New owner should make seller pay if she wants to stay

Q: Hi. I just purchased a home, and closing is Oct. 5. The seller wants to stay in the house until Oct. 15. How much rent a day should I charge her? -- L.

A: Charge enough that she'll want to leave as promised, and get the whole agreement in writing, preferably with a lawyer's help. Ask for more than enough to cover your expenses for the 10 days, and a lot more for any day after that. Ask that the rent money and a security deposit be paid in advance at closing. Talk with an insurance agent about proper coverage.

Classified ads reveal

foreclosures, repos

Q: My daughter is moving back to town, and we wanted to start finding homes for her to look at when she comes for vacation next month. We were hoping to have a list of repossessed or foreclosure homes but cannot come up with a list we do not have to pay for on the Internet. Is there a Web site or key words to use for repossessed or foreclosure out there? -- N.

A: You can ask local banks about repossessed homes, which are known as REO, real-estate-owned, properties, but your daughter might need some patience to buy one. You'd be dealing with committees, and it takes time.

The properties may not be in such good shape by the time they're lost to foreclosure. And they may not be great bargains; banks have to show examiners and stockholders that they're not giving assets away.

As for buying a foreclosure at auction, are you aware that if you are the successful bidder, you have to pay promptly in cash? You'd need a lawyer's guidance to make sure you didn't buy problems, including back taxes. And about the plan for your daughter to look at properties next month: The unfortunate owners facing foreclosure do not have to let anyone in to view interiors.

It's not as easy as they make all this look on television. But if you do want to locate local foreclosures, they're advertised in classified ads.

Receiving no interest

won't stop the IRS

Q: I own a house that has been in our family for 50 years. My cousin is buying it from me. I will act as the bank, and he will pay me monthly payments with no interest. How do we get the deed transferred into his name? Must we hire an attorney? -- via e-mail

A: A lawyer can help with the relatively simple deed and mortgage documents, but you may have a complication here. When you receive no interest (or very low interest) on a mortgage loan, the IRS may tax you as if you had actually received it.

Depending on the amounts involved or the fact that you're transferring within a family, you might qualify for an exception to this "imputed interest" rule. That's something to discuss with a tax professional.

Deed in lieu turns

property over to lender

Q: What is a "deed in lieu," and how does it affect your credit? -- P.

A: "In lieu of" means "in place of," and what you're asking about is "a deed in lieu of foreclosure." The process allows you to turn over ownership of your property to the lender and have the mortgage canceled, thus avoiding a foreclosure. It's much better for your credit record.

A lender will usually agree only when it's clear the place can't be sold for enough to cover the debt and the borrower has no other resources. If you're lucky enough to be offered that solution to a problem, grab it.

Buying another rental

leads to tax break

Q: I am considering selling a rental property I own and taking the profit to invest in another rental property. If I do this, is there a tax break of some kind? And if so, what is the time limit I have to buy the new property? -- D.S.

A: Yes, there is indeed a tax break. It will allow you to postpone (not avoid forever) taxes on your profit from the first sale.

That way, you can put the full proceeds into the purchase of a similar ("like-kind") replacement investment.

You do have time limits: 45 days in which to identify the replacement property (on the proper forms) and 180 days in which to complete both transactions. The IRS says you must not hold any proceeds while the second deal is pending, so you should do the whole thing under the guidance of a qualified intermediary (also known as a facilitator or accommodator). Look for a professional who handles Section 1031 tax-deferred exchanges.

Edith Lank will respond personally to any questions sent to her at 240 Hemingway Drive, Rochester, NY 14620

Please include a stamped return envelope. Readers may also e-mail her at ehlank@aol.com.