Technology TransactionsAsk Realty Times
Question: What does the term "under contract" mean?
Answer: In real estate it is a routine matter for buyers and sellers to sign a sale agreement. That agreement, however, does not mean the house has been sold -- that title has been transferred.
Instead, there may be a period of time allowed for the purchaser to have a structural inspection, to line up financing under certain terms, to check the title, etc. In this situation, the property is "under contract" but not sold, so other offers may be made. Such offers may also be accepted by a seller, usually as back-up agreements -- meaning they have no value unless the first offer falls through.
Question: I want to sell my primary for $450,000, a house which cost $225,000 five years ago. After my home is sold, I will be purchasing another home for $500,000 within six months and reside as my primary residence. I plan to put all of the profit from the sale of my current home into the new home. What do I need to do during the sale or after the sale of my home to avoid capitol gain tax?
Answer: Get out the settlement sheet (the "HUD-1) from the first sale and compare it with the HUD-1 you receive when you sell. The probability is that you paid $225,000 for the property plus a number of closing costs that will raise your basis. On the selling side, the home was sold for $450,000 less closing costs. In effect, for tax purposes -- and for real -- you probably paid more than $225,000 for the property and sold for a net amount of less than $450,000.
In general terms, when you sell your residence you may keep up to $250,000 in profits tax-free if you"re single and $500,000 if you"re married. To qualify, you must have lived on the property for two of the past five years. There is no requirement to buy a replacement home of equal or greater value.
For details and specifics, have a tax professional review your HUD 1s.
Question: I just had bought a pre-sale house and put down $5,000 for earnest money and few thousand dollars more for upgrading. All these advanced payments are non-refundable. The closing date on the purchase and sale contract expired a month ago due to the seller unable to finish the house, even now they are still working on it. The contract has not been extended since (the contract has "time is essential" on it). Due to hurry to get the house done, the quality of the house is poor and the seller refused to repair any defective parts that the buyer had detected. What options does the buyer have? Can the buyer cancel the contract and get all the earnest money back? How costly is it if the buyer sues the seller.
Answer: Sale agreements with home builders routinely include a clause which allows closing to be delayed because of bad weather, labor shortages, material delays and other factors. Since builders write the agreements you can figure that such clauses are in their favor.
The property must be completed so that it"s built to code and passes inspection by the local building inspector.
At least the builder continues to work on the property -- this is good news. "Defective parts" should be covered by warranties. Workmanship is always a debatable matter.
As to suing the builder, who is the builder? Many builders create corporations to complete one project and then the corporation is dissolved when the last home is built -- thus the value and importance of third-party warranties.
When buying a new home work with a buyer representative and always get third-party warranties for the home as well as its systems and appliances.
Question: I"m researching the public"s right to access to MLS information. Does the public have the right to access MLS data directly without a broker?
Answer: No.
Imagine that someone made popular software. The fact that everyone likes it does not mean the coding belongs to the public. It"s the same with MLS information -- you cannot reap where you have not sown.
It costs a great amount of money and time to acquire listings, pool data and operate computer systems. MLS benefits -- including access to the system -- are reserved for those who pay the bills, MLS members. MLS members may elect to show or withhold given portions of local MLS databases to the public -- but only when MLS members benefit.
Question: Should I switch to a 5-year ARM at 4.25%? My home is worth $265,000. I owe $235,000 on a 30-year fixed at 5.5%. I plan on owning the home for 20 years
Answer: You raise two issues: First, the ARM has a five-year term. Yes the interest rate is lower now but what happens after five years? Second, if it is an "adjustable-rate" mortgage, does this mean the interest rate might be something other than 4.25% during the loan term?
You have a fixed-rate loan at 5.5 percent. That is near the lowest rate seen in years. You expect to live in the property for another 20 years. You"ve done great. Keep the financing you have unless someone can offer a lower fixed rate for 30 years -- with no cash costs at closing.
Question: We made an offer on a home several months ago and gave the buyers $3000 in earnest money. As a result of our loan interest rate being higher than we expected, we canceled the contract and decided not to buy this home. Since that time we have purchased another home and the sellers of the first home have sold and moved away. However they have refused to release our earnest money and now this money sit in limbo. What is our recourse?
Answer: Was a real estate broker involved in this transaction? If yes, the broker would place the money in an escrow (trust) account and release it only with permission of both buyer and seller. If buyer and seller cannot agree to release the money, the broker in most states would turn the money over to a court.
Did you just give the deposit money to the sellers? If yes, you have the question of whether the purchase agreement allowed you to withdraw from the sale because rates did not meet a given standard.
Are the sellers still in your state? Are they far away. Their new location could present major hurdles.
You will need to show your sale agreement to an attorney to pursue this matter further. If the deposit is in a broker escrow account or has been deposited with a court, your odds of getting it back are better than if the money is with the sellers and the sellers are in another state. Possession may not be 99 percent of the law, but it sure creates leverage and that"s what the sellers have.
Have a real estate question? Send your inquiry to
//
. Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here.
This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.