2007-09-26 / News

Q & A With Peter G. Miller

I moved back home to save money. Will the lack of rental history cause a problem when I apply for a mortgage?

Q: I'm living with my parents to save money for the down payment on a house. I anticipate that it will take at least a year to save enough. Will my lack of a recent rental history be a problem when I apply for a mortgage?

A: No. If you have other transactions that can be used to establish a credit score - such as full and timely auto payments, credit-card purchases and student-loan repayments - then living at home should not be a problem. If the result of living at home is a fatter bank account, more savings and a larger down payment, then lenders are likely to be very pleased with your credit profile. For specifics, speak with several lenders.

Q: We are in the process of selling our condo and were advised to purchase a "condo resale package" for our buyers. Why do we need to do this?

A: When you sell a condo, co-op or property that's within a private-unit development, an important part of the purchase concerns how the property is organized and the rights of ownership. Buyers will surely want all condo documents, the most recent budget and the projected budget, among other items, before they finalize their purchase decision. They also will want to know if the homeowner's association plans any special assessments and whether there are any lawsuits that involve the HOA.

Homeowner's associations are allowed to charge a fee for gathering required documents, including updates, however, the charges to produce a resale package are limited. There also can be fees for rush orders and delivery expenses. Your broker or attorney can tell you more.

Q: My friend told to me that if I were to invest in a rental property that resulted in a loss, I could deduct the entire loss from my other income. For instance, if I owned an investment condo that was vacant for 12 months, could I write off the entire loss?

A: When it comes to real estate write-offs you need to use care. First, an "investment" presumes an effort to make a profit in a business or trade. If there's no profit motive, then what you have is a hobby.

Second, there may be a $25,000 annual limit on your ability to write off losses against non-passive income.

Third, your ability to take a loss may phase out if your income is above $100,000. It also may be impacted by your filing status.

For other considerations and details, see IRS Publication 925 and speak with a tax professional.

Q: Is there an accepted definition of "attached and in place" regarding what equipment is expected to be included without specific mention in the sales contract? Can we just say the "buyers requested all audio equipment currently attached and in place to be left in same manner, as they are considered attached fixtures?"

A: A "fixture" generally is considered something that goes with the house and is attached to it. The usual example goes like this: A built-in microwave is a fixture, a microwave sitting on a kitchen counter is not. If you remove the builtin microwave, there would be a huge hole in the wall.

However, rather than debating what is or is not a fixture, a better approach is to specify what is to remain with the property. The language above "requests" that audio equip- property. The language above "requests" that audio equipment must stay, but a request is not a requirement, and a clock radio can be seen as an example of audio equipment. As an alternative, say precisely what is meant. For instance: "The following items shall be included in the sale of subject property: the Smithburg 911 Execu-Tone audio system in the living room, including all speakers; hardware and wires; the children's swing set in the backyard and all shelving and bookcases now located in the lowerlevel office." Your broker or attorney can provide specifics.

If possible - and with permission of the sellers - it's wise to have a photo record of the items mentioned in the sale offer that you want to stay. This can prevent disputes.

Q: We have spoken to several lenders about refinancing our house. One said that no payment would be required for a month after closing. How is this possible?

A: When you have an apartment, you pay rent Oct. 1 for the month of October. When you have a mortgage, you make a payment Oct. 1 that covers the month of September. This is called paying in "arrears" and explains why there's a lengthy period after closing without a mortgage payment.

© CTW Features

Need real estate advice? Peter G. Miller, author of "The Common Sense Mortgage," would love to hear from you. Send your questions to peter@ctwfeatures.com. Due to the volume received, not all letters may be answered.

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