Tax credit available for profits from sale of home

Q: If I sell my home for more than the new one I want to buy, do I lose the extra cash to taxes? -- E-mail.

A: If the house you sell has been your main home recently (at least two of the past five years) then you will qualify for a special homeseller tax break. You can take up to $250,000 profit on the sale (twice that if you're married filing jointly) with no federal capital gains tax at all. Most states follow the same guidelines.

The Internal Revenue Service doesn't care whether you buy a replacement home or not.

Two names are on deed

Q: If two people are on the deed, do both parties' names have to be on the sales and purchase agreement? -- E.M.

A: Except in some cases where a married couple are concerned, each owner has the right to sell his or her share. In order to sell the whole property, all owners would have to sign sales contract and deed.

Do I have to use this agent?

Q: I have been working with an agent to sell my condo to buy another condo. I have also received listings from other Realtors and looking owners' listings as well. I found a condo that I liked and the owner give me his agent card to contact him. The agent that sold my condo told me to let him make the offer.

I have not signed any contract stating that his is my sole agent. Do I have any obligation to this agent? -- Patricia.

A: Unless you signed a contract hiring him to find your next condo, you don't owe that agent anything, legally.

But if he's been working for you, I'd say you have a moral obligation to use him for your purchase. That's a lot better than making your offer through the seller's agent, who is legally obligated to put the seller's interests first.

What is seller takes back mortgage?

Q: What's the meaning of seller takes back a second mortgage or seller takes back a note? -- Sarah

A: The seller who takes back a mortgage is lending money to the buyer. In return, the seller receives a mortgage that is a lien, a financial claim against the property. The seller also receives a note, which is the buyer's personal promise to repay the loan.

Instead of going to a regular lending institution the buyer will borrow some of the purchase money from the seller.

Or in this case, as it's evidently a second mortgage, the buyer will be borrowing money not only from a bank but also from the seller. With this arrangement, the seller will collect part of the purchase price (with interest) month by month over a period of years.

Wants to build home and work space

Q: I am currently trying to purchase land to build a small studio space in which I can use for my own personal work and for any part-time work. Because it's technically a business, I don't want to run into any zoning issues, but also don't want to get into the technicalities of purchasing commercial property (if possible).

I'm looking for a very small piece of land that allows me to build 1,500-square-foot building. Is it possible to buy residential land that would suit my needs to build a part-time business on now and potentially a house later? -- Nate

A: I'm not a lawyer and I'm not familiar with building codes in the area you're considering.

My advice is to make any written offer to purchase contingent upon receiving building approval for your plans. That way if your project is not permitted, you wouldn't have to go through with the purchase.

Grandfather passed, got loan

Q: My fiance's grandfather got a loan and helped us get our first house in August. He put the land contract in my name. He passed away in February.

Will the house go to my name since I have the land contract? Do I need to contact the lawyer who wrote up the land contract? -- Jeri

A: I'm not a lawyer and I haven't seen the documents involved, but unless you're named in the will, I don't see why the house would become yours on the owner's death.

You will have to talk with the lawyer who's handling the grandfather's estate. If they don't have a lawyer, then yes, talk with the one who drew up your land contract.

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.