Unpaid taxes will get homeowner in trouble

Q. My 83-year-old aunt pays $3,000 a year in property taxes. Her house is paid off. She lives in it. She wants to defer payments of the taxes.

Let's say she passes away in five years. When the house gets sold, will the $15,000 she will then owe get taken right off the sale? Someone told her she would lose the house. Also, if she decides to defer taxes, does she need to fill out certain paperwork to notify the state?

A. You don't say where your aunt is located, but in any area, unpaid property taxes start to collect penalties immediately. Your aunt would owe a lot more than $15,000 after five years, and the authorities wouldn't wait that long. Most likely her house would be seized and put up for auction in a tax sale long before that.

If she's on a slim budget, perhaps there are some senior taxpayer breaks available for her. She could inquire at any local senior center.

Otherwise, better tell her to economize somewhere else. There's no fooling around with property taxes.

Her other option would be to explore a home equity conversion mortgage, otherwise known as a HECM or reverse mortgage loan. She could borrow the $15,000 using her home equity, but it would have to be repaid by selling the house at the time of her death or when she moves out of the home. Her heirs could still buy the house at that time by paying off the reverse mortgage.

Q. I would urge anyone doing a FSBO ("for sale by owner") to be careful when showing their house. Remove valuables! Also consider removing bank statements/past income tax forms. Not everyone is a nice person, and I've heard too many stories about jewelry going missing after having people look at a house.

A. Well, I have said "always stay in sight" when showing your house.

A real estate agent - or, if this is a for-sale-by-owner, a member of the family - should accompany each viewer or group. If others show up to view the property, they can wait in the living room. It won't hurt to build anticipation.

It's not only those doing FSBOs who need to take precautions. Yes, someone should always be watching - quietly but conspicuously, perhaps from doorways, as potential buyers go through the property. And yes, jewelry and important papers should be tucked away ahead of time.

Q. We raised our family in this house for many years, and it's all paid off. We've decided to move to a senior residence, but we're not in a rush. We can pick and choose. Is there a time of year that houses sell for the most money?

A. Families like to move with the school year, and the spring pickup may start as early as February. Six months before you intend to move is almost a minimum for best results. Even if satisfactory buyers appear promptly, paperwork involved in their mortgage application, and the dovetailing of your needs with theirs, can result in problems if you're pressed for time.

I'd suggest listing your home promptly.

Q. This is our first time buying a home, and our Realtor says we should get an FHA mortgage. He just says it's the best kind for us. Can you explain why he said that?

A. The Federal Housing Administration is an agency of the federal Department of Housing and Urban Development. It was established - if I remember right - during the Great Depression by then-President Franklin Roosevelt, to help homeowners buy homes with low down payments. Lenders can safely make loans of up to 97 percent of the value of the property, because the FHA insures them against loss in case of foreclosure.

Yes, an FHA mortgage can be a great way to get in to a home with a low down payment. The money comes not from the government but from local lenders. The down payment is sometimes as low as 3 percent. In any case, it's less that 5 percent. FHA mortgages are intended for owner-occupants and can be placed on one- to four-family dwellings.

Insurance premiums to protect the lender can run more than 2 percent of the loan, payable at the start. As few FHA borrowers have extra cash lying around, this sum can be added to the amount borrowed. In addition, you'll pay a premium every year of around one-half percent of the remaining balance.

The FHA bases its loan on the value found by authorized FHA appraisers. Sometimes it requires certain repairs before the loan will be granted - items related to the preservation of the property or health and safety.

• Contact Edith Lank on www.askedith.com, or 240 Hemingway Drive, Rochester NY 14620.

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