ESL teacher faces home buying quandary: U.S. or Costa Rica?

Q: I am an ESL teacher living in Costa Rica. My husband and I just sold our home here, but we don't know if we should stay or move back to the United States. Would it be safe to do so, with the economy as it is right now? -- Via e-mail

A: I'm chuckling as I read your note. Nobody's rioting in the streets here.

Are you asking whether it's safe from a financial point of view? If you'd want to purchase a new home, this is actually a fine time to be a buyer. Mortgage interest rates are still relatively low (assuming you have good credit and income), and home prices offer real bargains in some areas.

We live in One World these days, and you probably can't find any place that will be completely insulated from the financial difficulties in the United States, anyhow.

No IRA involved

in money from sale

Q: I am thinking about selling my house. My sister and brother-in-law sold their house about a year ago. They made an $80,000 profit on the sale. My sister said they had to buy another home because they were advised that to avoid paying taxes on the profit, they would have to either buy another home, or roll the money into an IRA.

I thought you did not have to pay capital gains taxes on a profit made from the sale of your home if it is less than $500,000 and you are married, or $250,000 if you are single. -- L.

A: You are right and they are wrong. They're thinking about an old law that hasn't been in effect for a long time, and they've been getting some weird tax advice.

If you've owned and occupied your home as your principal residence for at least two of the five years before you sell it, you can indeed exclude the amounts you mention from federal capital gains tax. It no longer matters whether you buy another home.

I can't imagine where the IRA bit comes from at all. Retirement accounts never had anything to do with it, even in the old days.

Name on deed disqualifies

buyer from first-time status

Q: If my name is on a deed, but I never had a mortgage in my name, could I still be considered a first-time home buyer should I buy a home on my own? -- C.

A: If you are owner or co-owner of a house, you are not a first-time buyer. Mortgaging has nothing to do with it.

Parents' reverse mortgage

builds up gradual debt

Q: I have several questions regarding reverse mortgages. If my parents go that route, and later they want to move, will they lose all of the equity in their long-paid-for home? If they die, will we somehow be responsible for making payments? Neither I, nor my children, want the house particularly. -- Via e-mail

A: If your parents go for a reverse mortgage, a gradual debt builds up against their home, with interest. It starts with their closing costs, and then grows as they're sent money. Whether it uses up all their equity depends on how much they've borrowed by the time they die or move out. At that point, the whole debt must be paid off.

With the most common program, HUD's Home Equity Conversion mortgage, if the house can't be sold for enough to cover the loan, FHA insurance takes care of the rest. You would never have any liability.

Selling failing business

may or may not be solution

Q: Is it easier to sell a business (country convenience store with an apartment and 5 acres) while it is open or after we close it down? It's not as busy as we thought it would be and we may need to sell. -- S., via e-mail

A: I haven't seen your property or the neighborhood, and I'm not familiar with your local market. You can get much better answers from local business brokers, who know the area and can look over your store. Call a few agents who are handling business sales and ask if they would come over for a consultation. Most will agree to do so with no obligation to you.

Selling after foreclosure

can be money loser

Q: On a foreclosure, when the seller is the lender, is the seller (lender) allowed to profit from the sale? -- Via e-mail

A: In the unlikely case that a foreclosure auction brings enough to pay off mortgage, liens, back taxes and legal expenses, any proceeds left over go to the foreclosed owner.

But if you're asking whether the lender or investor who bought the property at the auction could then turn around and sell at a profit -- yes, they could. Usually, though, banks say they lose money buying, holding and selling those properties.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.