Permission from planning board, appraisal essential for driveway project

Dear Bruce: I would like to sell a neighbor a few feet of my property so that he may widen his driveway. I do still have a mortgage on the property. How can I determine the fair value of this and what will be involved? – W.B., Kentucky
Dear W.B.: First of all, in determining the value, you will have to have an appraisal from a decent appraiser in your area. Second, you will have to get permission from the planning board in order to be able to subdivide off these few feet. Third, you must be certain that if you subdivide you still have enough property remaining to meet all side, rear and front yard requirements for the building ordinance; otherwise you will have a nonconforming lot, which seriously diminishes its value. You must also receive permission from your mortgage company, or the whole project dies. By all means, have a planner and an attorney take care of this matter for you. Your neighbor should pay all of the expenses, since he is the beneficiary of your kindness.

Dear Bruce: In about a year and a half, I will have paid off my house. I feel fortunate that I will have attained my goal of paying it off. However, this area has become a less desirable location in which to live. After I pay the house off, what do I do next? Will the deed be delivered to me? Who do I notify? Banks, county property tax, house insurance? Where should I store the deed? Please inform so I can start the process or be ready. – Reader, via e-mail
Dear Reader: The paperwork is not complicated once the obligation is paid. However, many lenders will require you to do it all yourself. The more important part of your communication is that you are staying in the house just to own the house outright, even while the area is declining. If it is declining, I urge you to consider selling now and not waiting until it’s paid for in full. It is almost never a good idea to hang in when an area is going downhill. You could reinvest the money elsewhere. You might be a little more in hock, and it might take you longer to achieve your dream, but there is no virtue in owning a house outright that may depreciate materially. Determine the value of this house and put it on the block while the value it currently has is still available.

Dear Bruce: What if I am married and sign a quitclaim deed? What happens to the property when we divorce? Do I still have the right to 50 percent of the monies when it is sold? – J.C., via e-mail
Dear J.C.: You are out, pure and simple. Quitclaim deeds simply transfer whatever interest you have to a piece of real property to another party. If you have given that property away, that’s the end of the story. If there’s a divorce, the property belongs to the other party. Whether this asset may be considered and divided by the court during a divorce settlement is another matter. The specific 50 percent that you gave up is gone. If there is a mortgage, you are still responsible for it.

Dear Bruce: My husband bought an old farm on a contract 20 years ago. Since then, we’ve paid it off and purchased surrounding tracts of land. The farm is only in his name. The additional tracts are in both our names. My husband tells me not to worry because, as his widow, it would all come to me. I am not so sure. We have three married daughters. I have always worked alongside him and contributed. We are both retired. Do I have anything to worry about if my husband died? – J.S., Walt Hill, Neb.
Dear J.S.: Does your husband have a properly executed will leaving everything to you? If not, you have something to worry about. If he dies intestate, chances are the girls will get the bulk of the estate. In most states, the wife is only entitled to one-third if a will is not properly executed and probated. I would have a serious chat with my husband and an attorney to make sure that his affairs are such that everything clearly comes to you. It may be wise to add your name to the property either by “tenants by the entirety” or with a right of survivorship. That would absolutely guarantee that you would be a beneficiary and, of course, he would be if you died before him.
Dear Bruce: I’m 29 and live with my brother. I’m making between $350 and $500 a week in tips, plus a $400 a week salary, so I should be doing well. All I have is an SUV payment. It’s cheap to stay with my brother, but he has four kids who are driving me crazy. They are between 2 and 9. I’m thinking about getting a townhouse, but I don’t want to get into debt. I want to buy it with no money down. Is it true that this can be done? Should I stay with my brother and try to save some money or preserve my sanity? – J.B. via e-mail
Dear J.B.: You can’t gripe about the distraction when you are a guest in someone’s home. You’re living there on the cheap. Everything costs money, including privacy. You will go into substantial debt when you buy a condo or possibly a house (whether this is a good idea is a subject of another column). So, should you stay where you are and save? That’s up to you, but it seems that if you have not saved at this point with the income that you have, you should re-examine your expenses. You may be spending money foolishly.

Dear Bruce: We are in a quandary regarding capital gains when selling a home. I’ve been told that you have to own a house for a total of five years, living in it for two of those years, before you can sell it and reap the benefits of the capital gains. Others say that as long as you have resided in the home for two years, this is all that is needed. Would you please clarify this for us? We have lived in our home for almost three years. Can we sell it now, or do we have to rent it out for two years until we can sell it? – W.G. Victorville, Calif.
Dear W.G.: I’ve been getting this question a lot recently, and it bears reviewing. But, to tell the truth, the law is very clear, and I’m perplexed as to why it is so misunderstood. If the home you sell is or was your main residence for two of the past five years, you may then, as a couple, profit up to $500,000 without any federal tax obligation. That is the end of the requirement. Since you have lived in it for more than two years, if you sell it tomorrow morning all of your profit, up to $500,000 as a couple, is totally tax-free. I’ve said in the past that this is such a tremendous deal for the homeowner. Many have written saying “What am I thinking of, who can make $500,000 on a house?” In some parts of the country it would be very difficult. In other parts of the country, with the huge escalation of real estate profits, $500,000 is very possible.

Dear Bruce: I currently have a 30-year, 7.5 percent mortgage. I’m trying to refinance for 15 years at 5.25 percent. I would also like to borrow an additional $17,500 to pay off the debt on two cars and a high-interest credit card. We built the house about two years ago and paid $158,000. It is currently worth $220,000. Our combined income is $3,600 a month. Refinancing will save us a substantial amount in monthly payments. Does this sound like a good deal? I filed for bankruptcy about five years ago. – M.C., via e-mail
Dear M.C.: The first thing that jumps off the page is that your debt ratio is almost five times your annual income – far too high. I am surprised that the mortgage company will finance this much. I have no problem with the lower interest rates, but I do quarrel with the idea of financing your cars for 15 years. Do you think they will last that long? You should do something to try and increase your income. Program your payments so that you are paying off the amount that is borrowed for the cars and the credit card in a maximum of three years. Can you imagine if you charged a pair of jeans on that credit card you’ve consolidated, financing them for 15 years? This makes no fiscal sense.

Dear Bruce: I am employed and at one time, so was my wife. We were able to meet all of our monthly obligations then, but because of circumstances beyond our control, she is no longer able to work. Our monthly mortgage payment is $750 but we have not been able to make those payments. The mortgage company has not foreclosed on us yet, but they have also stopped calling us. They seem to have forgotten about us, but I’m sure that’s not the case. Is there any way we can keep the house? – B.W., Michigan
Dear B.W.: I am sympathetic with your situation, but it seems to me that hanging onto a house that you can no longer afford doesn’t make a lot of sense. If you have any equity in the house, you’d be far better off trying to sell it to protect whatever equity you have, rather than letting it go through foreclosure. If it goes to foreclosure, there will likely be an auction and the house will probably be sold for less than you could get through a normal sale were you to sell it on your own or through a broker. It’s time to let go of the house.

Dear Bruce: I am a 66-year-old senior who would like to voluntarily surrender my mobile home or sell it myself, as I can’t continue paying the mortgage since retiring. I think a senior apartment would be better for me, but I would need funds for the first month’s and last month’s rent. For that I am selling some furniture and other items. What is expected of one in a situation such as this? What are the pitfalls? – Reader, via e-mail
Dear Reader: I sincerely feel for you. Voluntarily surrendering your mobile home will destroy any credit that you may have, and you may wind up with a deficiency (the difference between what you owe and what it is sold for, plus expenses), which you will be responsible for. If you are able to sell it yourself and at least get enough money to pay off the mortgage, that would be a far better choice. If that’s impossible, then a foreclosure is the only avenue that will be open to you. If you do give the trailer back to the bank, your credit will be blemished. At your age however, it’s unlikely that credit will be a major factor, so I wouldn’t concern myself with that too much. By all means try to sell it and get out clean.

Dear Bruce: We have a 4-year-old Rottweiler and recently built a new home. While researching homeowners insurance I found it difficult to find an underwriter willing to take on my dog. I did find information pertaining to this on the American Kennel Club Web site. I had already had a policy through an insurance company and was hoping to combine my car and homeowners insurance into one. However, I found out that my car insurance carrier would not take my dog. – J.B., West Reading, Pa.
Dear J.B.: I have received a substantial number of letters from Rottweiler owners saying that they have been unable to get their dogs insured. This is a shame because there are many well-behaved Rottweilers. The problem is there are certain breeds that some irresponsible individuals have latched onto and failed to train them, so they become dangerous. Insurance companies are leery because in almost every instance, if a dog bites, the dog is wrong. As a guy with a couple of dogs, I believe that when a dog is poorly trained and does do damage, it may be necessary to destroy the animal.
The owners should also be penalized, and I don’t mean just financially. A slap on the wrist doesn’t do it. People who train dogs to do damage and are irresponsible letting the dogs run loose ought to be penalized with something more severe than a fine – a penalty that would be meaningful and sting.

Dear Bruce: Our North Carolina house, which has a mortgage, is not selling (and we are feeling it in Texas where we live). We’re not desperate, so we’ll probably end up looking for a tenant. What are the pros and cons of renting a house with the option to buy? Our real estate agent mentioned creative financing and suggested we help finance a buyer. What does that entail and how bad can it get? – Beau, Texas
Dear Beau: I would be a desperate seller and not a long-distance landlord, which can lead to disaster. Selling a house with an option to buy is only done in markets where the sellers outnumber the buyers. Oftentimes, it attracts a less-qualified buyer. As to the creative financing, here again the less-qualified purchaser is attracted. They are not able to get conventional financing because of a poor credit history, lower down payment or other variables. If you are going to consider giving a second mortgage to help increase the purchaser’s ability to attract the first mortgage, I have no great quarrel with that, as long as you at least mentally write off the amount of money. Frequently, you are going to be stuck for it. It’s far better to reduce the price, get out, lick your wounds and get on with your life.