A home sale that involves grown children and their folks can create valuable financial and tax benefits for everyone involved.
Q. My parents are retired and paid their mortgage off 13 years ago. The three of us have been talking about the possibility of my buying their house and then renting it back to them. This seems like it would be good for everyone, because my folks would get a lump sum from the sale but could stay in the house as long as they wish, and I would get the property when they eventually move out or pass away. What do you think of this plan?
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A. The type of deal that you and your parents are considering is called a "sale-leaseback." It's a great idea, provided that the three of you structure the transaction properly.
Let's say that you agree to buy the home for $200,000. You could make a down payment of 10 percent (or any other amount), and then get a bank loan to finance the rest of the purchase. Your parents would get to keep all $200,000 of the sale proceeds tax-free to supplement their retirement income, and would have the comfort of knowing that they could stay in the home for as long as they want by leasing it back from you.
Meantime, you would collect monthly rental payments from your parents and also would be eligible for all the special tax breaks that only rental-property investors can claim. And when your parents eventually move or pass away, you could move into the home yourself, sell it or rent it to new tenants.
Although a sale-leaseback can benefit everyone who is involved, it also can raise some complicated tax and legal issues. Make sure that both you and your folks talk with a knowledgeable attorney and tax expert before moving forward with your plans.
Q. I am being hounded, day and night, by a bill-collection agency that was hired by a home-improvement contractor who I refused to pay after he did some shoddy work on my roof a few years ago. I thought that bill collectors have to stop phone calling when a homeowner tells them to, as I have done several times, but I'm still getting two or three calls a day. What are my rights in this situation? Where can I complain?
A. The federal Fair Debt Collections Practices Act allows you to demand that a collector stop calling -- but generally only if your request is put into writing. Simply telling the bill-collector over the phone that you don't want to be bothered anymore rarely works, in part because he or she can claim that the conversation never took place.
Many business-supply stores sell an easy form that you can complete to order a collector to stop its phone calls, threatening letters and emails. You also can download such a form from several websites. One of my favorite legal-related sites is operated by publishing giant Nolo (www.nolo.com), which charges about $12 for a downloadable copy.
Send your request to the collector via certified mail, "return receipt requested." It'll cost you a few extra bucks in postage, but will let all but the most brazen collectors know that you are serious about enforcing your legal rights.
After receiving your letter, the agency can legally contact you for only two reasons: To tell you that it's ending its collection efforts or that it's invoking its right to seek a specific remedy (usually involving the courts).
It's important to note that these rules apply only to independent collectors. They don't protect you against "in house" collectors, such as those who work directly for, say, a bank or hospital.
If the harassment persists, file a formal complaint with the Federal Trade Commission (1-877-382-4357; www.ftccomplaintassistant.gov).
Q. We are going to buy a new house, but we would also like to keep our current home and rent it to tenants. If we rent the home out and our lender finds out, could the bank force us to pay the loan off in a lump sum because we no longer live there?
A. Probably not. Most mortgage lenders require that a borrower live in his or her home for the first six months or a year after the sale closes. But you have apparently lived in the property several years, so I doubt you have anything to worry about.
Still, you should be on the safe side. Haul out your copy of your original loan contract and read all the fine print. Call the bank for a duplicate if you can't find your own copy.
In the unlikely event that you are among the few borrowers who must pay their loan immediately if they move out, there's a chance the lender will waive this requirement if you have a good payment record. Another option would be to refinance your current mortgage through one of the many institutions that make loans on rentals.
REAL ESTATE TRIVIA: It's hard to believe, but this month marks the 42nd anniversary that the "old" London Bridge was moved from the United Kingdom to Lake Havasu, Ariz. The reassembled bridge spans 930 feet, linking the town to an island in the middle of the lake.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.
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