Swamped banks are slow in approving short sales

Q. I'm in the process of purchasing a house under a "short sale." I offered the full asking price. My bid was accepted by the seller and a contract was signed to have settlement by Jan. 29. That day came, but the settlement did not happen because of some legal issues. I agreed to extend the settlement date to Feb. 16. That day passed and still no settlement. I am being told by my agent that all I can do is wait.

I am buying the house as is but there are going to have to be a few major repairs. I want to drop my offer price down $10,000, but I'm afraid they will reject my offer and go with another. I think I am being pushed around with this sale. I think the bank should be doing more to meet my settlement date. Since they technically broke my contract, is there any legal action that I can take against the bank selling the house?

A. They probably didn't break your contract. Unless your contract said time was of the essence, it is still binding even after the proposed settlement date comes and goes. And if you're not getting satisfactory cooperation with your present contract, you certainly won't do better trying for a lower price.

I'm hearing lots of stories like yours. It can, evidently, be frustrating buying bank-owned properties or those that need bank approval. Banks aren't like regular sellers. You may be dealing with a committee that may not meet that often, your papers sit in someone's "in" basket, somebody else takes a two-week vacation - and lenders right now are overwhelmed with properties they're simply not set up to deal with.

But what about the "legal issues" you mention? The delay may be for your protection. You certainly don't want to pay for the house only to find that the previous owners still have some valid claim to it. Or a tax authority does. Or another lender. Your own lawyer is the right person to investigate, and to advise you if you want to forget the whole thing.

Q. Suppose I leave my home to a family member in my will. The five-year "look back" period has passed. I am now thinking about qualifying for Medicaid to pay for health care. Will I still be able to will my home to a family member? Or, will my home have to go toward payment of my health care?

A. What you said in your will doesn't make any difference in the ownership of the property while you are alive. You are still the owner.

Your will has nothing to do with the Medicaid look back period. It wouldn't enter into the calculations whether you qualified or not.

Q. What percent of the purchase price does a buyer usually pay?

A. The buyer pays the whole purchase price.

I think what you're asking about, though, is the listed price, the seller's asking price. And for that one there's no simple answer.

Every seller is different.

Some list well beyond what the place is really worth, figuring they'll have some bargaining room and can come down if they have to. Problem is, at an inflated asking price many buyers won't even come to view the place.

Some sellers hate dickering and ask a bargain price right at the start. They usually get a quick sale, or if their place is particularly appealing, might even have competing offers and end up receiving more than their list price.

Real estate markets are local, and for each one you can find an average discount from asking price for recent sales. But those don't really tell you much, because every transaction is different.

Q. I am 56. I own a nice condo that is almost paid off. I would like to buy another place closer to work. I teach, my salary is decent, but I don't have much of a tax write-off. Moving where I want would mean higher property taxes. I think I could easily rent out my place but have been advised by friends that renting is a big headache.

A. It's not clear what you're asking, but at any rate, your friends are right. Being a landlord is a skilled job, and an amateur can make troublesome and expensive mistakes. If you buy a new place, I'd advise selling the old one.

Don't let income tax write-offs enter into your decision. There's no point in spending an extra dollar on property taxes or mortgage interest just to get back 28 cents on your tax bill.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail ehlank@aol.com.

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