Q-Some time ago you said friends who buy a house as tenants in common, one owning 75 percent and the other owning 25 percent, cannot legally provide that upon the death of either the decedent`s share shall go to the survivor. Why can`t the right of survivorship be achieved by written agreement and recording so that, like a mortgage, it is binding on the decedent`s estate and takes priority over any contrary provision in the deceased`s will?
A-Let`s back up, because we just lost 99 percent of the other readers. When two people buy real estate together and they want the title to go to the survivor when the first co-owner dies, joint tenancy with right of survivorship is the way they should hold title. In some states, husband and wife can accomplish the same result by holding title as tenants by the entireties. A joint tenant`s will has no effect on property held in joint tenancy with right of survivorship.
However, joint tenants should be aware the survivorship feature can be defeated if one of the joint tenants conveys their interest before death, either to another person or to themselves as a tenant in common. Consent of the other joint tenant is not necessary for such a conveyance to break up the joint tenancy. However, if title is held by spouses as tenants by the entireties then both spouses must agree to any conveyance.
Another major problem with joint tenancy is all joint tenants must own equal interests. To illustrate, two joint tenants each own one-half, whereas three joint tenants each own one-third interest in the property.
If two co-owners want to own unequal shares, then a tenancy in common would be appropriate. But the shares of tenants in common are subject to each co-owner`s will.
I question whether your idea of combining the survivorship feature of joint tenancy with the unequal ownership feature of tenants in common will work. Frankly, I don`t see why the co-owners would want unequal ownership shares plus the survivorship feature.
As a lawyer, I see many problems. For example, one of the tenants in common could convey their interest before death to someone else. I doubt the recorded agreement would have any legal effect on such a conveyance. Also, a recorded agreement might not prevail over a deceased tenant in common`s will. Another problem is you would not get the benefit of avoiding probate, as joint tenants do. I give you an ”A” for creative thinking, but I think there are too many uncertainties. Please consult a real estate attorney for more details.
Q-In about six weeks my husband will be transferred out of town to a new job. We have visited the community twice but are thoroughly confused as to which suburb is best. The one we can best afford has cross-town school busing, and we don`t like that. But the town with the best schools has home prices which are too high for our budget. Do you think we should learn to live with the busing situation?
A-No. Don`t be in a hurry to buy a home in your new community. As you discovered, school quality has a big effect on home prices, so you don`t want to make a costly mistake.
Your best alternative is to lease a home with an option to buy. Try to get a rent credit so all or part of your rent is credited toward the down payment if you decide to buy. Benefits of lease-options include getting to try the home before buying, and leasing is usually cheaper than buying.
Q-Four friends would like to each contribute $10,000 toward the purchase of a rental house. Do you think we should form a corporation to limit our liability in case of a lawsuit?
A-No. Please consult a real estate attorney. There are many drawbacks and few advantages of forming a corporation for real estate ownership. If you want to limit your liability, carry adequate liability insurance for the property. Perhaps a better alternative is to form a limited partnership so the tax advantages can be passed through to the investors but the liability is limited. Another parternship advantage is the agreement spells out the rights and duties of each investor.
Q-Our home is listed for sale. The realty agent suggested we might like to carry back a $25,000 second mortgage since our VA first mortgage is assumable by the buyer. She suggests a 10 percent interest rate. Do you think this is about right?
A-You might be able to get a higher yield, perhaps 11 or 12 percent interest. Or you could make the loan an adjustable interest rate tied to the cost of funds index and adjusted every year. Frankly, a 10 percent interest rate is a little low in today`s market.
Q-On Monday, we made an offer to buy a house we had seen the previous day at a realty open house. Early on Tuesday morning my husband phoned the Realtor to tell her we had changed our minds, didn`t want to buy the house, wanted to revoke our offer, and wanted our $1,000 earnest money deposit refunded. But the Realtor was not in the office, so my husband left a message with her secretary that we revoked our offer. On Tuesday evening about 8 p.m. the Realtor phoned to tell us the seller had accepted our offer. But we told her we had revoked our offer on Tuesday morning. The Realtor said she never received the message and she refuses to refund our $1,000. We consulted an attorney who says we revoked our offer before it was accepted so there is no valid contract. But he won`t take our case to get a refund of our $1,000 because he says his fee could cost more than $1,000 if a trial becomes necessary. Meanwhile, the buyer threatens to sue us for damages if we don`t complete the purchase. In good faith, we went back to look at the house a second time and are now sure we don`t want to buy it. What should we do?
A-If you revoked your purchase offer before it was accepted by the seller, no contract exists because there was no meeting of the minds.
The key to your side of the story is the alleged revocation of the offer via the Realtor`s secretary. I suggest you visit her to determine her recollection of the matter. If possible, get her written statement as to whether or not she received your husband`s call revoking the offer, and if that message was relayed to the realty agent.
Your situation is a classic example of how a simple revocation of a purchase offer can become a very complicated matter when things don`t go right. I suggest you keep in touch with your attorney in case the seller follows through with that threat to sue you for damages.
As for getting your $1,000 deposit refunded, you might mention to the realty agent you are thinking of filing a complaint with the state real estate commissioner regarding the agent`s failure to follow your instructions. I wouldn`t be surprised if you get your $1,000 refunded very quickly.
Q-I inherited a run-down apartment building in a bad part of town. The city health department was immediately on my case to get the building repaired. Instead, I decided it was cheaper to have the building demolished. But I first offered it to the fire department and they held several drills there for their rookies. My demolition cost was, thereby, reduced by several fires they conducted, and the city hauled away the remains. But my problem is I now own a vacant lot in a bad part of town. The health department is still on my case because now my lot periodically fills up with trash dumped by neighbors which I must pay to have removed. I have had this vacant lot listed for sale with a fine Realtor for over six months without any offers. What should I do?
A-The best way to get rid of unwanted property is to trade it. Ask your Realtor to advertise your lot ”Will trade.” If the lot has any reasonable use allowed by the zoning, I think you will be pleasantly surprised by the exchange offers you will receive. I had a similar problem years ago with an unsaleable vacant lot which was traded for a saleable apartment building in a city about 50 miles away.
Another alternative is to start making offers to trade your lot for property you want to own. Eventually you will find a seller of another property who will accept your lot as all or part of the down payment on the property you want to acquire. Consult your tax adviser about the tax-deferral aspects of an IRC 1031 exchange.
Q-About two months ago we bought a house which has a shared driveway with the neighbor. However, our deed says nothing about any easement. What irritates us is the neighbor leaves for work about 6 a.m. in her noisy old car. We asked her to park her car on the street and not to wake us, but she wasn`t very nice and told us to go someplace I don`t want to go. The neighbor could build a driveway on her property to the back alley. Is there any way we can stop her from driving over our property?
A-Perhaps. Please consult a real estate attorney. If there is no recorded easement over your land, then you can deter the neighbor from using your land by erecting a fence.
However, the neighbor may argue she has a prescriptive easement to continue driving over your property. But a prescriptive easement can only be created by long-term use which is open, notorious and hostile. If you can prove the previous owner allowed permissive use, that defeats the neighbor`s prescriptive easement claim because the use wasn`t hostile. Since the neighbor has access to the street she couldn`t claim an easement by necessity, so you might win if the case goes to court.
Q-Three weeks ago we had a most unpleasant experience with a Realtor and would like your opinion if we should take any action. We are trying to buy a home and visited the Realtor`s Sunday open house. The house was exactly what we wanted. However, after many months of searching we know it was overpriced by at least $20,000. But the Realtor was a real snob and tried to justify the asking price although no home has sold in the neighborhood for even close to the listed price. We sat down with the Realtor who prepared a purchase offer bid. But when we stated the price we wanted to offer, she refused to continue. She said she knew the seller wouldn`t accept our offer. But last week we learned from a neighbor that another buyer submitted an offer through another agent and the seller accepted. This accepted offer was $4,000 below the price we were going to offer. When I phoned the Realtor she was very indignant and said the seller accepted the lower offer only because ”his personal financial situation had changed,” whatever that means. Needless to say we are very mad at the Realtor. What should we do?
A-I don`t blame you for being upset at the Realtor. As I`ve written here many times before, a real estate agent has a fiduciary duty to the seller to present all written offers, no matter how ridiculous the offer bid might seem to the agent.
Personally, I have made many low offers to buy property which I felt the seller would never accept but the seller either accepted or made a
counteroffer which was acceptable to me. Unless the agent has written authority to reject offers it is not up to the agent to decide which offers will be presented to the seller.
When a buyer feels the real estate agent will not fairly present a purchase offer to the seller the only way I know to be certain the offer will be properly presented is to write in the offer: ”This purchase offer bid to be delivered to the seller only in the presence of the buyer.” Of course I include such a clause just in those rare situations where I feel the agent will not enthusiastically work to get the seller to accept the offer.
If I were in your situation I would file a complaint against the Realtor with the state real estate commissioner who will investigate and possibly revoke the agent`s license for violation of fiduciary duty. You also may want to file a complaint with the local Board of Realtors but I doubt that will produce any results because they rarely expel members. You also may want to contact your attorney.
Q-Thank you for saving me tax on $125,000 when I recently sold my home. I am a widower who was planning on getting married, selling my home and moving into my wife`s home which is much smaller and easier to maintain. However, you said that before people over 55 get married they should ask their mate:
”Honey, have you used your over 55 rule $125,000 home sale tax exemption yet?” I realize that sounds corny but I asked my prospective wife that question. It turned out she had used her exemption when she was married to her late husband who died about two years ago. If I had waited until after the wedding to sell my home, I would have had to pay tax on all of my $130,000 profit. Now I only owe tax on about $5,000 taxable profit.
A-I appreciate your sharing that valuable information. To summarize, individuals age 55 or older who plan on getting married and selling their home should ask their new mate if they have used their once-per-lifetime $125,000 home sale tax exemption. If the answer is ”yes,” that means after marriage the spouse who has not yet used their $125,000 exemption will be disqualified from doing so because both spouses must make the election and only one use per lifetime is allowed. Ask your tax adviser to explain further.
Q-As a Realtor I greatly enjoyed your recent article encouraging home sellers to fix up their homes before sale. I often find a few thousand dollars spent on cleaning and repairing will make the home sell faster and for much more money than if it isn`t upgraded. However, I wish you had added that it doesn`t pay to make the cheapest improvements. For example, I recently listed a home where the sellers installed new carpet. That was a smart idea but they put in the cheapest $10-per-yard carpet with a poor pad. Prospects remark how hard the floors are. Instead of being an advantage, the new carpet is turning out to be a big disadvantage. Spending perhaps $5 to $10 more per yard would have made the home much more salable. Please tell home sellers it doesn`t pay to make the cheapest improvements.
A-Thank you for sharing that profitable and practical information.
