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| John Hall & Associates, Inc. |
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Articles and Advice |
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| Foreclosures drying up flow of HOA fees By Benny Kass DEAR BENNY: I live in a 12-unit condominium complex. We self-manage. One of the units will probably be going into foreclosure in the very near future. What does the complex need to do to collect the monthly dues and yearly assessments once the unit is in foreclosure? –Sara DEAR SARA: Unfortunately, this is a very common problem that many condominium associations throughout the country are facing. It has a downhill spiraling effect: When a unit owner is delinquent on his/her mortgage payments, that owner doesn't pay the condominium fees either. The first thing you should do is to consult an attorney in your area who understands community association law. There are to my knowledge some 12 states in the country that make the condominium assessment a priority lien. For example, in the District of Columbia where I practice, when a lender forecloses on a unit, up to six months of back condominium fees must be paid when either the bank or a third-party buyer at the foreclosure sale takes title. If you are in one of those "super-priority" states, you or your attorney should put the foreclosing lender on notice of this law. And regardless of whether this law exists in your state, you have to carefully monitor the status of the foreclosure sale. Just as soon as title passes -- either to the bank or to a third party -- the new owner becomes a unit owner, and is legally obligated to pay all future condominium fees. Actually, as harsh as it may sound, if a unit owner is in deep trouble and facing foreclosure, you want the sale to take place as quickly as possible. The longer the process takes, the more money your association will be losing if the delinquent owner is not paying the monthly condo fees. DEAR BENNY: In April 2005 we bought a lot in Missouri and received a general warranty deed a month later. The deed described the lot and its conveyance to us as husband and wife. Shortly thereafter, we began construction of a house. The house was completed in February 2006 and we began residing there at that time. We own the lot and house with no mortgage. The deed has not been changed to include the improvements, and there is no wording such as "joint tenants" or "right to survivorship." Your recent Mailbag article regarding the importance of this kind of wording has made me question whether we have what is necessary to describe ownership of both lot and house as well as protection of the surviving spouse's rights. –Ed DEAR ED: You raise a two-part question. First, the 2005 deed that you received conveyed the property to you and your wife. The fact that you constructed a house on the vacant lot does not change the fact that both of you own the property. I would not worry about that. I don't know Missouri law. You have to confer with a local attorney to make sure that your deed is properly worded. In many states, husband and wife take title as "tenants by the entirety," which is a form of title reserved exclusively for married people. Such a deed has the same effect as a deed that is held as "joint tenants," but actually gives the husband and wife more protections. But your state may take the position that the mere words "husband and wife" is sufficient. Not all states use the concept of tenants by the entireties. DEAR BENNY: Can you please define "capital gain"? You mentioned the term in one of your previous articles, but I did not quite understand how it would benefit me. My husband passed away five years ago and I am ready to sell our home and downsize to a smaller one. The house is 30 years old and the mortgage was paid off two years ago. I would appreciate any information you could give me on the subject. –Linnie DEAR LINNIE: Capital gain is the profit you have made on your house. You take your original purchase price, add to it the cost of any improvements you may have made, and you add certain expenses that you paid when you first went to closing (escrow). These expenses can be found in IRS Publication 523, entitled "Selling Your Home," which can be downloaded from www.irs.gov, and click on Publications. This is called the "tax basis" of your house. Then you take the selling price of your house, and deduct any real estate commission you may have paid, as well as other expenses such as advertising, legal fees associated solely with the selling of the house, and any loan charges you may have paid for your buyer. This is the adjusted selling cost. To get your gain you subtract your tax basis from the adjusted selling cost. This is a very oversimplified explanation. I have not discussed your situation about where your husband died, because you will get a stepped-up basis that will differ depending on where you live. Furthermore, I have not discussed the up-to-$500,000 exclusion of gain (up to $250,000 in your case because you cannot file a joint tax return) that you can take if you have owned and used the house for two out of the five years prior to its sale. You should carefully review the IRS publication, and if you still have specific questions, talk with your own tax and legal advisors. DEAR BENNY: I want to buy my brother's home (essentially for the amount of the mortgage), which I would allow my brother to continue to live in, and which I would use as a second (vacation) home. When my brother leaves the house (death, nursing home, etc.), I plan to sell the house and use the IRS $250,000 capital gain exclusion (assuming at least two years of ownership). Are there any potential problems with this plan? Would it be wise to place the house in a trust? –Frank DEAR FRANK: You have to talk with your attorney as to whether to put the house in trust. There are many variables, which are individual and possibly unique to your situation, so I don't believe it would be appropriate to give you advice on this issue. I see no real problems with your proposed plan. However, you should know that the new Housing and Economic Recovery Act of 2008, signed into law by President Bush on July 30, 2008, puts some restrictions on your ability to claim the full $250,000 exclusion of gain. This is complicated, but suffice it to say, if you sell a second home (whether it be a rental property, a vacation home or the type you are describing) the exclusion will be allocated between the time you owned the property and the time that you actually lived in it. In simple terms, the period of time you used the property as your principal residence will be eligible for the gain exclusion; the time that it was not your principal residence may be taxed. There is a formula to determine your taxable situation: The numerator is the amount of time (after Jan. 1, 2009) that the property was not your principal residence, and the denominator is the total amount of time of ownership from when you first bought the property. DEAR BENNY: My wife and I are considering renting our current primary residence for a short time after we build a new house with the idea of letting the housing market stabilize before we sell our current home. What are the tax rules regarding renting a primary residence and still counting it as a primary residence when sold? –Michael DEAR MICHAEL: Good suggestion, and hopefully that stabilization will occur quickly. In order to be eligible for the up-to-$500,000 exclusion of gain ($250,000 if you are single or do not file a joint tax return), you have to own and use (live in) the property for two out of the previous five years before the house is sold. In your example, if you already have owned and lived in the house for at least two years, you can rent it out for one day less than three more years. Be careful, however. If you rent out your house, will potential buyers be interested in buying when there are tenants? Will you be able to get the tenants out of the property in time to sell before the three years are up? Perhaps an investor can be found to buy and let the tenants stay in the house, but you cannot count on finding such a buyer. If you decide to rent, my suggestion is to make sure that the lease completely expires in two years. This will give you one full year in which to find a buyer. Otherwise, you will have to pay capital gains tax on any profit you make, unless you either hang on to the house as a long-term investment or do a 1031 (Starker) exchange. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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| Top ways to boost curb appeal By Pau Bianchina You've no doubt heard the term "curb appeal," which is the first impression that your home makes when a visitor arrives. Whether you have your home up for sale or just want things to look a little nicer when you or someone else pulls up out in front, the best place to start is by giving the front of your home a critical examination. Driveway: A driveway, by necessity, tends to be a fairly dominant feature, and it is often one of the first things that a person sees when they arrive at your home. If you have a concrete driveway that is oil-stained, check with your local home center for cleaners that can spruce it up. While you're there, get a crack repair compound and take care of smaller cracks before they become larger. For asphalt driveways, a seal-coat can often make a big difference in appearance and help prolong the asphalt as well. For concrete or asphalt that is badly damaged, it's time to be thinking about replacement. You can replace the driveway with the same material as before, or consider an updated look by using paving stones instead -- they hold up well in all types of weather, and can even be a very satisfying do-it-yourself project. Walkways: When someone arrives, is there a clear and safe path to your front door? You may not mind walking across your front lawn, but guests and prospective buyers would definitely prefer a walkway. There are lots of options for creating a new front walkway or replacing an existing one, so check out your home center or some landscaping magazines for ideas. Landscaping: Speaking of landscaping, do you actually have any? Is it well maintained? Few things look worse out front than an overgrown or neglected yard, and you can often remedy things with a little hard work and some minimal expense. Cut back or remove trees and bushes that have gotten out of control. Feed the lawn to get it to green up again, or consider removing all or part of it and replacing it with low-maintenance materials. If you have planter beds, be sure they're weeded and have fresh bark in them. Plan your landscaping to create a visual appeal by not having all the same type of plant. Intersperse some plants that provide spots of color at different times of the year, and mix plants for different heights as well. Shade Trees: Consider adding a couple of new shade trees in front. Trees are good for the environment in general; they help a home look more established and appealing; and they can help lower your summer cooling costs as well. Trees look best planted in odd numbers -- a grouping of three or five, for example -- and the folks at your local nursery can help you with proper spacing. Exterior Paint: There is probably nothing that will help or hurt the outside of your home as much as how your paint job looks. A fresh coat of paint in up-to-date colors works wonders, while old, peeling paint in a color scheme that went out of style when Eisenhower was president can really ruin a first impression. If the paint is in generally good condition and just has a few bad spots, spend a couple of hours with a paint scraper and a can of exterior primer to get things ready for touch up, then have your local paint store match you up a gallon of paint and touch up the primed areas so they blend in. You might also want to consider repainting the eaves or window trim in a fresh new color to liven things up a little. A New Entrance: Your front door is one spot that every visitor has to pass though, and it can make a lasting impression. A fresh coat of paint or stain can sometimes do the trick, but if your door is badly beat up you should consider replacing it. Check with a local company that specializes in doors (not a home center) and see about having a new door matched to your existing frame. The door company will cut the door, mortise the hinges, and drill for the locks using your old door as a pattern, so you can slip the new door right into place without expensive frame alterations or extensive carpentry. Whether you're getting a new door or working with your old one, make sure that there are no squeaks or groans when it opens, and that it fits well in the frame without binding. Check the operation of the door handle and deadbolt; check the condition of the weatherstripping; and don't forget the operation of any screen and storm doors. Cleaning: Last but far from least, clean things up a little. Pick up any trash that's accumulated, including dead leaves, cigarette butts and other small debris. Wash the siding to remove dirt, dust and cobwebs, and wash the windows. Hose off the walkways periodically, and make sure that all exterior lighting is operational. Finally, clean off the front porch -- including porch furniture and knick-knacks -- so that that area is clean and inviting as well. |
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| Choosing the right weather stripping By Paul Bianchina Air infiltration -- the movement of outside air into and out of your home -- can account for a significant amount of heat loss, and the resulting air currents can make a home feel uncomfortably drafty. When it comes to air infiltration some of the most common culprits are exterior doors, so a few weekend hours devoted to some new weather stripping can have some pretty dramatic results. Selecting the right weather stripping The type of weather stripping to use depends somewhat on the type of door and frame you have, and also on how much time and effort you want to devote to the task. The easiest and least expensive is foam, but, while it's better than nothing, foam doesn't form a tight, uniform seal and is also easily damaged. Foam weather stripping comes in rolls of different widths and thicknesses, and is self-adhesive. It is applied to the inside edge of the door stop -- the wood strips mounted on the door frame that the door closes against -- and is designed to form a seal when the door closes against it. Select a foam that is the same width as the thickness of the door stop -- typically 1/2 inch -- and that is thick enough to close the gap between the door and the stop. Simply cut the foam to length with a pair of scissors, peel off the backing paper, and press it firmly against the door stop. A better choice is a compression weather stripping, which also fits between the door and the door stop to seal off air leaks, but has the advantage of being easier to adjust and considerably more durable. One type of compression weather stripping is a semi-rigid, high-density foam strip that mounts into a slot in the door stop. Most new doors now come with this type of weather stripping, and if you need to replace an existing piece on one of your doors, installation is simply a matter of cutting the replacement material to length and tucking the flange on the weather stripping into the slot on the door stop. If your door does not currently have this type of weather stripping, adding it would necessitate removing the door stops, cutting a slot along one edge, then reinstalling them. Almost as effective -- and easier to install -- is vinyl bulb weather stripping. Vinyl bulb weather stripping has a tough, hollow strip of vinyl set in a rigid piece of aluminum, and a complete weather stripping kit contains two long pieces for sides of the door, one short piece for the top, and all the necessary screws or nails for installation. To install, cut the short piece to fit between the door stops. Close the door, place the weather stripping on the face of the door stop so that the vinyl bulb is slightly compressed against the face of the door, and nail it in place. Then simply repeat the process with the two side pieces. To complete any door weather stripping operation, don't forget the gap between the bottom of the door and the wood or metal door sill. The simplest way to close this off is to use a door sweep, which is a flat aluminum strip with a piece of vinyl weather stripping in one edge -- simply screw the strip to the outer face of the door so that the vinyl makes contact with the sill and covers the gap. More effective, however, is the door bottom, which is an L- or U-shaped aluminum strip with a curved vinyl insert on the bottom. The metal fits over the very bottom of the door, and is adjusted up or down so that the vinyl forms a complete seal against the sill. Installation may require removing the door and cutting a little bit off the bottom to accommodate the thickness of the metal and vinyl. All of these types of weather stripping are available at home centers, lumber yards, hardware stores and discount stores, and typically come with complete installation instructions and all of the necessary hardware for fast and easy installation. |
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| Mortgage approval is no easy task By Dian Hymer It wasn't too long ago that home buyers made offers without financing contingencies and closed the deal in as short as 14 days following acceptance. Quick closes are virtually impossible today if you're buying a home with the aid of a mortgage. And, it's highly recommended to include loan and appraisal contingencies in your offer. Following the credit crisis of August 2007, many mortgage lenders closed down. Those that are left have cut their staff due to low demand for mortgages. Also, it's now necessary to actually qualify financially for a home mortgage. This adds time to the loan approval and funding process. For most mortgages, home buyers are now required to have good credit. They need to provide verification of employment (W-2s or tax returns), verification of the funds needed to close (down payment and closing costs) and verification of reserve funds. If the funds haven't been sitting in your bank account for a few months, some lenders require proof of where the money came from. Be prepared to provide brokerage statements, and any other supporting documentation that will validate you as a bona fide borrower. Buyers who own other real estate will need to provide even more documentation. HOUSE HUNTING TIP: It's a good idea to start pulling together all of your financial documents as soon as you're serious about buying a home. Ideally, the paperwork required by the lender should be forwarded to your loan agent or mortgage broker within a couple of days of contract acceptance. You can't wait until the last minute to provide the lenders what they need and expect to close on time. Before you write an offer, check with your mortgage person to find out how long it will take to process and fund the mortgage. Some lenders are taking 35 to 40 days from acceptance. So, you wouldn't want to commit to a 30-day closing, if this is the case. Make sure that you allow sufficient time in your contract for the appraisal and formal lender underwriting approval. This could take two to three weeks, depending on the lender and on how diligent you are about supplying the documentation. Your lender or mortgage broker will order the appraisal of the home you're buying. It should be ordered as soon as possible. If you end up not buying the house, you might owe an appraisal fee. However, waiting to order the appraisal could cost you time. Many lenders require a review appraisal, which is a second appraisal to confirm that the first one is accurate in terms of market value. Ideally, this should be done before you remove your appraisal contingency. If it can't be done within that time frame, ask the seller for an extension. Before August 2007, it was common practice for lenders to prepare the mortgage documents for the buyers to sign even though all underwriting conditions had not been met. For instance, the lender might have needed proof that you paid a charge-card account down to a zero balance. Today, many lenders won't issue the mortgage documents until all of the pre-funding conditions have been met. So, you need to be prepared to provide additional documentation that the lender might request, even if it's at the last minute. Work with a good loan agent or mortgage broker who will help keep you on track throughout the process. And, as outrageous as the lender's requests might seem, don't let it get to you. Lenders have a lot of due diligence work to do to restore their credibility with investors. The housing market is dependent on investors buying mortgages so that buyers can buy homes. THE CLOSING: Properly qualifying buyers for mortgages is long overdue. |
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| Credit crisis delaying home purchases By Dian Hymer Changes in the housing market can change the nature of home-sale transactions. For instance, before the boom in the home-sale market that began in the second half of the 1990s, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) purchase agreement used by most California REALTORS® included a clause in which the seller warranted the condition of the property. The boom market changed that. The version of the C.A.R. purchase contract most widely used during the fast-paced market that subsided in 2006 did not include a seller warranty. Instead, the buyer agreed to purchase the property in its present condition subject to the buyer's inspection rights. Market conditions changed the home-sale transaction in a very significant way. Similar changes are taking place in the current market. The most obvious change is that it's harder to get financing. Not only is there a lack of liquidity, there are fewer lenders in the mortgage business and the qualification requirements have tightened considerably. Lenders now fully qualify buyers for mortgages, which takes more time than it took to grant a stated-income mortgage, a popular type of home loan during the boom years. With a stated-income mortgage, the borrowers didn't have to verify the income that they stated on their mortgage application. Now, most lenders require complete verification of employment, income, assets and credit history. Full qualification and underwriting approval can take up to three weeks or more, depending on the lender, the mortgage amount and your financial situation. Many lenders now require two appraisals rather than one, particularly on loan amounts over $1 million. With some lenders it can take as long as seven to nine days after the first appraisal is sent to underwriting for the second appraisal to be done. This means that your loan contingency could expire before you have complete approval. Some lenders work faster than others. Find out before you make an offer how long the entire loan approval process will take. Tailor your loan contingency time period accordingly. Otherwise, you might have to ask the seller for an extension. HOUSE HUNTING TIP: It's always best to meet the contingency deadlines stated in the contract. You may want to ask the seller for a concession at some point, perhaps to cover the cost of a defect discovered during inspections. A seller who's happy with your performance is more likely to be cooperative than one who is mad or anxious because you have not met your deadlines. With mortgage approval taking longer, short closings are virtually impossible unless you're paying all cash. In most cases, it's difficult to close a home-purchase transaction in less than 30 to 40 days from contract acceptance. During the boom market when financing was easy to obtain, many buyers closed within a couple of weeks. Check with your lender to find out a realistic time frame for closing before making an offer. There is far more negotiating now than there was a couple of years ago. More buyers are asking for sellers to pay to correct inspection-related defects. Some buyers require that the work actually be done before closing. This can pose a problem. It's often hard to line up contractors at the last minute to do work within a short time frame. For this reason, it's a good idea for sellers to have pre-sale inspections done before they put their homes on the market. If there are defects discovered that will be red flags to a buyer, consider having the work done before your home goes on the market. THE CLOSING: Not only will this minimize your chance of a delayed or failed transaction, your home will be more salable. |
| Sellers wise to replace exterior door By Paul Bianchina Q: We are trying to replace a plain, solid-wood, paint-grade, eight-foot outside door on a home we are trying to sell. The old hinges are different from what's common today. I am not sure if this could be changed or not. Do you know what we should do? --Jim E. A: Your best bet would be to have a door company make you up a new door to fit. If possible, take the door off the hinges and take it into the door company so they can measure it for you. If that's impractical, talk to the door company first and ask them what measurements they will need, and do the measuring yourself. There are actually several measurements to take, including height, width, exact hinge locations, hinge backset and more, so be sure to get a list from them. You can then select any door style you like that will fit the opening. They will cut it to an exact size, including mortising to fit the existing hinges and knob. All you need to do from there is remove the old hinges from the old door and install them on the new door, then re-hang the new door on the existing frame -- no need to mess with the old frame or try to find new hinges. You can find door companies in the Yellow Pages under "doors." Q: I have some cast-iron plumbing fittings in a house that was built in 1961. My father told me about the hemp/pine tar and lead in the joints, and I was surprised to see the "lead" scrape off with a screwdriver. I am attempting to install one of those recessed water and drain boxes for a washer machine and need to turn the Tee sideways into the wall. I hope to accomplish the feat with a long pipe. I am hoping the vent pipe will turn with it. If I can accomplish the turn, how do I reseal the original seal? Can I just pack the soil cement back down to make it water tight? --Sam M. A: You have a couple of options. You can try turning the fitting, but first of all it probably won't turn, and secondly you run the risk of loosening other fittings in the string, creating new leaks. Also, if you do get the fitting to turn, you will then need to clean out the fitting as much as possible -- remember you're dealing with old lead, so use all the EPA guidelines for dealing with this material -- then repack it with oakum and seal it with soil cement. A better method, and your only option if the fitting won't turn, is to cut out the old fitting. You can do that with a chain cutter, which you can rent. The cutter is simply wrapped around the pipe, pressure is exerted, and the pipe will snap where the chain is. If you have enough room, there are also power cutters you can rent. Make a cut above and below the old fitting, then remove the fitting. Install new ABS pipe and fittings as needed, which are connected to the old cast iron using rubber sleeves that are secured with screw-tightened metal bands. Once you have the new ABS fitting in place, connecting your new laundry box will be considerably easier. All of the parts and fittings you need are available at any retailer of plumbing supplies. Q: I have a problem with my gas furnace. Sometimes the igniter will not light up to turn on the burner, and the LED light will blink a 1 long and 3 short signal. I will turn off and on the thermostat to clear the signal and it will eventually light the burner. I have called a couple companies and one told me that if the igniter is cracked, I won't be able to get any heat at all. The service department said it might be the board and it could cost up to $500 to have it replaced. Can you give me some idea what could be the problem? --Karina C. A: I would tend to think that one of the computer control boards is defective, and your furnace and thermostat are not "talking" to each other the way they should. A cracked igniter is also a possibility, but what you describe sounds more like an electronic problem. You need to contact a service technician who works on your particular brand of furnace, and have them come out to your house. They can interpret the meaning of that particular signal, and run some other diagnostic tests as well. An on-site inspection of the furnace and the thermostat is the only way to determine the problem and make the necessary repairs. |
| Will plan to avoid capital gains tax work? By Benny Kass DEAR BENNY: My 42-year-old son will move home next month. I am 65 and thinking of downsizing. I would like to place him on the deed when he moves in and after two years, sell my home. Since he is on the deed, will up to $500,000 be tax exempt? I know that there could be problems with this arrangement. Is this possible and what are the drawbacks with this arrangement? –Richard DEAR RICHARD: First, what do you mean that you will "place him on the deed"? Will you be selling the house to him, or just adding his name to the deed? If the latter, there are potential tax complications. This would be treated as a gift. The law is quite clear that the tax basis of the person giving the gift (the giftor) becomes the tax basis of the person receiving the gift (giftee). For example, let's say you bought the house many years ago for $100,000 and now it is worth $500,000. Your tax basis is $100,000, excluding any improvements that you may have made along the way. If you give half of the house to your son, his basis becomes $50,000. If you then immediately sell it for $500,000, your profit is $200,000 (half of $500,000 less your basis). If you have owned and lived in the house for at least two years, you can exclude the entire gain and pay no tax. But your son did not live in the house for two years. His profit is also $200,000, but he would have to pay the IRS $30,000 (based on the current 15 percent capital gains tax rate) plus any applicable state or local tax. Now let's look at a sale after both you and your son have owned and lived in the house for two out of the five years before sale. You sell it for $600,000. The tax basis for each of you is $50,000. You have thus made a profit of $250,000 each. In this scenario, both of you can claim the $250,000 exclusion of gain and pay no tax. You have raised an interesting plan, but do the numbers before taking any action. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
| Mortgage is paid off -- now what? By Benny Kass DEAR BENNY: I paid my mortgage off in late May. What should I expect to see in the way of documents? How do I really know it is complete? --L. DEAR L.: When you borrowed money to buy or refinance your home, you signed a mortgage document or a deed of trust. The latter is more commonly used throughout the country. Your lender recorded that document among the land records in the county where your property is located. Now that you have paid off your loan, there has to be something filed to indicate that the mortgage (or deed of trust) has been paid and released from land records. Different states have different forms: Some use simple releases, while others use certificates of satisfaction. Your lender will either arrange to file the release, or will send that release document to you for recording. You should make sure that the release has been recorded, and a helpful employee in the local recorder of deeds should be able to confirm this for you. Although not necessary, you should ask your lender to return the mortgage document and the promissory note back to you, marked "Paid and Cancelled." Here are two more things you should do: First, if your lender has been escrowing money to pay your real estate tax and insurance, make the appropriate arrangements with the taxing authority and your insurance company so they start sending you their bills. Next, if you have an automatic payment plan whereby the lender is sent the mortgage check each and every month, don't forget to cancel that arrangement. DEAR BENNY: We bought our home in 1971 and somewhere along the way we have lost the HUD-1 settlement (escrow) statement. Where and how would I be able to get a copy of this? Isn't this something I would need in case we were to sell? –Carol DEAR CAROL: You have raised a difficult question. The HUD-1 is the settlement statement currently in use for the great majority of residential real estate transactions. It lists all of the numbers (charges) involved when you first bought -- or refinanced -- your property. Yes, it is always helpful to have your HUD-1 when you go to sell it, because the more legitimate expenses you can add to your home purchase, the higher your tax basis will be. And the higher your basis, the less tax you may have to pay. But this may be academic since you have owned the property for all these many years. If you have also lived in the house for two years before it is sold, you can exclude up to $250,000 (or $500,000 if you are married and file a joint tax return) of the profit you make. Of course, any profit above those thresholds will be taxable. However, I do not believe that HUD-1s were even in existence back in 1971. When the Real Estate Settlement Procedures Act (RESPA) became law in 1974, the law mandated that a universal settlement statement be used for all residential closings. The Department of Housing and Urban Development (HUD) created the form and thus the name HUD-1. Back before there was a HUD-1, simple settlement statements were used -- often one for the buyer and one for the seller. Do you remember where you went to closing (called escrow in some Western states)? If so, you should contact that company, but I suspect that they have long since retired their old files. You also could check with your lender, but once again, I don't think this will be productive. If you live in a homeowner association or a condominium, the property manager may have a copy of your settlement statement. Otherwise, you will have to recreate the settlement sheet from memory. The courts have often held that just because you don't have papers does not mean that you did not have expenses. DEAR BENNY: When my ex-wife and I got divorced she signed a quitclaim deed. Do I need to do anything else to get her name off of the deed and will there be any tax implications? –Brad DEAR BRAD: A quitclaim deed basically means that the grantor (your wife) is deeding you whatever interest she has in the property -- nothing more and nothing less. I often joke that I will be happy to give you a quitclaim deed to the Brooklyn Bridge. A quitclaim deed is usually used when a divorcing spouse conveys his or her interest in the joint property to the other spouse who will end up owning the property. In order for it to be effective, however, it must be recorded among the land records where the property is located. An attorney or the local recorder of deeds should be able to assist you. Once the deed is recorded, you will be the sole owner of the property. As for the tax implications, no gain or loss is recognized when property is transferred from a spouse (or former spouse) if the transfer is "incident to a divorce." This means that there is either a court-ordered divorce or a property settlement agreement between the parties. For tax purposes, the basis of the property of the person transferring the property becomes the tax basis of the person receiving the house. For further clarification, discuss your situation -- before you sign the deed -- with your tax advisors. One tip: If you are going through a divorce, and one of you will end up owning the entire property, consider making the transfer while you are still married. Many jurisdictions waive any transfer and recordation fees for transfers between husband and wife. However, if you are no longer married, (depending on your state law) you may have to pay these fees. DEAR BENNY: Three years ago, I had to file for bankruptcy. Since then, I've had a very good track record. I have no debts (only have a debit card). I have paid rent faithfully ($950 per month). My credit rating has risen to about 675. I have found a condo in an area where two units have sold for approximately $110,000. The unit I am looking at is listed for $69,900, because it needs some work. I wonder if in today's market I stand a chance of being able to find financing with my background. –Dick DEAR DICK: Filing for bankruptcy can impact your credit standing for as much as 12 years. You should talk with a number of mortgage lenders and see what they say. Since the condo you are interested in buying will have a lot of equity, some lender may be willing to work with you -- although the interest rate may be higher than the current market rates. As you know, the economy is sluggish, and many lenders who have been financially impacted by the mortgage "meltdown" are justifiably nervous of making loans to people who have bankruptcy in their history. Do you have any relative (or friend) who can guarantee the loan? Perhaps the seller may be willing to take back all of the financing, in which case you do not have to go to a commercial lender. I would first talk with a financial counselor so that you can learn all of the options that may be available to you. Your state or local government may also have a mortgage loan program that will meet your needs. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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