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posted: 3/8/2014 12:01 AM

Timing a home sale to avoid taxes on profit

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Q. I understand I must live in my house at least two years to avoid the tax on my profit. It will be two years on Aug. 9 that I closed on my home.

So would it be reasonable to advertise and possibly sell the house in July with the condition of closing after Aug. 9?

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A. Sounds fine to me. If you sold on the first day the house was listed (which might mean it was priced too low) most buyers would want several weeks to arrange a mortgage loan anyhow.

Only thing is that you might as well put the house on the market before July. It seems a shame to waste that big pool of springtime prospects, especially families that want to move with the school year. Including that closing date restriction won't bother most buyers.

Q. As a wedding gift in 1953, we received a set of 12 Princeton University Wedgewood collectors plates. At our age, with no one to pass them on to, we are desirous of selling them, therefore can you please advise possible value and marketability.

A. It looks like you sent your question to the wrong newspaper columnist -- that does happen. But I was intrigued anyhow, so I took a look on the auction site eBay, where it appears that plates like yours sell for about $25 each, sometimes a bit more. You're welcome.

Q. I often see terms used in your column that relate in some way to ownership of a property -- title, deed, abstract, etc. I paid off my mortgage several years ago, duly recorded with the county, but have never had any actual piece of paper like a deed. Should I be concerned? What am I missing? Can you explain these terms and where they are applicable?

A. What a fine question, and I'll enjoy answering it. To take title first, you can translate that as ownership. It's not a piece of paper, as it is with a car. The person who has title to real estate is its owner.

The deed is the document by which you received title to your real estate. If it's on file in the county's public records office (and I'm sure it is as you say), you're fine.

An abstract traces the legal history of the property, as shown on documents in the public records. It lists all the deeds that form a chain of title as each owner of your land transferred title to the next. It includes mortgage liens placed against the real estate over the years, documents showing that those loans are paid off and other legal claims on the property -- perhaps the neighbor's right to a driveway easement, or a workman's judgment for unpaid repairs.

An abstract that goes back for centuries can make for interesting reading. When you sell your property, though, an up-to-date one is used to ensure the buyers they're receiving clear title with no unknown claims likely to pop up later.

When a new abstract is needed, sometimes an old one can save money because the researcher can start where the old one left off. If you've been in your home a long time, though, that may not matter because local customs require going back only a certain number of years.

The public records office keeps all those documents where anyone can see them. If for some reason you did want your own copies and couldn't find them, you could always order them from the county for a nominal fee.

Q. Our daughter is moving out of state to attend graduate school. She plans to purchase a townhouse instead of renting and take a tenant or two to offset the cost. She has excellent credit, but her credit history is thin as she is in her early 20s. We are willing to cosign a mortgage with her if she does not qualify on her own.

Our local bank will not write a mortgage for a property that is out-of-state. How to we go about establishing a relationship with a lender for the purpose of getting a prequalification letter and a good-faith estimate? We would like to see what she would qualify for on her own first, and then secondly with our assistance.

A. While your own bank will not lend on out-of-town property, there may be other local ones that have branches where your daughter is going. It is possible to apply for a loan, or for prequalification, over the phone or online. She may also want to contact a couple of mortgage brokers (that's brokers, not mortgage bankers) where she'll be living, to see what they suggest.

• 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.

© 2014, Creators Syndicate Inc.

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