Condo association could ease ownership demands

Dear Bruce: My wife and I are in our upper 60s, retired and have no debt other than monthly expenses that we pay off. Our health is generally good. Our 28-year-old house cannot be updated anymore than we have without expensive expansion, which we don’t want to do. It also sits on an acre that is getting harder to keep up with. We are thinking of moving into new housing. We want a single dwelling on a small piece of land like a patio home but no condo association. We’re looking at construction cost of $180,000, plus land of $32,000 (I know it will go up). I have more than $560,000 in an individual retirement account and a 401(k) that I will have to draw on next year. I believe we can clear $150,000 on our house. We have a little over $79,000 in savings accounts and $23,000 in a mutual fund. We also have a $50,000 annuity due to mature in January. My wife has her own IRA and 401(k), plus a cash inheritance, but we don’t want to figure that in our evaluation. Finally, we gross $55,000 a year on retirement and Social Security. Am I being paranoid about being able to financially handle this? Could we take on more of a house? How would you finance this? – L.L., Colona, Ill.

Dear L.L.: I don’t think there’s any question that you can handle this kind of an arrangement. When asked about financing, it seems to me a conventional first mortgage would be your best bet. The one thing that I question is the fact that you are trading up rather then trading down at this intersection in your life. I also don’t understand your antipathy toward condo associations. The condominium allows you to not have the responsibility of exterior maintenance, lawns, etc. Whether you can find the type of dwelling you want that is not part of a condo association or something similar is a matter of the local market, and I don’t know yours. I would not be comfortable in dipping into your savings, which are decent but not princely. One factor you mentioned is that you would like to avoid some of the maintenance that you are currently responsible for. Given that, I would seriously consider a community where that responsibility is not yours.

Dear Bruce: Can you give me some information on whether a covenant is legitimate and binding if there has never been a homeowners association to enforce it? I purchased my home in the late 1990s and was issued a copy of the covenants, as were all the homeowners in this subdivision. Since then, many of my neighbors have added nice additions or improvements to their homes, sometimes contrary to what the covenant reads. I have no problems with this, because I plan on doing the same. I’ve been having a property dispute with my neighbors since 1997 concerning this issue. They, too, are in violation of this covenant, but apparently they feel they can, but I can’t. I need to get this settled once and for all. My attorney has been no help to me even though property disputes are his specialty. Can you recommend what city, county or state agency that I can contact to get written proof and confirmation on this matter? – J.L., via e-mail

Dear J.L.: I can’t imagine why your attorney has been of no help. It seems to me that he’s the wrong attorney. Property laws vary from state to state but as a general observation, any person who is a signatory of the covenant, in other words any property owner, can start an action against any other property owner who violates the covenant. It would seem to me that your plan of attack regarding the neighbor might include a conversation with him saying you are agreeable to living and let live. But in the event that he is going to battle you on your addition, then you will immediately go to court to seek relief since he is violating a covenant that you both agreed to. That kind of a trashing contest generally leaves no winners except the attorneys. I am very surprised that your current attorney can’t deal with this. It is clear to me that he is not the one to be dealing with this.

Dear Bruce: I have a question regarding what my husband and I should do with $300,000 on the short term. We want to be able to use it within six to eight months for our next home. We are about 60 and 70 years old, both retired within the last four months. We are selling our South Lake Tahoe home and should come away with $300,000. We will be moving to Oregon in early July and want to keep our options open. We already have a Realtor and builder in place so we can either build or buy a turnkey home. We are thinking of putting the money into a bank in Oregon instead of Nevada, some in accounts or funds that mature at different times so as to earn more than the small amount savings accounts pay. We are ignorant of what is out there and that is why we seek your advice. – J.C., South Lake Tahoe, Nev.

Dear J.C.: Short-term interest is almost nonexistent. While $300,000 is a lot of money, it really is not in terms of investment. You could purchase six-month government paper or something similar, but frankly for the little bit of difference, I would be inclined to talk to my broker and see what a brokerage account would yield. If you were more comfortable in a bank it doesn’t matter where in the country the bank is located as long as it is federally insured, and there are ample ways that you could properly invest $300,000 in different accounts and be completely insured. It does give you almost total liquidity given that – if push came to shove and you’ve invested for six months and there’s a couple of months to go – in advance you can work out a deal where, for a point or two more than what you are being paid annually, you can borrow the money until your CD matures. Good luck with the new home.

Dear Bruce: My mother is 81. Her health is becoming an issue now, so she is going to move in with my sister in California until she needs full-time care for which there is insurance. Her present home, a small factory-built home in a gated retirement community, is for sale. The home is now nine years old with several additions made over the years. The total cost of the house with the additions is $72,000. The asking price is $105,000 and it appears we will be able to sell if for that amount. My mom and her first husband had property that ended up being sold and she used her one-time exemption on capital gains at that time. My father died, she remarried and outlived another husband. The home that she’s in now was purchased with the money she got from her last marriage, and she has owned the home from day one as a widow.

With this sale, if she were not to invest the proceeds of the sale into another house within two years, it seems that she will have to pay taxes on the money. My sister’s home will require modifications for my mom to move in, requiring an architect and a contractor. If my mom pays for these with the proceeds of the sale of her home, would this be a gift and exceed the gift limitation laws, or could this suffice as the expending of the proceeds of the sale, including the portion that would have been subject to capital gains tax for her new residences? Are we stretching things too much? – J.R., Ventura, Calif.

Dear J.R.: I don’t see any problem here. Unless there is something I have missed, your mother has lived in this house for more than two years and is selling a main residence on which she is entitled to a $250,000 gain. With the modest gain that you have described, I don’t see any tax implications whatsoever. If I’ve missed something, I’m sure my readers will let me know.

Dear Bruce: We purchased a lot in the 1950s with the intention of building in the near future. We did build our home and moved in 1957 and have been in it since that time. The lot was paid for in cash. We borrowed funds to assist with building the house. Upon payment of the lien, we received a receipt “Lien Satisfied.” We have a deed on the lot, but no deed on the actual house we built. When we asked an attorney to draw up a deed, listing husband, wife and daughter, he advised against it, and said the deed on the lot was sufficient. We don’t agree. – M.S., Bristol, Tenn.

Dear M.S.: It would seem to me that you are confusing a couple of things. One does not get a separate deed on the “sticks and stones” of the house. A deed is issued for the property and it includes any improvements on the property. It is possible to have liens placed against the property and improvements, but it is a packaged deal. If someone works on your home and gets a mechanics lien and you don’t pay the bill, his lien is on the ground as well as the building. As a separate issue, putting your daughter on the deed, in my opinion, is a very bad idea. You can leave the property to your daughter through an appropriate will. If your assets are considerable, a trust may be in order. I think it’s foolish to put your child on a deed. If she gets herself into trouble, you put that portion of your home in jeopardy. I have no reason to believe that the deed on the property that was satisfied is insufficient.

Bruce Williams is a national radio talk show host and syndicated columnist.

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