing of the property? Will it make a difference to your lender? Remember that when applying for a loan you must provide the lender with the complete and final purchase agreement. Do you have an experienced buyer broker who represents you? If yes, first speak with him or her about what you want changed. Question: I"m contemplating getting licensed to become a real estate professional, but how promising is the outlook in New York City? I"m sure it"s competitive, but do you think I would have a better chance in a different location? Answer: Every market is unique and your potential for success depends on your skills, persistence, education, online presence, marketing and -- often -- luck. Big cities are excellent places to do business simply because so many people and so much going on means there are many opportunities. Are big cities competitive? Sure. But so is every town and burg. Probably the best way to get started is to find a situation where you can work as a licensed assistant to a successful broker or agent. Question: Is it true that there"s a new law in California that requires a mandatory 5 percent down payment to purchase a home? Answer: No. For instance, FHA and VA both require less than 5 percent down and many programs backed by private mortgage insurance (MI) can be had with 5 percent down. For specifics, speak with local brokers. Question: My husband and I listed our home with a broker because he sold us this house several years ago. His gave the job to his son who is an agent in his office, but the son has not been aggressively marketing our property. For several months we have been trying to find out what kind of marketing is being done and making suggestions, but they are slow to move. Yesterday the father called to lecture about how he "can"t do anything" unless we drop the price by $25,000. We have already dropped the price by $25,000 and have fewer showings than at the higher price! We now think he is essentially telling us that he isn"t trying to sell the property because he thinks it"s priced too high. Mind you, it"s priced comparably to other homes in the neighborhood. How can we get out of our listing agreement with this broker? Answer: It"s certainly unpleasant to reduce the price of a property once and then face a second reduction. That said, let"s look at the specifics here. First, it may well be that the property was appropriately priced when listed. It may also be true that the market has softened and therefore a price which once made sense is no longer viable. You need to get a new competitive market analysis (CMA) from the broker to see where the market sits today. Second, brokers and clients need to communicate. You should ask the broker or the agent to go through the marketing plan to see what has been done or not done. It"s entirely possible that you are unaware of the various steps taken by the broker. In turn, it"s the broker"s responsibility to follow the marketing plan and explain all that has been done to date. As to ending the listing agreement, that can only be done with the mutual consent of both you and the broker. Many brokers understand that it"s counter-productive to retain a listing with dissatisfied clients and will end a listing as a matter of good public relations. Others want to be compensated for cash costs to date. The best approach is to calmly speak with the broker and suggest that you will at least pay for his cash costs. Have a real estate question? Send your inquiry to Ask Realty Times. Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here. For past columns, please press Ask Realty Times. This column is designed to provide accurate and authoritativePages: [1] 2