Q. My father-in-law is moving from his home of 60 years to assisted living. One of his grandchildren wants to buy the house, possibly in a cash deal. What is the best way to set a fair market value? Are we naive to think we can make the transaction with just a lawyer and no Realtor? What "gotchas" should we be careful about?
A. A real estate broker's primary obligation is to produce a ready, willing and able buyer. Your father-in-law already has that, so there's no need for an agent. You could, though, ask a broker for a simple one-page written estimate of value. Or, you might ask two brokers and then use the average of their two figures.
In your state, it's customary to use attorneys for real estate transfers, so a lawyer, preferably one active in real estate matters, could certainly handle the paperwork. It might be more appropriate to retain two lawyers, one representing each party. They'll know whether any special precautions need to be taken.
In another state, you would simply follow local settlement procedures.
Q. My mother gave me a lake home for $1 in 1985. She passed away in 1999. I am considering selling it.
It is my understanding that if I sell it, my cost basis would be $1 plus the cost of any improvements. Is there a way to avoid capital gains on the entire value? Is there a way to sell it to a family member in order to avoid or minimize taxes? It's written in my will that my nephew will receive it upon my death. Do you have any suggestions?
A. You really received the place as a gift. You also received your mother's cost basis. That figure, plus the cost of improvements, is your cost basis.
Q. We will put our house on the market without a broker, for sale by owner. We would like any advice about what to do when somebody says they want to buy it.
A. First off, understand that the Statute of Frauds requires that certain contracts be in writing in order to be legally enforceable, and that includes any contract for the sale of real estate.
Oral agreements are not binding. Someone could offer to buy with cash in front of five witnesses. You could shake hands and accept a $20,000 good-faith deposit. But that person could still back out of the deal the next day and demand return of the deposit. As far as the law is concerned, there would've been no contract.
There's no point in oral dickering, and you wouldn't be able to hold them to it anyhow. Your best response is "We'll be happy to consider any written offer."
Ask your lawyer for a blank copy of a typical sales contract used in your location. Study it carefully ahead of time. When you receive an offer, ask about the buyers' financial situation. If they offer all cash, where is the money coming from? If they require a loan, what's their credit rating and their income? It's helpful if they already have a lender's written acknowledgment that they qualify for a loan.
The offer may contain contingencies. For example, they will buy, but only if:
• They are able to obtain a mortgage loan for a certain amount.
• Their present house sells.
• They receive a satisfactory home inspector report.
To protect against getting the house tied up indefinitely, each contingency should have a time limit. You won't run much of a risk if you take the house off the market for a few days while waiting for an inspector report.
If, on the other hand, you're willing to wait around until their house is sold, you could insert some provisions about the matter into a written counteroffer. An escape clause would allow you to continue showing your house. If you wanted to accept a later offer, those first buyers would have a few days to remove the contingency and agree to buy, come what may. Otherwise, they'd have to drop out, leaving you free to negotiate with your new purchaser.
Buyers are understandably reluctant to hand an earnest-money deposit directly to you. Suggest that the deposit be held by your attorney, their attorney or an escrow company.
As you can see, you may be relying more on your lawyer than you would if you were using an agent.
Good luck to you!
• Contact Edith Lank on www.askedith.com, or 240 Hemingway Drive, Rochester NY 14620.
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