A mechanic’s lien that is filed against your property can prevent you from selling your home or refinancing your loan. There are a variety of ways to have these liens removed.
Q-I spent about $5,000 to have my kitchen remodeled earlier this year. Although I paid my contractor in full, the plumber who my contractor hired for some of the work has since filed a mechanic’s lien against my home because the contractor never paid him.
Can the plumber do this? If so, what should I do now?
A-Yes, the plumber can file a lien against your home even though you paid your contractor in full. The lien clouds the title to your property, so you can’t sell the home or possibly even refinance until the plumber gets his money and the lien is removed.
Although most liens are filed by tradesmen who weren’t paid by a homeowner, they’re sometimes the result of a subcontractor-in your case, a plumber-who wasn’t paid by the contractor who hired him.
You have a variety of ways to deal with this problem. Start by asking the contractor if he simply overlooked the plumber’s bill or if he intentionally refused to pay it.
If the contractor won’t pay immediately, you can pay the plumber yourself, then sue the contractor to get reimbursed. Remember, though, that winning in court is like winning half a war: The victory is meaningless if the contractor refuses to pay you, too.
If you’re willing to pay at least some of the plumber’s bill to resolve the issue and get on with your life, ask the plumber if he’ll accept a reduced payment. He might be willing to take, say, 50 cents on a dollar in exchange for removing the lien and getting a chance to move on, too.
Q-I am trying to get a loan to purchase a home. Although I got a divorce in 1990, a bankruptcy that my ex-husband filed in 1991 keeps appearing on my credit record.
One lender has already rejected my loan application because of the bankruptcy, even though I was not involved in my ex-husband’s court filing. What can I do to clear up my credit record?
A-If you’re certain that your ex-husband’s creditors are only interested in him and not you, contact a manager at the credit-reporting agency that your lender used and ask that the information in the agency’s files be updated.
Also, contact the nearest office of the nation’s three largest credit bureaus-TRW Inc., Equifax Inc. and Trans Union Corp.-to make sure their records are accurate, too. Expect each bureau to ask for a copy of your divorce papers and any other evidence that supports your case.
One more tip: Since it can take several weeks for your records to be corrected, ask each credit agency to immediately put a note in your file stating that you are contesting some of the information in its computer database. By doing so, future lenders that you visit won’t be surprised when your ex-husband’s bankruptcy pops up on your credit report.
Q-My wife and I inherited a home from my uncle. It’s a nicer home than ours, and I think it’s probably worth about $20,000 more than the home we own now.
If we sell our home and move into the one my uncle left us, will we be able to defer paying taxes on our resale profits because his house is worth more than ours?
A-Probably not. Internal Revenue Code 1034, the “rollover residence replacement rule,” allows home sellers to defer paying taxes on their resale gains only if they build or buy a more expensive residence within two years before or after they sell their old one.
Since you inherited the home from your uncle and paid nothing for it, you probably won’t be eligible for this important tax break.
Theoretically, you could qualify for IRC 1034 if you sell your current home, move into your uncle’s place, and then buy and occupy yet another new home before the two-year deadline expires.
However, you’d only get to spend a couple of years in the home that you have inherited before you would have to pack up and move again if you wanted to defer paying taxes on the profits from the sale of the home you own now.
Only you can decide whether the hassle and expense is worth it.
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Write to David Myers at P.O. Box 2960, Culver City, Calif. 90231-2960.
