"Finders, keepers" works in the schoolyard, but not in the real estate world.
Q. We agreed to sell our home last October, and the sale closed on Nov. 27. Last week, the title company that handled the sale sent us a letter stating that our sales proceeds were improperly calculated and that we received $2,512 too much. Now they want the $2,512 back. Do we have to issue a refund?
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A. You have to issue a refund if the title company (or just about anyone else involved in the sale) can prove that you were overpaid. "Finders, keepers" works in the schoolyard, but not in the world of real estate.
Miscalculations don't occur very often. But when they do, the party that has been "unjustly enriched" by the snafu is legally obligated to make it all square.
Don't write a refund check until you have reviewed all the closing papers, and you are satisfied that a refund is warranted. If you still have questions, seek the advice of an outside real estate lawyer or real estate professional who wasn't involved in the transaction. But if the review indicates that you were overpaid, cut the check and settle the problem fast. If you don't, it's a safe bet that you will wind up in court -- in which case you'll have to pay a lawyer anyway and spend lots of time defending a case that you probably can't win.
Q. My cousin and I want to buy a house together. We would split the down payment and monthly loan payments equally, but he would live in the house while I rent my half to a tenant. Could we treat the same house differently for tax purposes?
A. You and your cousin can treat the house differently as long as the two of you do not file a joint tax return.
Though both of you could deduct a pro-rata share of property taxes and mortgage-interest payments, you alone would be able to take additional write-offs for repairs, depreciation and the like because the Internal Revenue Service would likely classify you as a "rental property investor." The rent money you collect would be fully taxable.
Q. I am applying for a home loan. My sister got into a financial jam earlier this year, and I loaned her $4,000 to help. Now she has repaid the $4,000, plus $800 in interest. Can I list the $800 as "income" on my loan application to improve my chances of getting loan approval?
A. You can, but it won't do much good. Unless you make such loans on a regular basis and have established a good track record of collecting payments, most lenders will say that the $800 is merely "temporary" income rather than "permanent" income.
There are other types of temporary income that lenders usually won't consider when deciding whether to make a loan. Most bankers won't count short-term unemployment benefits or payments from a state workers' compensation fund. Payments from a roommate who plans to share the borrower's home usually don't count, either, unless the borrower can produce a formal rental agreement. And, in an unusual twist, foster parents often can't get credit for child-care payments they receive from the government -- even if they're hoping to buy a home so the kids won't have to live in a cramped apartment.
Though most lenders won't count such items as income, it's worth noting that many will consider them a "compensating factor" that can bolster your chances of getting a loan if you don't have a sterling credit history. So when in doubt, borrowers should list every source of income they have -- temporary or otherwise.
Q. I want to refinance my mortgage, but there is a $7,200 tax lien against my home that resulted from a long dispute I have had with the Internal Revenue Service. Can I refinance without paying off the tax lien?
A. Probably not. A tax lien almost always takes priority over any other lien on a home, including a first mortgage. It's doubtful that you can find a lender who will refinance the loan without insisting that the tax lien be paid off first.
If you don't have $7,200 in cash to pay the lien off, you can have the bill paid as part of the refinance. Essentially, the lender would earmark $7,200 of the proceeds for a check that would be cut to the IRS and add the amount to the balance of your new mortgage.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405. Our booklet "Refinancing the Right Way" includes several "insider tips" to get the best mortgage deal. For a copy, send $3 and a self-addressed, stamped envelope to David Myers/REFI, P.O. Box 2960, Culver City, CA 90231-2960. Send questions to that same address, and we'll try to respond in a future column.
© 2012, Cowles Syndicate Inc.