Neighbor Threatens to Pull Out of Landscaping Agreement
Question: Twelve years ago, my neighbor gave me spoken permission to landscape part of his property, which is visible from my home. I had a landscape architect design an expensive plan. Recently, my neighbor ripped out one of my plants and is now threatening to pull out all of the others. This will seriously detract from the beautiful landscaping I now enjoy. It will cost me a lot of money to move the plants to my property and totally change the way my yard looks. Can my neighbor do this 12 years later? Can I do something to prevent this?
Answer: Since your neighbor gave you permission to use part of his land, he can revoke that permission at any time. If you had occupied part of his property without his approval, then you might have acquired a prescriptive easement.
However, you clearly do not meet the “open, notorious and hostile” prescriptive easement requirements since your neighbor approved your landscaping of his property. The best you can do now is negotiate with your neighbor to allow your landscaping to remain. Perhaps you might emphasize how this makes his property more valuable.
If that doesn’t work and if you have a lot of money to waste on legal fees, you might consult a real estate attorney about seeking an injunction to stop your neighbor from removing the landscaping.
Put Off Land Buy Until You’re Ready to Build
Q: I am in the early stages of research for buying acreage, about 10 acres, where I would eventually like to build a retirement home. Are there any tax advantages to buying the land now because I do not own a home?
A: It’s unwise to buy land far in advance of your building a retirement home. Too many things can happen that might change your plans, and then you could be stuck with the land, which might be difficult to sell.
If you have read this column over the years, you will recall the many sad letters from retirees who bought lots where they planned to build their dream homes someday. However, illness, death and economic reverses often change those retirement plans. Many lots in retirement communities are extremely difficult to resell for even close to their original purchase prices. To be safe, don’t buy real estate you don’t plan to use within six months.
Some Tax-Free Profit Allowed on Home Sale
Q: My girlfriend and I both own our own houses. We expect to get married this year. She plans to sell her house and move in with me. If she invests the proceeds from her house sale by paying down my mortgage, could she avoid capital-gains tax that she would owe on the sale of her house?
A: No. The best way to avoid tax when selling a principal residence is to follow the simple rules of Internal Revenue Code 121. It allows up to $250,000, or $500,000 for a married couple filing jointly, tax-free home-sale profits.
To qualify, the seller must have owned and lived in the primary residence an aggregate of two years during the five years before the sale. If your girlfriend meets the two-year test, her sale profit up to $250,000 is tax-free. Paying down the mortgage on your house won’t help her save taxes. For further details, she should consult her tax advisor.
Age Disparity Snarls Reverse-Mortgage Plan
Q: I read in your excellent column about reverse-mortgage tax-free income for senior citizens. But you said both spouses must be at least 62 to qualify. I am 59, and my wife is 51. When I am 62, my wife will be 54. I don’t want to wait eight additional years until my wife becomes 62, as I will then be 70. How can this aspect of reverse mortgages be handled?
A: If you both hold title to the home, after you become 62 the obvious solution is for your wife to quitclaim her interest in the residence to you. But she might understandably not be willing to do that unless she can be assured that if you die first, she gets the house.
This problem could be solved, after you obtain the reverse mortgage, by putting the house into a living trust with your wife named as your heir if you die first. When you turn 62 and are serious about a reverse mortgage, review the situation with a reverse-mortgage representative to determine the best solution at that time.
Lender Won’t Cancel Mortgage Insurance
Q: Several weeks ago, you had a letter from a reader who took your advice for removing private mortgage insurance from his home loan. He said his lender required a new appraisal and allowed insurance removal after showing the loan-to-value ratio was below 80%.
When I recently phoned my lender, I was told appraisals are not allowed and that the homeowner must pay the loan down by 20% without considering appreciation in market value. We paid $212,000 for our house about two years ago. Nearby homes are now selling for $250,000. The lender cited the Homeowner’s Protection Act of 1998. Is the lender violating the law?
A: The federal Homeowner’s Protection Act of 1998 does not apply to older mortgages such as yours. Tough mortgage lenders can refuse to remove the insurance until the mortgage is paid down below 80% of the home’s original sales price.
However, ask if your mortgage is owned by Fannie Mae or Freddie Mac. If it is, the loan servicer must remove the insurance when the loan-to-value ratio drops below 80%.
Because you have an uncooperative mortgage lender, if you can’t get the insurance removed, the best way to get even is to refinance with another lender who doesn’t require it.
Go Straight to Lender for Foreclosure Deals
Q: I enjoyed your recent explanations about how to profit from fixer-upper houses. We have done one “fixer.” At the time, it wasn’t all that much fun, but when we finished, it was satisfying.
Can you provide more information about buying foreclosures from a bank or savings and loan association? I have contacted local banks, and they say that when a property is foreclosed, it goes to a Realtor to be sold. I find these foreclosed properties usually are not bargains. Any ideas?
A: You are correct that most foreclosing lenders will list foreclosures with local agents at full market value. That takes the fun out of buying bargain properties.
I’ve found that the secret to buying foreclosure bargains is to either buy at the foreclosure sale, which requires cash, or, if there are no bidders, buy immediately after the sale from the foreclosing lender, who takes the property back.
A great technique is to send a Federal Express letter to the lender’s president the day after the foreclosure sale and to enclose a purchase offer to buy for the amount of the lender’s foreclosed loan, presuming the house is worth that much. I include my deposit check, such as $5,000, and specify the mortgage terms I want the lender to approve.
My letter explains that I want to buy the house “as is,” including evicting the residents, if necessary. Of course, the lender’s president never sees the letter, but it does get to the right person.
Such offers are usually counter-offered, but the advantage is buying the foreclosed property directly from the lender before it’s listed for sale with an agent at full market value. Many lenders just want to get rid of their foreclosed properties quickly and are glad to carry back a mortgage, which becomes a profit-producing asset.
Fellow Agent Offers Bonus, Then Reneges
Q: I am a real estate agent. I sold a house for which the listing agent and the sellers offered a $1,500 bonus to the selling agent at the completed closing. I noted that provision on the sales contract, but the sellers scratched out that provision.
When I contacted the listing agent, I was told I was not entitled to the $1,500 because I did not present a full-price offer. But the multiple-listing service document never said a full-price offer was required to obtain the bonus, nor did the listing agent tell me that. What recourse do I have to obtain the $1,500 bonus owed to me?
A: I am shocked the listing agent would fail to pay your $1,500 bonus. If you and the listing agent are members of the same association of Realtors, a mediation or arbitration procedure could settle this dispute between agents. File a complaint stating your claim and then attend the hearing.
When both agents aren’t members of the same association of Realtors, your legal recourse is to sue the listing agent for $1,500 in Small Claims Court.
Your claim is against the listing agent, not the seller, who led you to believe you would receive the $1,500 bonus.
Incidentally, although you have the written multiple-listing service bonus offer, in most states sales-commission splits between cooperating realty agents don’t have to be in writing to be legally enforceable.
Buyer Needn’t Grant Seller’s Request to Rent
Q: I am buying my first home, and the sale is to close at the end of January. Now the seller wants to rent the house back from me for a month. Her new house won’t be finished until late February. I was looking forward to moving in. Do I have to rent back to her?
A: No. If your purchase contract does not provide for a rent-back to the seller, you are only obligated to abide by the written terms in that agreement.
As a general rule, it isn’t smart to rent back to sellers. The primary reason is such sellers often stay beyond the agreed time. For example, one month might extend to two months, perhaps longer.
However, if you do rent back to the seller, be sure to have a written rental contract and hold back the equivalent of two or three months’ rent in case the seller doesn’t move out when agreed.
Consult your insurance agent to be sure you have adequate insurance for such a temporary rental. Also, consult your attorney as to the legal aspects.
Letters and comments to Robert J. Bruss, a San Francisco-area lawyer, author and real estate broker, may be sent to P.O. Box 280038, San Francisco, CA 94128. Bruss suggests consulting an attorney or tax advisor before making important real estate decisions.
