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Q: My husband and I saw a beautiful house. The whole family agreed it was a lot of house for the money, we intended to make an offer, but our agent said 50-percent of the neighborhood was in foreclosure. The surrounding homes look nice and the yards are mowed, etc., and she said she would do what we wanted but advised us against it. A broker we know in our hometown doesn’t think it’s a really big deal. What would you do?
A: There are huge red flags here.
You’re not getting a bargain, you’re getting market value and right now the market where the property is located is not so great. Moreover, prices could fall further. Thus a “lot of house for the money” may also be a lot of house for a lot less money in six months.
It’s not realistic to think of buying at the bottom of the market because no one knows when or where the bottom will be reached, but an area with such a substantial percentage of foreclosures is unlikely to rebound any time soon.
Your agent has properly and appropriately told you about the foreclosures. Here are some additional questions to ask:
Why is it that so many homes in one community have been foreclosed? RealtyTrac.com reported that in the first quarter of 2009 Nevada had the country’s highest level of foreclosure filings -- one of every 27 homes was in jeopardy. In the community you’re considering the ratio is one home out of every two, an astoundingly-high proportion.
Does your agent have any objective reason why prices might be near marketplace bottoms or why they might rise – new jobs in town, a growing population, etc?
What offering price would your agent recommend? You have unusual leverage and may be able to get a better price.
Can the property be financed? What happens if an appraiser says the property is worth less than the sale price?
What is the condition of the property? You’ll need a professional home inspection.
Would it make sense to buy in September when the major selling season is past and prices might be lower still? You could, of course, lose the house to another buyer if you wait -- or prices could rise.
Have you spoken with an insurance broker about coverage for the property? Is coverage available? If yes, at what cost?
If you have to sell, how will you be able to compete with such a large volume of homes?
Your agent will follow your instructions, but if it was me, I’d listen with care to the agent and look elsewhere.
Q: We’d like to add our children to the title of our house. Will they have to pay taxes now since they will get 25 percent ownership each, and where will I get the forms to file?
A: A number of gurus will tell you that in many jurisdictions you can just get a “quitclaim” deed to change your title. However, if you take this approach you may be required to pay substantial property transfer taxes. You may also raise gift, estate and liability issues.
Instead, do the following: Speak with a tax professional. Ask about the gift and estate tax implications of adding the children’s names to the title. This is important because in essence you’re making a large gift, and large gifts -- more than $13,000 from each of you to each of your children in 2009 -- can set off tax issues. Instead of a single gift, you may want to give each child ownership pieces over time.
Next, speak with a real-estate attorney. Ask how title should be held. Consider what would happen if one of the children is sued -- and lost. What if the children get married? Divorced? Is there a better way to accomplish what you’re trying to do?
Then ask if title can be transferred in exchange for “good” consideration -- that is, love and affection. In some areas such consideration will mean there are no transfer taxes.
Lastly, since everyone in the family will be property owners you each will have estates with assets. That means everyone needs a will and a living will.
Send your questions to firstname.lastname@example.org. Due to the volume received, not all letters may be answered.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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