Ask Realty Times - June 24, 2005 by Peter G. Miller
Question: We came across a beautiful brand-new home. We fell in love with it but found out that the property tax would be about $8,000 a year while other houses in the same price range had taxes of $3,000 to 4,000 a year. Why is it that the property tax on the new home is so much higher. Answer: It's not so much that the house is new, it's that the owners are new. There are several factors which can hold down property taxes. For specifics, ask about local property tax policies. For example: First, if there's an assessment every three years instead of annually then the property tax for other homes may be based on old values -- in today's fast changing market a value that's several years old could be significantly lower than the current price. Second, there may be a cap on residential property tax increases. The result is that the longer you live at a given address, the greater the cap impact over time. Third, some owners may have lower rates -- think of those aged 65 and over. Question: To what lengths does the IRS actually go when a tax fraud case lands in their lap? A certain individual was reported using the IRS "hotline" a year ago for committing more than 10 years of tax fraud and nothing has been done about it to date. And why won't the IRS give any information to the whistle blower on the status of the report when they publish cases anyway? Answer: For all anyone knows the case has been processed and the claims have been found to be untrue or the case was resolved with a civil settlement that includes interest and penalties. Tax information is generally regarded as private and not disclosed. Matters that go to court, by their nature, are public. Question: Does it or doesn't it make sense to put money down or prepay your mortgage? Suppose that I have available 10 or 15 percent to put down or should I purchase with zero money down and invest my cash elsewhere? Answer: If you buy with little down you will have higher monthly costs because you'll need a larger loan. Also, you'll be required to pay for private mortgage insurance. The question then becomes: What can you get by using the money elsewhere? Some people will do very well and some will invest in Enron. As to prepayments, the usual issue is not do I put $100 toward reducing my loan each month or $100 toward paying down my credit card bill, instead the issue is that money often disappears on frivolous purchases if not specifically set aside for mortgage pre-payments. Question: If I was to take out a $100,000 interest-only loan to buy two properties that would not only pay the loan but give me extra income, would it be smarter than a fixed-rate loan? Would it be even better if I prepaid every month? Answer: The interest-only loan has a low cost up-front -- but not forever. Thus to answer your question you would have to see when the loan switches from interest-only to amortizing. Let's say that you can get a 5/1 interest-only loan with a start rate of 4.875 percent. For a 30-year, $200,000 mortgage the initial monthly payments for five years will be $812.50. After five years, the loan would have 25 years remaining. If we assume that the interest rate does not change, the monthly cost for principal and interest is $1,154.66. However, in a reasonable world, is it really possible that interest rates will remain unchanged for 30 years? Is it possible that they might increase. What if rates rise 2 percent during the life of the loan? Four percent? Six percent? Question: The house I'm interested in is currently in foreclosure. I have spoken with the seller briefly. Her house has been appraised at $150,000-$170,000. What do I look for and what questions do I ask? Answer: Before going further, why not speak with local brokers? You may be able to acquire a property for much the same price but with guarantees regarding condition. The process of buying a home is too complex to have a short list of questions. Instead, ask if brokers can help in the transaction. Question: What is the proper way to receive and present multiple offers, even if there are only two offers? Answer: All written offers must be presented to sellers. In a situation with numerous offers, it can make sense for the broker to sort offers according to price, contingencies, down payments, etc. and to then recommend the best ones. However, the owner still has the right to review all written offers -- and should. Question: I purchased a home for my child to live in. The cost was $150,000 and the property is now worth $400,000. Originally she was to get a $75,000 gift from me as an early inheritance. I put her on title as joint tenant because it was half of that price. I have since found out she has made late property tax payments with penalties from day one. She's deep in debt and insisting on more than the original $75,000. I do not want her to end up with all of the property as it was my investment and is to be shared with my other children. What a mess! She wants all but $130,000. She has never made any rent, mortgage, or interest payments in all these years. Can I do a vesting change and a percentage change without her signature? Answer: She holds title. It's an asset to her, a possession and cannot be taken away because circumstances and perceptions have changed. The lesson here is this: Never give title to property without first reviewing the matter with an attorney. As well, there can be tax implications with a large gift -- reason to think about estate planning. Before going further create a will and living will to protect your assets and assure an inheritance for all your children. Question: Our neighbor has built a fence in the middle of our driveway, blocking the entrance to our house. We have been in the house for a little over a year, and we do have a charge for title insurance on our closing statement. We have been advised to have another survey done, which we are doing. Does our title insurance cover the cost of any legal fees, survey fees, and property repairs that we will incur? Answer: Was there a survey at the time you purchased the property? Has the driveway been in place for years or was it just built? Is there some reason why the fence was suddenly built? You need to contact an attorney immediately. Question: My husband and I made an offer on a house. Our broker gave them seven days to get back to us and they still have not. I guess my question is: Should we just wait or is there something we can do to get into the home faster? Answer: You made an offer to purchase a property. The seller can accept, reject or counter your offer. In this case you might see the lack of response as a rejection since the offer has been neither accepted nor has it induced a counter from the owners. What happens after seven days? Do you mean the offer will be withdrawn? If that's the case then the offer will automatically lapse unless there's an acceptance by the sellers. The seller should be aware that even if there is no response to your offer, if the property is listed for sale and your offer meets all the terms of the listing agreement, then the broker may be entitled to a commission.
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. ForwardSourceID:NT00005D12 | 
