Hire a real estate broker when selling home to renters

Q: We are selling our house to our renters. They have been prequalified. What do we need to do now? -- F.V.

A: You need to negotiate a sale price, sign a sales contract that protects the interests of both parties and see to all the financial arrangements, documents, legal services, inspections and disclosures that are needed before final transfer of title.

I'd suggest hiring a real estate broker, perhaps by the hour, to guide you and your tenants through the process.

What to do next

Q: My mom owns a house in Nokomis, Fla. We've watched the value decline from $350,000 to $180,000. The house is currently rented at $1,000 per month. The tenant also pays utilities and their lease will expire soon. We would rather sell the house, so mom has the money for her nursing home; however, we fear that it won't sell and will lay vacant requiring a greater expenditure of funds for expenses. What should we do? Sell or continue to rent? -- e-mail

A: Forget how much your mother once could have sold for. That has nothing to do with your decision.

You didn't tell me her cost basis for the property and whether she'd have any profit if she sold now for $180,000. Nor do I know how long she's owned the house and how long she's been out it. All that might make a difference from an income tax point of view. If she'd have a sizeable capital gain, better check promptly with a tax professional to see if she has a time limit on using the homesellers tax exclusion.

You don't need to worry about the house standing vacant if you list it at a tempting price. Anything will sell if the price is right.

Thinking of downsizing

Q: I'm thinking of selling my home and buying a smaller, less expensive one. I'm also planning on retiring in 10 years. Should I hold on and wait for my house to be worth more? Or should I go ahead and downsize? -- L.

A: From a financial point of view, it doesn't matter whether you do it now or later. If you're buying and selling in the same market, what you lose on one end you make up on the other.

Choose when to downsize simply on the basis of what you really want to do.

Qualification suddenly harder

Q: I am in the process of purchasing a home. I was pre-qualified for a $244,000 loan. I am in the process of trying to close, but it seems that the lender has suddenly gotten cold feet.

I qualified based on my last two W-2 forms and last four pay stubs. Now the lender wants to use my adjusted gross income from my tax return, since I itemize deductions. With the way that works, I may not qualify. All my agent could tell me is that Federal Housing Authority has gotten stricter with its lending standards. -- D R.

A: All I can tell you is that FHA has become stricter with its lending standards.

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.