About Real Estate: Home-warranty sales jump
A growing number of homeowners are offering to pay for a warranty plan in an effort to sell their property faster and, perhaps, save them from getting sued if something breaks shortly after a buyer moves in.
Q. We're getting ready to put our home up for sale. Our sales agent wants us to offer any buyer a one-year home-warranty policy that would cover various items if they break down. He says offering a policy will help make the property sell faster, but we think that the eventual buyers should pay the $500 or so for the coverage because it would benefit them instead of us. What are your thoughts?
A. I think offering to buy a one-year home-warranty policy for a prospective buyer is a good idea, especially because home sales in most neighborhoods are still slow.
A typical warranty policy provides for the repair or replacement of most appliances, the electrical and heating systems, the water heater and a handful of other items that might break down or wear out within a year after the new buyer moves in. Coverage for additional items, such as air-conditioning systems and pool or spa equipment, usually can be arranged for at an additional charge.
Such policies not only give buyers an extra measure of confidence to close a deal, but also can protect sellers if something goes wrong long after they move out.
For example, if a built-in dishwasher breaks down a few months after the sale closes, the policy will reimburse the new owner for some or all of the cost of having the machine fixed or replaced. Without a policy, the buyers might ask the sellers to pay for the repairs or even sue if they believe the dishwasher had a defect the sellers should have disclosed.
Spending $500 or so for all the coverage that a home-warranty policy provides would be a wise investment on your part, not only because it could help the property sell faster but also because it would provide both you and the buyers another layer of protection if something goes wrong within a year after the sale is completed.
Q. We have a shingle roof, and part of it is covered most of the day by the shade of a neighbor's big tree. The shaded part has turned dark green, but the other side still has its original color. Is there some type of fungus that is growing on the "shady" side of the roof? Is this a sign that the roof is about to collapse, or that we're breathing in mold?
A. Probably not. The greenish color on your roof is likely caused by harmless algae, which often grows on roofs that don't get much sunlight.
Common algae won't hurt a roof or pose health hazards to its occupants, according to a representative for the federal Environmental Protection Agency.
To restore the roof to its original color, safely climb up to the roof and scrub the discolored tiles with a watered-down solution of algicide -- the same chemicals that are used to clean swimming pools. Or, call a professional roofing contractor for help.
Q. My mom died several years ago, and now my dad (age 85) is finally moving from his longtime house and into a rest home. I am his only heir. I don't want to sound greedy, but for tax purposes, would it be better for him to deed the house to me while he's alive or for me to inherit the property from him after he passes away?
A. It's almost always better to inherit property than to receive it as a gift before the owner dies.
To illustrate, let's say that your father purchased his house many years ago for $30,000 and that it's now worth $250,000. If he deeded it to you now and you immediately sold it for a net profit of $220,000, you would owe tens of thousands of dollars in federal taxes on the sale proceeds.
Conversely, if you later inherited the home from him instead, the value of the property would automatically be "stepped up" to reflect its value on the day he passed away. If the property was worth $250,000 on the day of his death and you immediately sold it for that amount, you'd owe absolutely no federal taxes at all.
Talk to an accountant or other tax professional for more details. It also might make sense for your father to form an inexpensive living trust and use it to hold title to his home and other property.
After he passes away, the trust would allow the house and other assets to quickly transfer to you without having to go through the costly and time-consuming probate court procedures that a common will demands.
• 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.
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