Dear Edith: Last year I wrote to you in an absolute panic, as we were facing foreclosure. I took your advice, and now I am writing again, as you requested, to share the good news. Our mortgage company offered an interest-only loan for five years. We are able to stay in our house despite the fact that my husband is laid off for the winter. -- C.R.
Answer: Many thanks for reporting back. Usually we're all just left wondering what finally happened.
Half the troubled homeowners who negotiate "workouts" with their lenders these days end up losing their properties anyhow. The good news, though, would be that the other half make it through with their new arrangements. Glad to hear it's working out for you.
Seller Concessions
Hi Edith, I am curious. When making an offer to buy a house, what does it mean if you ask for "seller's concessions"? Isn't this basically the same as just offering a couple thousand dollars less when you submit your offer to the seller? Is there any advantage to one over the other? -- E.S.
Answer: As so often, it all depends
If your written offer said you'd buy only ifthe seller would agree to pay $2,000 of your closing costs, you'd be asking for a "seller concession." If instead you simply offered $2,000 less for the property, then yes, the seller would come out the same either way. So would the buyer, more or less.
So where's the advantage? A concession might help if a buyer who was $2,000 short of cash couldn't buy any other way. The arrangement would get the house sold, thus benefiting both parties.
There are plenty of potential drawbacks, particularly with larger concessions than the one in your example. The bank's appraiser might report the place wasn't worth the higher purchase price. The buyer's mortgage plan might limit concessions. The buyer would end up paying on a larger mortgage loan. Capital gains tax considerations could be involved. The neighborhood might see artificially inflated property values.
No one financial strategy is ever right for everyone. Seller concessions can be useful in one situation and not in another. It's true we are seeing more of them lately. But once again, the answer depends on the needs of the parties involved.
Buying Vacant Lots
Hi. I have this idea about buying some residential vacant lots in Las Vegas and in California and holding. Is this a good idea and would it have any tax-related consequences, etc.? -- H.
Answer: You're obviously a beginning investor, and vacant land is not a wise purchase for a beginner. Buying it often requires all cash. It yields no income and involves holding costs for property taxes and insurance. Even experienced investors can get caught when trying to predict the direction of future growth. That would be particularly true in an area one wasn't familiar with.
If you intend to become an investor, line up your own real estate lawyer and CPA before you start. They can analyze your situation and advise you better than I can.
Condo Questions
To Edith Lank: Question one: I was required by my condo's homeowner association to replace my garage door. This expense was in 2006. May I write this off on my 2008 tax return?
Question two: If I sold this condo at a loss this year, would I be allowed to write off the loss on my 2009 tax returns? -- Via e-mail
Answer one: No. Answer two: No.
That's assuming the condo is your own residence. If you rent it out, take the questions to your tax preparer for more complicated information.
Aid For Disabled
My mother-in-law is currently receiving disability and has a diagnosed traumatic brain injury. My wife and I want to find a single family home in Florida for her to retire to (under $100,000). We have savings to cover a 20 percent down payment, but will need a mortgage. Are there programs for adults with disabilities to have reduced rates or to help them receive loan reimbursement? Via e-mail
Answer: I don't know of any mortgage breaks for the disabled. But the loan (and ownership of the house) will have to be in your names anyhow, unless your mother-in-law has a good credit rating and enough dependable income to carry the payments comfortably on her own.
Combining Mortgages
Dear Edith: Can a mortgage and an equity loan be consolidated into one fixed mortgage? -- K.S.
Answer: Certainly, if the amounts involved work out. You could use one new loan to pay off the two you have now. That will only work, though, if you have enough equity in your property to qualify for the larger mortgage you'd need. And of course you must have a good credit record.