Plus, readers sound off on unresponsive lender complaints
Realty Q&A is a weekly column in which Lew Sichelman, a nationally syndicated columnist who has been covering the housing market for more than 40 years, responds to readers’ questions on real estate.
WASHINGTON (MarketWatch) — Question: I’m buying a townhouse worth about $230,000 in Southern California. I’ve been out of work for a year now and will run out of unemployment benefits in a few months. Can I sell a share in my home? Clearly the buyer would be buying a share of current value, but what else is involved? I know this is a bit of a crap shoot but I don’t really want to sell the place altogether and live off the equity until I can collect retirement benefits starting 2015 at the earliest. Any advice you can offer is welcome. —W.B.
Answer: I don’t see how someone living off unemployment and not yet being able to collect retirement benefits can possibly buy a house — or qualify for a mortgage. But I’ll leave that alone to get to your question about selling “a share” in the house.
Yes, you can — in several ways. All you have to do is find an investor. Check with the top selling real-estate agents in your area. They always have a list of people looking for ways to make money on real estate.
One method of selling a portion of your property is to actually sell part of it, perhaps to someone who would reside in one of the bedrooms and share the kitchen, living room and other common spaces.
If you don’t want a roommate, you could sell a portion of the future equity to an investor. For a certain amount, for example, the investor would be entitled to a certain percentage of the property’s increased value, either when you sell or a pre-determined date sometime in the future, say 10 years down the pike. The more the investor is willing to put up, the more equity he would be entitled to. For further information on equity sharing, check out this pamphlet from the San Francisco law firm of Sirkin & Associates.
A third way to raise cash would be to rent out a bedroom or two and share the rest of the living space. But that again entails having roommates.
Question: Thought my conundrum may interest your readers. I have to find the answer before filing 2011 tax returns. I purchased a short-sale single-family home in June for my stepdaughter to rent and live in. Because I am retired and my income had decreased, the bank required my son to be a co-signer on the 30-year fixed-rate mortgage. The property was recorded in my name and my son’s name. I paid all the expenses, including closing costs, repairs to the property and the down payment. All funds were drawn from my individual retirement account. My son only contributed his good credit to the deal but no money. My wife was excluded from ownership by the bank due to prior credit issues.
So here is my dilemma: Is my son a partner and required to file a Schedule E when he files his tax returns? Do I have to share the income/expense with my son? Being age 69 and in questionable health, will my son become sole owner automatically when I die even though he has no money in the deal? The property is pretty much cash-flow neutral with only a small amount of positive income.
I have no current will or trust. I appreciate any clarity you might be able to contribute to the complexity here. —O.C., Weimar, Calif.
Answer: For starters, even though you are merely in what my doctor calls “middle youth,” get yourself a will or a trust. Without one, you are creating a nightmare for your heirs — and perhaps even having ownership in the property go to someone you’d rather not see have it. Of course, you won’t be around to actually see anything, but you get my point.
As for your income tax questions, you have no true partnership. Maybe in the eyes of your lender, but as far as Uncle Sam is concerned, you should report all the income and claim all the expenses.
If the property is held as joint tenants with rights of survivorship, it will pass upon your death to your boy outside of any future trust or will. If, on the other hand, it is held as tenants in common, your ownership interest will pass to your heirs in a probate process. So you need an estate attorney to advise you about titling or re-titling, including, if you like, what percentage of ownership you’d like each of your heirs to receive.
Feedback
A recent column which profiled a few of readers’ horror stories about dealing with unresponsive lenders ( Realty Q&A, Jan. 20, 2012 ) generated a couple of hundred responses plus dozens of e-mails directly to me. Most of those sent my way also were tales of woe. Some even sent me their complete files so I could see for myself the difficulties they have experienced and perhaps even intervene on their behalf, which I unfortunately cannot.
But a few other e-mailers took the opposite tact, that struggling owners have only themselves to blame. Here’s one signed by Brian that seems to encapsulate their side of the debate:
“I would never waste my time writing about an article I read but this one has me angered. I agree with the banks. Foreclose on them. I am sick and tired of hearing everyone scream that they got screwed. They shouldn’t have bought it in the first place. Why can’t Americans except responsibility for their own actions? Nobody forced them to buy the house. They thought it was easy money and everyone was a speculator.
“I have lived within my means for 38 years and I am doing just fine through this recession. I think the banks should foreclose on all these people and let the system wash out. It will give the housing market a chance to reset to realistic prices so people who have lived within their means and saved can afford a nice house at a decent price.”
Brian is not alone, by any means. But I think he and others are failing to understand the feelings expressed by protest movements — or gauge their strength. They see that banks and other financial institutions which have been saved by the government — read that as “bailed out” — are now booking record profits for their stockholders, and they question, “What about us little guys? Why can’t we catch a break, too?”
I’m not saying that they are right or wrong. But Occupy Wall Street and other movements like it believe that it was our tax money that rescued the failing financial sector, not to mention the American automobile business. So now it is time for lenders and investors to bite the bullet a bit on behalf of their benefactors, the little people who collectively saved their butts in the first place.
Nationally syndicated columnist Lew Sichelman has been covering the housing market for more than 40 years. MarketWatch readers are encouraged to send their real estate questions to him at lsichelman@aol.com . Answers will be presented in this column every Friday. However, because of the volume of e-mail he receives, he cannot answer every reader’s query.
No comments:
Post a Comment