On homes and real estate: Rent with option to buy

Q. My tenants signed a rent-with-option agreement to close in May 2012. They’ve maintained the property for 16 months and paid the rent on time. Their credit may not allow them to fulfill the purchase on the above date. I would like to find a way to close the deal. Are there any creative ideas?

A. Perhaps “seller concessions” would help your tenants qualify for a mortgage loan. You could agree in the sales contract to pay their closing costs, up to a certain amount limited by the rules of the particular mortgage plan being used.

Then there’s the possibility of extending the option agreement. The prospective buyers might be able to cure their credit problem in the future. After all, they’ve managed to be faithful with the rent. It’ll help if they’ve made a nonrefundable deposit that can count toward their eventual down payment and if they’re receiving similar credit every month for a portion of their rent.

That won’t solve the problem, of course, if both you and they are eager to go through with the sale in 2012. In that case, again, depending on how serious the credit problem is and what caused it, you might agree to take back a mortgage for all or part of the purchase price. That would tie up your proceeds up for years, of course, so it’s customary to set an interest rate somewhat higher than the current average, perhaps 6 or 7 percent. If they cleaned up their credit, the buyers could always refinance later, through a regular lending institution, and pay you off completely

Q. What is your real estate specialty — broker? Broker manager?

A. I’m a real estate writer.

I was an active broker years ago, but I gave up my license up when I started writing the column. Since then, I’ve taught real estate on the college level, spoken at Realtor conventions around the country and had my own radio and TV shows. I’ve published eight consumer books on real estate and two textbooks, both currently in tenth editions. (Plus, I’ve written one little book on Jane Austen.)

Q. Is that $8,000 first-time homebuyer credit still in effect?

A. I’m afraid it isn’t.

Q. We have a home up North that we anticipate selling at a profit. Unfortunately, we also have a home in Florida that would sell at a considerable loss … if we could find a buyer in that market at all.

I’m thinking of asking a friend or relative to buy our Florida place from us (at current market value) so we can capture the capital loss as an offset to the gain we’ll experience with the sale of the other property. The potential gain and loss are about the same amount.

Once we’ve been able to capture the loss on our income taxes, our plan would be to then buy the Florida property back from our friend or relative (at a slightly higher price for their trouble) as soon afterward as tax law allows.

So our question is: What constitutes a “sale,” from an income tax perspective? Is there any length of time the property must remain “sold” before we could buy it back and still qualify to write off the loss on our income taxes?

I’ve been reading your column for many, many years but I’ve never seen anything like this addressed.

A. You don’t tell me if either of these is your principal residence, which the IRS defines as the place where you live more of the time. Tax treatment differs for profit and loss on the sale of a main home, a vacation home or property that’s been rented out. It’s possible you don’t have as much of a tax problem as you anticipate — or you may have more.

Feel free to write back in more detail.

Q. My husband and I bought our home before we were married. The deed lists us as being single. Is there a way to update the deed to say we are married and to update my name to my married name?

A. The two of you can sign a new deed naming yourselves — husband and wife — as owners. That’s not really necessary, but it may change a few things. The lawyer who helps you with this simple procedure can explain whether or not your state has special treatment for property owned by a married couple. A new deed might involve changes in your inheritance situation, for example, or the right of either of you to force a sale.

Ÿ Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

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