Q-I agreed to sell my home to a VA home buyer. I realized I would have to pay his discount loan fee, which probably will be about 2 percent. But I figure it is worthwhile for me, because I will be receiving an all-cash sale. However, the Realtor failed to explain to me that I also have to pay for repairs required by the VA appraiser. She came out last week and didn`t like several things. She said I must paint the exterior, fix the back porch stairs, replace a cracked bathroom window and enclose the garage with wallboard.
A contractor friend estimates this work will cost about $4,000. I am willing to do this unexpected work if the buyer will raise the bargain price I gave him on the house. But the Realtor says I can`t change the price. What can I do?
A-The property purchase terms should have been negotiated before, not after, signing the sales contract. Your Realtor should have emphasized that VA (and FHA) appraisers often require repairs be made to the home before the VA (or FHA) mortgage will be approved. For example, I once sold a home to a VA buyer and the appraiser required the front of the house to be painted (but not the back, which needed paint much more).
At this point in the transaction, you should re-read your contract to see whether you are obligated to make these repairs. If not, you have the choice to (1) cancel the first sale and renegotiate with the buyer or (2) go ahead and pay the $4,000 for the repairs, so the original sale can be completed.
Vacation home
Q-We plan to sell our home and move to our vacation cabin, which will become our full-time residence. Our problem is that when we sell our principal residence, the net sales profit will be about $100,000. Neither my wife nor I is over 55. If we spend the $100,000 to upgrade our vacation cabin and pay down its mortgage, can we avoid tax on this sale profit?
A-No. Internal Revenue Code 1034, the rollover residence replacement rule, requires you to defer your profit tax when you sell your principal residence and buy a replacement principal residence of equal or greater cost within 24 months before or after the sale.
Unfortunately, unless you bought your vacation home within 24 months of the sale of your principal residence, it cannot qualify as a replacement principal residence. Paying down its mortgage balance won`t help either.
Lifetime annuity
Q-A friend gave her home to her university in return for a lifetime annuity. When she dies, the university will sell the home. In the meantime, my friend gets to live in her home and receives a lifetime annuity. I own several properties and, because I don`t have any relatives I like, I am considering the same type of arrangement, but not with my friend`s university. How can I find out about such a donation plan?
A-Many charities, such as churches, hospitals, colleges and religious organizations, welcome real estate donations in return for lifetime income paid to the donor.
Of course, not all charities accept property donations, because most prefer cash, which is easier to manage.
