Belt and Suspenders

Edith Lank
Sat, 17 Aug 2019 21:00:00 -0700
Lifestyle

Ms. Lank: What does it mean when a property shows up in the multiple listing system as a new listing with a pending offer?

I get email updates about my area from a couple of different real estate offices. The email I received today regarding a property shows today's date as the list date and a pending offer with today's date.
Updated: Sun Aug 18, 2019

Ms. Lank: What does it mean when a property shows up in the multiple listing system as a new listing with a pending offer?

I get email updates about my area from a couple of different real estate offices. The email I received today regarding a property shows today's date as the list date and a pending offer with today's date.

I thought it might be being relisted by a different agency, but I checked the property history, and it was last sold in 2012, so that's not it. — M., askedith.com

Answer: This probably means exactly what it says: The property just went on the market, and an offer has already been accepted.

Other potential buyers who really want the property might hope that something goes wrong with that deal. There's always a chance that the accepted buyers won't be able to arrange financing, or their current house won't sell, or their attorney will nix the purchase or they'll exercise their right to drop out after receiving a disappointing home inspection report.

There's many a slip 'twixt the cup and the lip. So another couple that really wants the house could submit a written offer that's "subject to the nonperformance of the existing sales contract." Sellers will usually accept such a backup proposal — it's like having a belt and suspenders to hold your pants up.

If the original contract does fall through, the backup purchase contract will become effective immediately. But while they're waiting to find out, the second would-be buyers are pretty much tied up; they won't dare make an offer on another property till they see what happens with this one.

Fooling the Assessors

Dear Edith: I have a house for sale for $260,000, and I received a $220,000 offer for the house and a $40,000 offer for "fixtures." My assessment is $229,000. The buyer wants to keep the assessment (and property taxes) low. My Realtor advised against accepting the offer. Is it legal to reduce a sales price by making the mechanicals and house contents a separate purchase? —X., edithlank@aol.com

Answer: That sounds like a pretty amateur attempt to fool the assessors. For one thing, in many jurisdictions they don't automatically change assessment when a property is sold. Then again, fixtures already go with the house — they're legally considered part of the real estate. And in many areas, sales tax could be due if it were the sale of that much furniture or appliances.

Then there's the matter of your would-be buyer's financing. Does the buyer have enough cash to base the mortgage application on a $220,000 purchase price? If not, he or she will probably expect you to sign a second contract for the bank to see. Does the buyer know — and do you know — that lying to a federally chartered institution, which many lenders are, is punishable by a fine and up to a year in jail?

You may qualify for the homesellers income tax exclusion on profit from the sale, but you also may not, in which case there could be IRS complications.

Your broker gave you the right advice. You don't need this one.

Keep the Mortgage

Ms. Lank: When someone wrote that they didn't want to pay off their mortgage because they could take the interest payments as an income tax deduction, you answered: "It's never worth spending a dollar just to get 28 cents back. That's more or less what you're doing when you make mortgage payments and then take a deduction on your tax return."

I am a retired broker. I was active for four decades and was a state and local Realtor Board officeholder. I have found many times that paying off the mortgage is injurious in the sense that the mortgage allowed other things to be deducted — by bringing the borrower to the break-even point, other Schedule A items can become deductible.

The proper response would have been to recommend consultation with financial or taxation experts. Your blanket statement is purely wrong. — R. W. D., edithlank@aol.com

Answer: As you point out, those interest payments might make a difference when deciding whether to take a standard deduction or itemize deductions on the tax return. I doubt, though, that many taxpayers would come out ahead by choosing to pay that interest.

Yes, the word "never" is pretty strong and should be used sparingly. And yes, the proper response to many of these questions is "consult a professional." Passing the buck like that makes for a boring column, though, so I try to hold responses of "consult a lawyer" or "see a CPA" to no more than once per week.