Ms. Lank: I am planning to retire in seven years. I found a bank-owned house in a retirement community for $230,000. All other like models are asking $265,000 to $299,000. If I buy it, I would put 40 percent down and rent it until I move out there. My brother made a spreadsheet for me that showed all of the costs, income and tax benefits. I would have a gross loss of $53,000 for the seven years.
The house is in good condition for renters, but after I move in, I would replace the flooring, cabinets, kitchen and landscaping. This would cost about $41,000. When I move, I would sell my house. Right now, it is worth $208,000 and no mortgage. Is it better to buy and rent it out now, or just wait until I am ready to move out there? -- L.F.
Answer: If you've never been a landlord before, it's easy to get into trouble, especially if it's out-of-town property. And are you sure rentals are allowed in that community? And finally, seven years is a long time ahead to commit to retirement housing. Things can change.
HOW MUCH TO PAY
Dear Mrs. Lank: Here is a family situation whereby the couple is divorcing and one spouse is buying out the other and remaining in the house, which is valued at $237,000 on Zillow. In 2006, the house was assessed at $300,000. The spouse remaining in the house is considering a buyout price of $150,000 -- based on the 2006 appraisal and a top-of-the-line kitchen remodel since then -- and is applying for a mortgage loan at their credit union. According to Zillow, the kitchen remodel adds about $23,000, although it cost considerably more. They hope to resolve it amicably.
Is there a law that the credit union has to lend based only on a current appraisal? As a former banker, I am worried because I know bankers' bonuses are based on how many loans they sell. What would be your advice given this situation? -- E.R.S.
Answer: Don't worry about easy loans. These days, bankers follow much stricter guidelines than they did in your time. And they'll certainly use a current appraisal.
Averages aren't much help in estimating how much a specific kitchen remodel would add to market value. In one instance, a seller might recoup none of the expense -- for example, if the new kitchen over-improved the property and pushed the price much higher than buyers are willing to spend on that particular street. On the other hand, it's possible to imagine a situation in which a modern kitchen might more than pay for itself in sale price.
Each of the divorcing spouses can hire an independent appraiser, agreeing in advance to base the buyout price on the average of the two current estimates.
WHERE'S THE $300?
Hi! After we made a purchase offer on a house we bought in August, we had an inspection done. The chimney needed work, and the owner agreed to either have the work done or pay us $300. At closing, it wasn't clear, but when I got home and added up the figures, I found out we never got the $300.
When I called the paralegal working on our closing, she claimed we should have said something to our broker at the final walk-through. She made it sound like it was our responsibility to see that either the chimney was fixed or we got the money. Our broker was surprised that we didn't get the $300, saying the chimney was not something that is inspected in the final walk-through.
The paralegal told us we could take the previous owner to small claims court, but it wouldn't be worth the cost. Can you tell me who is at fault for us not receiving the $300? I feel like neither our lawyer nor our agent was really looking out for our best interest. -- B. and J.W.
Answer: It costs almost nothing to go to small claims court, if you're willing to take the time and effort to represent yourselves and see what a judge has to say.
If that closing agent had a copy of the document in which the $300 roof agreement was set out, it would be her responsibility to see that you received the credit.
If your real estate agent had the agreement, it should have been forwarded to your lawyer. If only you and the seller knew about the document, it would have been up to you to see that your lawyer received a copy.
And finally, if the agreement was only oral -- forget it! In the sale of real estate, nothing is binding unless it's in writing and signed.