Q-We are trying to buy a home but are encountering difficulty with the seller who does not have a real estate agent. Our purchase contract contains a contingency for obtaining a mortgage commitment within seven days.
The mortgage broker wrote a letter to the seller stating we qualify for a mortgage.
However, the seller didn`t receive the letter and claims we are well beyond the seven-day deadline for getting a mortgage.
Also, she says a mortgage broker`s letter is meaningless because (1) he is just a middleman and is not the actual lender and (2) the appraisal hasn`t been completed.
We suspect the seller has a better offer from another buyer and is trying to get out of selling the home to us. What should we do?
A-Consult a real estate attorney. If litigation becomes necessary, even when a real estate purchase contract says ”time is of the essence,”
deadlines for removing contingencies are not always strictly enforced.
Anything can happen in a trial court and the judge might be very reluctant to enforce a forfeiture of your purchase contract.
Or he might strictly construe the deadline, which you apparently didn`t meet, with a firm mortgage committment from a specific lender.
I agree with the seller that a letter from a mortgage broker saying you qualify for a loan is meaningless because he isn`t the lender, just a middleman between you and the lender.
If you think the seller is going to cancel your contract and sell the house to another buyer, your attorney might recommend bringing a specific performance lawsuit to enforce your purchase contract.
The attorney probably also will suggest recording a lis pendens (which means litigation involving the title is pending) to effectively stop a sale to another buyer.
Q-The soil under our home is not very stable. I think the house was built on filled land which was not properly compacted. Whenever a heavy truck goes by on the street our house shakes.
Our home is located on the edge of a steep ravine and the bedrooms seem to be slipping away from the rest of the house.
Our insurance agent says earth movement is not covered by our homeowner`s insurance policy.
It is getting to the point where I am afraid to stay in the house when we have a heavy rain because I am worried half the house will slide down the ravine.
I talked to a realty agent about disclosing this problem and selling our home but she said no agent in his or her right mind would risk handling such a sale which, even if the house could be sold, would be for far less than we paid for the house.
Is there any way we can walk away from our house and take a casualty loss income tax deduction?
A-The casualty loss tax deduction requires an uninsured event which is sudden, unexpected or unusual. Examples include damage caused by fires, floods, thefts and earthquakes.
But threatened losses don`t qualify. Unless your home suffers a casualty loss, which is not reimbursed by insurance, you don`t qualify for a tax deduction. Consult your tax adviser for details.
Q-A year ago we bought a house full of furniture that we were paying for on monthly installments. Then in December our home burned. The firemen said the fire started in the kitchen in the wiring.
Unfortunately, we did not have a renter`s insurance policy because it was too expensive. Do we have to continue paying for the furniture that was destroyed, and is the landlord liable to us for damages?
A-Consult your attorney. Your situation shows why renters should always have a tenant`s insurance policy. In addition to protecting you from loss due to fire, a tenant`s policy pays for loss due to other causes such as thefts, water damage and liability for injury to persons on the premises.
A tenant`s insurance policy, like automobile insurance, seems expensive until a loss occurs; then it becomes very cheap protection.
The destruction of your furniture doesn`t relieve you of the responsibility to pay for it. You made a contract with the furniture company and it wasn`t its fault your furniture was destroyed by fire.
The landlord might be liable to you for damages if he knew of a dangerous wiring condition and failed to repair it. However, if the landlord had no notice of the hazard, he would not be responsible to you for damage caused by a fortuituous event.
Q-I followed your advice and diligently searched for a below-market bargain home that I can fix up for profit. In a neighborhood of $150,000 homes, I found a rundown ”fixer house” that I acquired for just $87,000.
It will require about $20,000 of work to bring it up to the same condition as nearby houses. My question is do I owe any tax on my bargain purchase?
A-No tax is due at the time you buy a bargain property for less than its market value. You can see how difficult it would be to tax such profits which cannot be exactly calculated.
However, when you sell the property, then the difference between its adjusted cost basis (purchase price plus capital improvements you add) and its adjusted sales price (gross sales price minus selling expenses) will be your profit.
Of course, if the house is your principal residence, then you can escape tax on your sale profit by buying a replacement principal residence of equal or greater cost within two years before or after the sale (IRC 1034).
Or if you are 55 or older, and live in the home at least three of the five years before its sale, you can claim up to $125,000 of tax-free home sale profit if you have never used this tax break before (IRC 121). Consult your tax adviser for more information. Congratulations on making that bargain purchase.
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Please note: Real estate laws differ from place to place, and laws of your area should be checked before making decisions on real estate problems. Robert Bruss will answer inquiries addressed to Tribune Real Estate Features Service, P.O. Box 6710, San Francisco, Calif. 94101.
