Smart home-buyers demand that the seller respond to their offer within two days. A longer period provides the seller with too much time to fish for a better deal.
Q–We made an offer on a home the weekend before last and gave the sellers five business days to accept or reject our offer. The sellers’ real estate agent called us the day after our offer expired and said the house had been sold to a couple who offered $2,000 more. We would have gladly raised our offer by $2,000 or even $4,000 if the agent had told us that another offer was pending. What can we do now?
A–You made a big mistake when you gave the seller five business days to consider your offer. Buyers should always include a clause in their purchase offer that gives the seller only 24 or 48 hours to either accept the offer or make a counteroffer. By giving the seller five business days (which of course works out to seven days when the weekend is included), you unwittingly provided ample time for the seller’s agent to show your offer to competing buyers and secure a higher bid.
Though the seller has agreed to another buyer’s proposal, you can still make a backup offer for the home that the seller can accept if the first deal falls through. If you instead choose to make an offer on a different house, I hope you’ll learn from your mistake and make sure you give the owner no more than 48 hours to respond.
Q–We are going on a two-week vacation at the end of the month, and a friend will rent our house for 12 days that we will be gone. Will we have to report the money he pays us to the IRS?
A–No. The Internal Revenue Service says that anyone who rents their own home or vacation property to tenants for fewer than 15 days a year does not have to declare the rental proceeds on their tax return. You won’t have to pay taxes unless your friend stays for more than two weeks.
Q–I have been renting an apartment, but now I am moving because I have purchased my first house. When I rented the apartment five years ago, I put up $1,200 cash — $600 for the first month’s rent and $600 for the last month’s rent. Today, my rent is $785 per month. Must the landlord accept that $600 as full payment for my last month’s rent, or will I have to pay an additional $185 because my rent now is higher than when I first moved in?
A–Your landlord must consider the $600 as full payment, provided you have your original receipt or lease documents that clearly state the $1,200 you put up five years ago was full payment for your first and last month’s rent. You paid your last month’s rent years in advance, and the landlord can’t ask for more even though your rental fee has climbed.
Savvy landlords today use more restrictive wording in their lease agreements. Rather than saying that part of the tenant’s move-in check represents “payment in full” for the final month, the contract stipulates that the money is a “deposit toward the last month’s rent.” Had the lease agreement you signed five years ago contained such a clause, the landlord could keep the $600 and also ask you to pony up an additional $185.
Q–The IRS placed a tax lien on my home in 1996 after winning a judgment against me in court. I paid the lien off in 1997, but it still appears on my credit record with a notation that the lien was filed in 1996 and released in ’97. Now I want to refinance my mortgage, but I am worried that having the lien on my record will hurt my chances of getting a loan. How can I get the lien removed from my credit history?
A–Only time can heal the wound on your credit record that was created when the Internal Revenue Service slapped on a lien on your home.
Your letter states that the lien was created after you failed to pay a debt in a timely fashion. The bill was delinquent for a long time and your creditor, the IRS, finally had to take you to court in order to collect its money. The lien will remain on your credit record for seven years from the date it was created in 1996, even though you paid the bill and had it released last year.
Many lenders feel a recent tax lien is almost as bad as a recent bankruptcy. Lenders are understandably nervous about loaning money to anyone who has failed to pay past debts, especially if the creditor happened to be a branch of the U.S. government.
You can probably still get a mortgage, although you’ll need to show the lender that your financial house is back in order. The bank might also insist that you make an unusually large down payment or pay a higher-than-average interest rate — two common ways that lenders offset the extra risk involved in loaning money to applicants who have a major blemish or two on their credit record.
Q–I have bought a new desktop computer and printer for my home, for a total of $2,940. Are they covered under my homeowners insurance policy, or do I have to pay extra to protect them?
A–Most standard homeowners policies provide either $2,500 or $5,000 worth of protection for computers and related equipment. Read your policy or check with your insurance agent to determine exactly how much coverage you have.
Though your new computer and printer cost $2,940, you might not have enough protection even if your policy provides $5,000 worth of coverage. That’s because most computer users also have lots of other equipment, such as modems, pricey software programs, a facsimile machine and even an expensive laptop computer in addition to their desktop PC system. The cost of replacing all that equipment if it’s stolen or destroyed could easily top $5,000 and maybe even reach $10,000.
For about $20, you could add an “electronic equipment rider” to your homeowners policy that will provide an additional $5,000 in coverage for all your high-tech possessions. I bought such a rider last year, and the cost-effective protection it provides lets me sleep much better at night.
Q–I rented out my home in May because I could not sell it before the purchase of my new home closed in June. I know that I must declare the rental income I get on my tax return, but do I also have to declare the $750 security deposit the renters gave me before they moved into my old home?
A–No, you don’t have to report the security deposit you received as “rental income” on your next tax return.
Rules published by the Internal Revenue Service clearly exempt landlords from paying taxes on the security deposit they receive from a tenant. But if your tenant eventually defaults and you keep part of the deposit to cover the lost rent, the IRS will consider the portion of the security deposit you keep as taxable rental income.
Q–I would like to follow the advice in your “Free and Clear: Getting the Mortgage Monkey off Your Back” booklet to pay my loan off early and save on interest charges. My loan is one year old, with an outstanding balance of $165,632 at 8.1 percent and payments of $1,237. If I add $63 to each of my future payments (for exactly $1,300 a month), how much sooner would I pay the loan off and how much interest would I save?
A–Your loan is a year old, so you have already paid about $13,447 in interest. If you stick to the plan your lender gave you, it will cost an additional $264,861 in interest over the remaining 29 years. Adding $63 a month, beginning with your next payment, would allow you to pay the loan off 25 years, five months from now and reduce your future finance charges to $214,292. You’d save $50,569 in interest and pay the mortgage off three years, seven months ahead of schedule.
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Write to David Myers, P.O. Box 2960, Culver City, Calif. 90231-2960.
