Many buyers make their offers contingent on selling their own home first. Sellers should protect themselves in those situations by including a “kick-out” clause in their sales agreement.
Q–Our home has been on the market for a month and we have just received an offer that is very close to our asking price. However, we are worried because the offer is contingent upon the buyers selling their home first. We want to accept their offer, but we don’t want to get stuck if they can’t sell their home. What should we do?
A–Start by telling the buyers that you’ll accept their offer if they remove the condition that their current home must sell first. If they refuse, you can still accept their offer but protect yourself by including a “kick-out” clause in your sales contract.
Including such a clause in your sales agreement would allow you to rescind your acceptance of their offer–in other words, kick it out–if a different buyer makes a better offer while you’re still waiting for the current buyers’ home to sell. You could also include a clause that says your acceptance is good for only 15 or 30 days: If the buyers can’t reach an agreement to sell their own home within that time period, your agreement would be canceled and you could put your house back on the market relatively soon.
A real estate agent or lawyer can help you write a kick-out clause to include in your sales contract and may have some additional ideas that will protect your interests if the buyers’ own home-sale falls apart.
Q–I heard that Congress is thinking about passing a law that would allow homeowners to deduct their mortgage-interest payments without having to fill out a long tax return. What are its chances of passage?
A–You’re probably talking about the novel tax-reform plan recently suggested by Sen. Byron Dorgan, D-N.D. Under his so-called Shortcut System, married taxpayers with incomes under $100,000 and single filers with income less than $50,000 would get at least a partial deduction for their mortgage-interest charges without having to fill out a cumbersome tax return.
Dorgan estimates his plan would relieve 40 million Americans from their current tax-filing duties. But Washington insiders tell me there’s little chance that a sweeping tax-reform bill will be passed this year, so Dorgan’s deal appears dead as a doorknob.
Q–I own a tiny vacation home in the mountains, and the city council there has passed an ordinance that requires homeowners to trim back or even cut down their trees if the trees obstruct another owner’s view. Is that legal?
A–The constitutionality of such a law seems questionable, but it’s a safe bet that even more cities will pass them now that a California appeals court has said they’re OK.
The California decision, which was issued earlier this year, involved a homeowner who was sued by a neighbor after the city approved a “View and Sunlight Obstruction from Trees” ordinance requiring owners to trim their trees if they blocked another property owner’s views. The homeowner with the offending trees claimed the Constitution prevented the city from passing such a law, or at least prohibited the law from being enforced.
The appeals court felt differently. The judge who wrote the decision likened the law to tried-and-true zoning ordinances that establish height limit for property owners who want to build on a vacant lot or add another story to their current home. The judge also noted that many private homeowners associations across the United States already have similar laws on their books and that some of those restrictions have withstood previous court tests.
Although the case involved two California property owners, the decision can be used by cities in other states to defend against challenges to similar laws in their area. You can hire a lawyer and fight your own community’s anti-tree law, but I’m afraid your lawsuit will quickly (pardon the pun) be cut down.
Q–I heard that the FHA loan limit is going up. What is the new limit, and when does it take effect?
A–I’m afraid you’ve gotten a little ahead of yourself. Congress is considering raising the limit on Federal Housing Administration loans to $227,150, but Washington insiders tell me there’s no more than a 50-50 chance that the measure will be approved.
The FHA loan program is extremely popular, largely because it requires down payments as low as 5 percent. The agency won’t insure loans for more than $170,362 in costly housing markets or $86,317 in areas where homes are relatively affordable because it wants to make sure the program is used by people who really need help rather than rich buyers who are looking for fancy homes.
The powerful National Association of Realtors and some other groups are urging Congress to create a uniform $227,150 ceiling for FHA loans, which they say would allow several million more Americans to qualify for the agency’s programs. Their efforts are opposed by some lenders and federal legislators, who say the government shouldn’t spend its money insuring loans for people who earn enough to qualify for a mortgage as high as $227,150.
Q–Who is supposed to pay for the cost of a home inspection, the buyer or the seller?
A–Everything in a real estate sale is negotiable. But most of the time the buyers agree to pay the home-inspection fee because they’re the ones who will benefit the most from the inspector’s findings.
Some sellers don’t want an inspector nosing around their property, but savvy buyers always make their offers contingent upon the home passing an inspection by a qualified inspection company.
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Write to David Myers, P.O. Box 2960, Culver City, Calif. 90231-2960.
