Lenders may balk when sellers agree to subsidize buyer's costs

Many sellers in neighborhoods where sales are still tepid now offer to pay some or all of a buyer's closing costs. It's a wise marketing decision that can make a house sell faster, primarily because it can reduce the amount of hard cash that a buyer must have in order to complete a purchase.

Several banks, however, prohibit their homebuyers from accepting a seller's credit that exceeds the amount of the buyer's actual closing expenses. Some lenders also require that any seller-paid closing credits be used to cover a buyer's one-time-only, "nonrecurring" costs - such as title insurance or upfront loan fees - rather than "recurring" charges like fire insurance or other items that must be paid on a monthly or annual basis until the loan is eventually retired.

Because the bank won't let you offset the $1,800 difference by writing a check to your buyer, the simplest solution may be just to drop the agreed-upon asking price by the same amount.

To illustrate, let's say your contract calls for a $210,000 sales price and that you have agreed to pay $6,000 of the buyer's closing costs. Because the buyers' closing costs will be only $4,200, you could simply amend the sales contract to reduce the price to $208,200 and the credit to $4,200 - thus making up for the $1,800 difference while also adhering to the bank's loan requirements. Talk to your real estate agent or an attorney for more details.

Q. We spent almost $5,000 last month to buy a hot tub and have it installed. Can we deduct this amount on our next tax return?

A. No, the cost of your new spa cannot be deducted on your next return. However, you can add it to the cost-basis of your home, which will reduce any taxes you might owe on the profit when you eventually sell.

Q. We have had our mortgage for 13 years and have never missed a payment. Last month, however, our bank did not send us our monthly statement, and we subsequently forgot to pay the bill. We received a "late notice" five days ago and have since brought the mortgage up to date, but the bank also wants to charge us a $125 late-payment fee and a $35 processing charge. Are we legally required to pay these costs, considering that it was the bank's fault that we did not get the monthly bill on time?

A. Yes, the bank has the right to levy both a late fee and a processing charge even though it apparently failed to send you a monthly payment reminder.

Nearly every mortgage contract allows a lender to charge a late fee and related costs against borrowers who don't make their monthly payment in a timely manner. Few contracts, however, actually require the lender to mail out a monthly statement. Many banks still do so, but it's a courtesy that is not required by law.

You were smart to bring your mortgage up to date as soon as the bank sent you the late-payment notice. Doing so should prevent any damage to your credit rating, because most banks don't report late payments unless they arrive 30, 60 or even 90 days after the deadline.

Your letter states that you have had your home loan for 13 years, and that you were never late on a payment until now. Call your lender's toll-free customer-service department and ask the representative to waive those fees. Many banks are willing to do so for dependable borrowers like you, but won't provide the same courtesy to those who have been delinquent in the past.

bull; For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.

#169; 2009, Cowles Syndicate Inc.