Q–About six years ago, I bought a house with my best friend. Last month he told me he wants to sell the house and move away from this area. But I don’t want to sell–I have a good job, love the house and don’t want to move. However, I can’t afford to buy my co-owner out. He says he can force me to sell by taking me to court. We hold the title as tenants in common. Can I be forced to sell?
A–Yes. A major weakness of holding real estate titles as tenants in common or joint tenants (except tenancy by the entireties between husband and wife) is that one owner can force a sale of the property even when the other owners don’t want to sell.
It is called a “partition” lawsuit. If you owned land and one owner wants to sell but you don’t, the court can order the land partitioned between the owners. However, partitioning a house isn’t practical, so the court can order the house sold with the sale proceeds divided according to each owner’s share. I suggest you hire a real estate attorney to protect your legal rights.
Q–We are considering refinancing our home loan, which has an 8.35 percent interest rate. Our mortgage broker says we can save about $110 per month by refinancing with a so-called “no cost” refinance. But we’re wondering if interest rates will drop further and if we should wait to refinance. What’s your advice?
A–Grab that refinance deal. If interest rates drop further, you can refinance again.
I’m sure you realize that the so-called “no cost” refinanced mortgage really isn’t. The mortgage lender raises the interest rate to include the normal refinance costs such as loan fee, title fee, appraisal, credit check and other mortgage expenses the borrower normally pays.
The “no cost” mortgages are ideal for refinancing because those up-front fees are not immediately tax deductible on a refinance but the mortgage interest paid is fully tax deductible.
Please be sure the so-called “no cost” refinanced mortgage does not contain a prepayment penalty. Some mortgage lenders include prepayment penalties for two or three years to discourage frequent refinancing. Without a prepayment fee, if interest rates drop further then you will be free to refinance again.
Q–We carried back a second mortgage for our home buyers about three years ago. All went well until about four months ago, when the payments to us stopped. I phoned the borrowers and learned the husband lost his job. Also, the wife said they are now separated. She wasn’t sure if they would be selling the house. How long should we give them to decide to either make up the missing payments or sell the house?
A–One minute more. Then start foreclosure. The chances of that couple making up your payments are very remote after missing more than two payments.
Filing the foreclosure papers will motivate the borrowers to do something, such as list the house for sale. If they don’t take any action to cure the default and reinstate your mortgage, at the foreclosure sale you either get the house back (to earn a second profit) or a bidder will pay off your mortgage. Either way, you win. A local real estate attorney can handle the foreclosure details.
Q–As a real estate broker for about 12 years, I sometimes encounter listings that won’t sell no matter what marketing methods I use. For example, I’ve got a very attractive one-bedroom condo listed in an upscale complex, priced right, but it hasn’t sold in over four months. My sellers are getting anxious, blaming me. The problem is, this condo fronts on a busy street and many prospects don’t like the traffic. But when the windows are shut, you can’t hear the automobile noise. Any ideas sales ideas?
A–The one technique I’ve never seen fail, when properly used, is to advertise it for sale on a lease with option to purchase.
For example, you might headline your classified ad: “$5,000 moves you in; rent to own.” Then describe the condo’s features and the monthly rent; give the Sunday open house hours, the address and your phone. Be sure the lease-option gives a generous rent credit, at least 33 percent, toward the purchase price.
The higher the rent credit, the greater the probability the tenant will buy the condo during the one-or two-year option period.
Q–I am thinking of moving out and renting my large house to tenants. Do I have to notify the IRS when I do so?
A–No. Just move out and begin collecting rent from your new tenants. Of course, the rental income you receive must be reported on Schedule E of your income tax.
This is the same place you also report applicable deductions such as mortgage interest, property taxes, insurance, maintenance and repair costs, and depreciation deductions. Your tax advisor can give you full details.
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PLEASE NOTE: Real estate laws vary from place to place. Be sure to check the laws of your state and municipality before making decisions on real estate matters.
Write to Robert Bruss at Tribune Media Services, 435 N. Michigan Ave., Chicago, Ill. 60611.
