On homes and real estate: Financing vacant land

Q. We are interested in buying 5 to 10 acres of land in a rural area. Can we get a mortgage for a land purchase?

A. Every time I write that banks don’t want to lend on vacant land, I hear from a few (usually in small towns) that say yes they do. It won’t hurt to inquire in villages near the land where you’re interested.

Otherwise, you’ll have to pay cash. Or maybe you could find a seller willing to take back a private mortgage for some or all of the purchase price.

Q. In October 2008, I signed a lease to rent a house as “rent to own.” When I signed the contract, I paid $4,500 down and have been paying $800 rent diligently each month. I had bad credit, so the landlord/owner suggested I pay $500 to get in the “Credit Repair Program.” I did.

Last month he called to say he wanted to put up the house for sale, since the program to repair my credit was taking too long. I asked him about the $4,500 I had put down. He told me I was not going to get it back.

The lease agreement states that “if a tenant has a deposit on the purchase of the home and decides not to comply to contract, the deposit will be forfeited.” I feel that since I am not the one who quit, why should my deposit not be returned to me?

I was on a month-to-month lease, so I gave him 30 days’ notice soon after. I moved out because I did not want to end up homeless should a buyer be interested in purchasing the home. Please can you advise me whether I should seek legal advice or take him to small claims court?

A. You should do both. A lawyer who specializes in real estate can tell you whether it’s worth the expense of a lawsuit. If not, your attorney can explain what to say when you represent yourself in small claims court.

It’s too bad you moved out. If everything was done over the phone with nothing in writing, it could end up being your word against his word in regard to who broke the contract.

Let’s take up another matter: The place to go for help with straightening out your finances is with a member of the nonprofit National Foundation for Credit Counseling. The service should be free or inexpensive. Reputable counselors don’t require an upfront fee of hundreds of dollars, and it’s clear yours hasn’t done anything for you in more than two years. To find a local agency, take a look at www.NFCC.org.

Q. Is there a federal law that defines a first-time homebuyer?

A. The definition varies for different programs. With the federal tax credits offered in 2008, 2009 and 2010, neither the taxpayer nor spouse could have owned a principal residence during the three years before the sale.

Q. You mentioned an IRS table where I could compute the value of my stepfather’s life estate in a house that I am going to own when he dies. I can’t find it. Can you direct me to the correct site? I will be contacting an attorney to terminate the estate, but I would like to offer my stepfather some compensation.

A. IRS publication No. 1457 can tell you what percentage of the house’s value is attributable to your stepfather’s life ownership. The older he is, the less his share is worth. But if he doesn’t want to sell, there may not be an easy way to do it just from your end. At best, it might involve an unpleasant lawsuit.

Q. How do you price a sale? Should the home be priced at approximately the same price per square foot that neighborhood homes have sold for? Considering the home is in as excellent condition as those sold.

Why would an agent pressure one to list lower than price per square foot? A fast sale?

A. A lot depends on how quickly you want to sell or need to sell. Yes, it’s best to judge by how much similar nearby properties have sold for, but if possible, those should be recent sales — the market changes quickly these days. And appraisers take other factors into consideration, such as lot size, number of garages or baths and the like.

If you have plenty of time to explore the market, you can always list higher and wait to see if buyers will be attracted or not. If you really want to sell promptly, take advantage of your agent’s experience.

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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