Real Estate in Steamboat

By JOYCE COHEN

Published: June 24, 2007

WITH their two growing children sharing a bedroom, Asa and Micael Holmstrom decided it was time to look for more space.

Not that Filip, 6, and Felicia, 7, couldn’t have continued to share. But Filip is autistic, and “being autistic also means sometimes you don’t want to sleep,” Mrs. Holmstrom said. He often rises at 3 or 4 a.m. “It’s hard for Felicia,” Mr. Holmstrom said.

For four years, the family, from Stockholm, rented a two-bedroom apartment with a panoramic view at the Victory on West 41st Street. They landed there when Mrs. Holmstrom relocated to New York to open the United States office of Columbitech, which provides encryption software for wireless networks.

Upon their arrival, with no credit history in the United States, they found that landlords required more than a year’s rent in advance. The newly built Victory, however, had no such requirement. Recently, though, the rent rose- to nearly $5,000 a month from $4,000. It was more than they could afford.

Meanwhile, Felicia started preschool nearby. The family anticipated that Filip would join her. At age 3, however, he spoke just a handful of words: mama, papa, cookie.

At the preschool, “they said it is something special with him and we don’t want him here, and as a mom I got very defensive and frustrated and angry, but they were right,” said Mrs. Holmstrom, 42.

Over time, it became increasingly apparent that Filip needed special attention. In public, for example, he would try to grab food from a stranger’s hand, especially candy. He still barely speaks.

The Holmstroms were heartened by Filip’s acceptance to the Hawthorne Country Day School, for children with autism and other disabilities, in Hamilton Heights. Last fall, he enrolled in kindergarten at the school, on West 143rd Street near Convent Avenue.

At the same time, the family was hunting for a bigger home to buy. At first, they saw no reason to leave their neighborhood west of Times Square, where they had several high-rise condominiums to choose from. That was before they realized their budget of $1 million would buy no more than a one-bedroom in that area. They decided to look outside the neighborhood.

Filip initially traveled to school by bus, a 90-minute ride by the time his schoolmates were picked up. Mr. Holmstrom, 34, a stay-at-home father, met him after school and took him downtown for additional speech and occupational therapy.

The school was a quick trip on the A train – only three stops and 15 minutes from Times Square. “I don’t think people can get their heads around how close it is” to Midtown Manhattan, Mr. Holmstrom said.

The Holmstroms found Hamilton Heights calm and lovely. “Convent Avenue is the most beautiful avenue in the whole Manhattan,” lined with brownstones and greenery, Mrs. Holmstrom said.

Mr. Holmstrom had been inside some of those brownstones. He works part-time as the technology director for infinitefamily.org, a “virtual adoption” group that connects Americans with AIDS orphans in South Africa. Some of the people he works with live in Harlem, “so I have the pleasure of going to their brownstones,” Mr. Holmstrom said. Their homes had lots of space, plus fenced-in backyards.

But spending a few million dollars on a finished brownstone wasn’t an option, nor was spending well over $1 million on a dilapidated one.

“We don’t have the knowledge; we don’t have the connections” to do extensive renovations, Mrs. Holmstrom said.

Everywhere, though, they saw ads for the many condominiums rising in Harlem. “It didn’t hurt that the apartments were half the price” of those in Midtown, Mr. Holmstrom said.

The Lenox on West 129th Street had possibilities, but the neighborhood seemed comparatively congested. The building at 111 Central Park North, still incomplete, was an exception to the pricing rule. “They were basically doing Midtown pricing,” Mr. Holmstrom said, with three-bedrooms costing more than $2 million.

THEY took a look at the Langston on West 145th Street, five blocks from Filip’s school. They could buy a three-bedroom penthouse with a terrace and a view of Jackie Robinson Park for about $1 million. Though they wanted the view for Filip, who gazed endlessly from the windows of their rental, they feared a high terrace was unsafe.

“Filip is strong and jumping around all the time and has no sense of fear – we could not have Filip there,” Mrs. Holmstrom said.

The ground floor was a better choice. For $660,000, plus around $600 a month in common charges, they could buy a three-bedroom, two-bathroom apartment. The terrace, safely fenced in, was nearly 1,000 square feet.

“Even in Upper Manhattan it is hard to find an outdoor space that size,” said Sidney Whelan of the Halstead Property Company, the lead sales agent for the Langston, who lives around the corner.

The family moved into their new home in April, the first Langston residents to arrive. Mrs. Holmstrom walks Filip up the hill to school.

Filip, who craves swinging, has a therapeutic swing in his bedroom and a swing set outside.

As for Felicia, now a pupil at the United Nations International School, she is happy to have a room of her own, and is already growing seedlings by her window, to be moved outdoors when the backyard planters are ready.

“We have all this space to run around,” Felicia said. “We were always told we couldn’t run around because we didn’t have space.”

In her new home, which is filled with children around her age, she has more friends than ever. They gather on the building’s communal playground for play dates.

Filip goes, too, but only with a parent. “We have to let him run because it’s like there’s a dynamo inside him,” said Mr. Holmstrom, who is a former Swedish champion in floorball, a kind of indoor hockey.

“Every second, you have to be prepared,” he said. “I always follow him. It’s like man-on-man coverage.”

By JEAN RAFFERTY

Published: June 20, 2007

Even on a gray and drizzly day, the appeal of the Château du Feÿ is immediately apparent. Behind the wrought-iron gate, a fountain plays in the courtyard and the rosy brick and pale stone facade of the long, low Louis XIII abode – one of France’s Monuments Historiques – is more welcoming than imperious.

“It sounds pretentious, but it is a friendly place, full of light and really very livable,” said the current chatelaine, Anne Willan, founder of the renowned French cooking school La Varenne and author of more than 30 cookbooks, many of them written at the chateau.

Ms. Willan and her husband, Mark Cherniavsky, formerly a World Bank economist, bought the property in 1982 as a weekend retreat for themselves and their children, Simon, then 12, and Emma, 10.

In her book “From My Château Kitchen,” Ms. Willan described the moment when a real estate agent threw open the shutters and light streamed into an elegant series of salons that glittered as the crystal chandeliers were reflected over and over in the mirrors. She called the feeling she experienced a “coup de foudre,” or a thunderbolt, and it marked the beginning of the family’s 25-year love affair with the chateau.

Now, with their children grown and living abroad, the couple have decided to put the place on the market. Their asking price for the 38-hectare (91-acre) property is 3.8 million euros, or about $5.1 million.

“The Chateau du Feÿ is an outstanding, attractive estate in a completely unspoiled setting less than a hundred miles from Paris,” said Philip Hawkes, the agent who first showed the property to Ms. Willan and who is handling its resale.

The intimate feel of Le Feÿ belies its size. Built in 1640 on the foundations of an older fort by Nicolas de Baugy, counselor to King Louis XIII, the chateau totals 1,000 square meters (about 11,000 square feet).

It is structured around a large entrance hall and reception rooms, and is flanked by square towers with walls almost a meter, or about three feet, in diameter. Instead of a large central stairway, there are two small staircases, one in each wing, that lead to the upper floor and the 15 bedrooms.

The chateau has had only seven owners in more than 370 years. The second owner embellished the principal rooms with 18th-century wood paneling on the walls, enhanced with motifs of carafes and wine glasses in the dining room and musical instruments in the grand salon, a music/living room used for entertaining. “The oak parquet floor is lovely for dancing,” Ms. Willan said.

In the left wing near the master bedroom, a library houses the couple’s 5,000-volume collection of antiquarian and modern cookbooks. The bookcases will be sold with the house as well as the carpets, chandeliers, some furniture and the new John Deere minitractor.

Once the couple bought the chateau, “we looked at each other and said, ‘What have we done?’ ” Ms. Willan said during a walk around the property. “We found out immediately. That phrase ‘la vie de chateau’ doesn’t mean grandeur. It means that you never know what will happen – pleasures, crises, meeting lots of people.”

When the family moved in, her sensibilities as a culinary specialist took over and “the first thing we did was to install a temporary kitchen,” she said. “And it lasted 14 years,” she added with a laugh.

Today, there are two: the family’s updated kitchen and the professional one created in 1991 when Ms. Willan transferred the Varenne school into the chateau from Paris. The school’s programs include classes at the house, visits to local markets and gastronomic meals from some of the region’s Michelin-starred chefs. And many of Ms. Willan’s recipes, including those from her latest book, “The Country Cooking of France,” were conceived and tested here, with the ingredients coming from just outside the kitchen door.

The chateau’s herb garden, with its looping brick walks, is not far from an 18th-century enclosure with an organic vegetable garden a hectare (2.5 acres) in size. Its square beds surround a central pond, and espaliered trees and bushes provide more than 50 varieties of fruit and berries. (The estate even has a small truffle oak plantation.)

The walled enclosure also contains an all-weather tennis court, and there is a heated swimming pool on the other side of the house. At the back of the house is a large terrace with views over the Yonne River valley.

Both of the couple’s children celebrated their weddings at the chateau, and “when we gave a grand millennium party,” Ms. Willan said, “we slept 46 guests on the property.”

There are several outbuildings including a gatehouse, a cottage, a farmhouse, an apartment, stables and a barn.

Some interesting features include a medieval well 90 meters (295 feet) deep; an old bread oven that was found in a henhouse and now is used for classes; and a 17th-century dovecote, with boxes for 10,000 birds.

“Owners had the right to a pair of birds an acre,” Ms. Willan said, “so it is a measure of the estate’s size, at its height, of nearly 5,000 acres.”

From the window of the master bedroom in the left tower, one can spot nine local villages, two of which were part of the estate in feudal times.

A 1751 map shows the extent of the property, which was a major wine producer until the phylloxera epidemic, the invasion of sap-sucking insects in the 19th century that destroyed most of Europe’s vineyards.

Wild boar and deer roam the forest, whose oaks are said to have been the source of wood for Napoleon’s ships.

The property is a 10-minute drive from the town of Joigny and its train station, which has a fast service to Paris, and there are highways nearby.

Yet, the Château du Feÿ is a world of its own. “You are floating in this landscape with wonderful views and you don’t want to leave,” Ms. Willan said. “It’s very quiet and peaceful. I call it never-never land.”

DEAR BOB: My parents died in 1993 and left their home to me in excellent condition. In 2007, the state took the home by condemnation for a new road. Over the 14 years, the condition of the house has declined due to neglect, but property values in the vicinity have generally increased. Can I claim no increase in my basis because of the decline in condition and the need for repairs? –Harold B.

DEAR HAROLD: When you inherited the house in 1993, your stepped-up basis was its market value as of that date. Your taxable capital gain will be the difference between that 1993 market value and the amount you receive for the house from the state.

PurchaseBob Bruss reports online.

For example, suppose the house was worth $100,000 in 1993 when you inherited it and the state will now pay you $225,000 for it by condemnation. That means you have a $125,000 capital gain, subject to a maximum 15 percent federal tax plus any applicable state tax.

Your adjusted cost basis would not have increased since 1993 unless you added capital improvements, such as a new roof or a room addition, during your years of ownership. For full details, please consult your tax adviser.

GETTING RID OF A BAD CONDO ISN’T EASY

DEAR BOB: Every time I read your column and you advise a home buyer not to pay all cash, I shout “right on.” I foolishly paid 100 percent for a one-bedroom condo about 10 years ago. Since then, the condo complex has become badly run-down. It is mostly occupied by renters, and the maintenance has become very poor. I would love to sell, but I can’t. The only condo I know of that sold recently had a large mortgage and the loan company let the buyer take over payments. I wish I had a mortgage like that. Any ideas? –Maurice H.

DEAR MAURICE: If your condo complex has more than 20 to 25 percent renters, mortgage lenders might have stopped lending there or they probably charge higher-than-normal interest rates.

You should look into refinancing for not more than 80 percent of your condo’s market value. That would give you cash to buy a home elsewhere. Then, with the lender’s approval, you could advertise your condo for sale “take over mortgage payments,” thus enabling your condo to probably sell.

SHOULD REALTY AGENT GIVE UP HER SALES LICENSE?

DEAR BOB: I am a licensed real estate agent, but I really want to start buying on lease-options or short sales myself and re-leasing them to tenant buyers. I want to start by finding deals for other investors, as I badly need to earn some quick cash. Should I just call the real estate commissioner and terminate my license? Or should I put it on inactive status so I don’t get into trouble? –Ramona C.

DEAR RAMONA: When you are acting on behalf of others, such as a property owner or an investor, and expect to be paid a fee or commission, you need a real estate license.

If you have a realty broker’s license, then you can work independently. Of course, if you only have a salesperson’s license, then you must work under the supervision of a licensed broker.

Don’t be so quick to terminate your hard-earned real estate license. Putting it on inactive status, if you won’t be working for fees or commissions, makes more sense just in case you decide to go back to selling real estate for sales commissions.

The new Robert Bruss special report, “Pros and Cons of Living Trusts to Avoid Conservatorship, Probate Costs and Delays for Your Heirs,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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Copyright 2007 Inman News

Ann Burns held a life estate in a house that was destroyed by fire. Mitchell Weiss was the trustee of the Kent Burns Trust, which held the remainder interest in the house.

Burns insured her interest in the house with Fair Plan. The trust insured its interest in the same house with Clarendon National Insurance Co.

PurchaseBob Bruss reports online.

Clarendon estimated a cost of $480,722 to demolish and reconstruct the house. But Fair Plan estimated a $474,000 replacement cost. The two insurers determined Burns and the trust were not both entitled to the full insured amount on their insurance policies, but that payment should be on a pro rata basis.

Burns was paid $279,410 by Fair Plan and the Trust was paid $198,793 by Clarendon. Burns and the Trust sued their insurers for breach of the duty of good faith and fair dealing, as well as breach of contract. The insureds argued they should each be paid their full policy limits rather than the pro rata payments because neither party has a duty to rebuild the house.

If you were the judge would you order the two insurance companies to pay their insureds up to the policy limits?

The judge said no!

Burns and the trust each held separate insurable interests in the same property, the judge began. Each was required to obtain fire insurance to protect their respective interests, he added.

Under state law, the judge explained, neither Burns nor the trust has an obligation to repair or rebuild destroyed property.

“Our Supreme Court long ago recognized that the nature of insurance does not provide for recovery in excess of the value of the property destroyed where there is but one loss,” the judge emphasized. Therefore, multiple insurers of the same property are not required to pay more than the total loss so a pro rata payment by each insurer is proper in this situation, the judge ruled.

Based on the 2007 California Court of Appeal decision in Burns v. California Fair Plan, 152 Cal.App.4th 646.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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Copyright 2007 Inman News

Q: We had a new roof installed on our house in the Sierras. The roof is a 12-in-12 pitch (45 degree) and is approximately 17 squares (1,700 square feet).

We contracted for a 30-year Elk brand composition roof with 30-pound felt underlayment. The instructions require a ridge vent system, without which the manufacturer’s warranty would be void. We told the roofer this.

There is full wood sheeting on the roof. The instructions require a 3/4-inch opening on either side of the ridge beam to allow air flow.

My biggest concern, though, is that the roofer applied 15-pound felt — not 30-pound — in a vertical direction as opposed to the horizontal overlap. The contractor maintained that the felt is frequently installed this way. But code and the manufacturer’s instructions say that felt must be applied horizontally across the roof.

The second installation issue we have concerns the ridge vent system. The roofers did not cut the opening. When we discussed this with them, they told us they had shimmed the sheeting to allow air flow. But there is no evidence of any shimming. What are your thoughts regarding moisture, condensation and/or water penetrating the joints of improperly installed felt underlayment? Up to 6 inches of snow remains on the roof for as long as three months during winter.

The product has a 30-year warranty against defect, but the manufacturer says the warranty will be voided if the roof is not installed according to instructions. The roofing contractor has a five-year warranty against leaking or failure. I would appreciate your thoughts regarding the chances of failure.

A: Oh boy. We’re afraid your roofer did you no favors. The first thing that comes to mind is whether there is a building permit? If so, how in the world did this job pass inspection?

We’ve done a little investigation into the specifications the Elk Corp. requires to maintain the limited warranty they provide with their roofing products. From what you describe about the roof installation, Elk has grounds to disavow any responsibility should the roof fail during the warranty period. You can check out the specs at www.elkcorp.com.

That does not mean that roof failure is inevitable. The relatively steep pitch of the roof may well save the day. In fact, we think that it’s as likely as not you’ll be OK. But the manner in which the contractor installed the felt underlayment and the ridge vent sure doesn’t meet Elk’s specs or any common construction practice that we’re aware of.

Fifteen-pound felt is fine, but the vertical application is not. We can only guess that the roofer installed the felt vertically because it was easier to do so on the 45-degree angle of your roof.

Building felt is the last defense against water infiltration. Felt underlayment is always applied horizontally and overlapped at the seams. The uphill layer laps over the bottom layer by a couple of inches to give any water that might get under the shingles a channel to flow away from the inside of the house. Vertical application defeats the goal of shedding water to the outside.

Of greater concern is the ridge vent installation. Ridge ventilation systems are installed to help vent warm summer air from the attic. Without proper ventilation, the roofing material, as well as the sheeting and underlayment, will be subject to increased expansion and contraction. This will shorten the life of the roof.

According to Elk, the proper way to install the vent system is to remove a 1/2- to 3/4-inch slot of sheeting from each side of the ridge. The slot should not be cut within 12 inches of the gable ends or any intersection of two roofs.

It sounds as if the roofer simply didn’t follow the instructions, and when you called them on it they tried to feed you a line of baloney.

Shimming the sheeting, if that’s what they did, doesn’t cut the mustard. If they did shim, it was out of laziness. The roofer just didn’t want to bring the Skilsaw on the roof. But we wouldn’t be surprised if nothing at all was done.

Our suggestion is that you try to get the contractor back to install the ridge properly. Also put them on notice that you’ll hold them responsible if Elk will not honor the warranty because of faulty installation.

If they refuse, contacting the California Contractors State Licensing Board is in order, at www.cslb.ca.gov or (800) 321-2752.

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Copyright 2007 Bill and Kevin Burnett

Why is mortgage interest deductible without limit on two homes and not just the primary residence?

Some accountants have jokingly referred to the concept as the “Congressman’s Rule” because some of our lawmakers have a residence in the nation’s capital and another in their home state.

But what if you happen to own more than two homes? Granted, many people have a difficult time finding the funds for a primary residence let alone a getaway in the mountains or a condo on a desert golf course. But more and more parents are leaving homes to their children, giving the kids a huge asset, sometimes without much notice.

Before 1987, mortgage interest on all residences could be deducted without limit. Since then, consumers with more than two residences are required to choose two “qualified” residences where mortgage interest could be deducted, but the selected residences are allowed to be juggled into the “qualified” category from year to year.

For example, let’s call my personal residence “Seattle” and my vacation home “Palm Springs.” Suppose I’m transferred to Phoenix and decide to buy a home there. Depending upon the purchase prices and considering when “Phoenix” was purchased, I may decide to claim Seattle and Palm Springs as my two residences for this tax year. If Seattle is sold next year, I likely would pick Palm Springs and Phoenix as my residences for next year, depending on when in the calendar Seattle was sold.

A home does not actually have to be used to qualify as a selected residence. If there is no rental or personal use of a residence for an entire year, it can be designated as a selected residence and interest can be deducted. If it is rented or used only occasionally by the owner, no interest can be deducted under the personal-residence rule unless there are at least 15 days of personal use.

The personal-residence rule requires that personal days must exceed the greater of 14 days or 10 percent of rental days. The personal-usage requirement must be met before a property can be designated as a selected residence. If the home is rented more than 140 days, there will have to be 15 days of personal usage before the interest can be fully deducted under the residence rule.

Longer rental seasons are a bonus under the 10 percent rule. For example, a mountain resort home near the ski slopes (for winter sports) and a lake (summer water sports) might be rented for 250 days a year, allowing the owner to use it for 25 days.

Personal use does come at a cost. Depreciation is limited only to the percentage of time that a house is rented. If you rented for 90 days and used it yourself for 10 days, you can take only 90 percent of the total expenses and depreciation.

Another way to catch a few hours at the beach without eating into or exceeding your 14-day or 10 percent limit is to clean the house yourself between renters. Days spent maintaining the house do not count toward the personal-use limit. You can even deduct travel costs to get to the house and expenses such as paint and cleaning supplies.

But if the Internal Revenue Service determines that you were at the house more to sit in the sun than to clean the kitchen and refinish the deck, those days may be added to your personal use and could jeopardize your tax savings.

The house also is supposed to be rented at fair-market value to qualify as a legitimate investment property. If you rent to relatives at discount rates, the IRS may rule that the house is not a business and disallow many of your deductions.

One of the more effective uses of a vacation home as a tax shelter is for future retirement. For example, if you are 50 years old, you can buy a vacation home, furnish it and have renters pay for it while you capture the depreciation for 15 years. When you have taken most of the tax advantages out of it, you can move in and/or convert it to a private residence.

And because most mortgages “front load” interest, you will have used up most of your tax deductions from the mortgage in the 15 years you were working and renting the home before you reached the traditional retirement age of 65. In the later years of the mortgage, when interest deductions are relatively low, you probably will be less concerned about deductions because your income will have fallen off after retirement.

So, if you have home loans, it’s always a good idea to look down the road to see how long mortgage interest will really be a benefit — on one or more homes.

To get even more valuable advice from Tom, visit his Second Home Center.

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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2007 Tom Kelly

Whether you are a first-time home buyer or a longtime homeowner, you will profit from reading “The First-Time Homeowner’s Survival Guide” by Sid Davis. He is both an experienced real estate broker and a home renovator so he knows which home repairs and renovations will reflect well in home enjoyment and increased resale value.

The book begins with the basics of repairing and upgrading home electrical systems and plumbing. Davis shares his construction knowledge without becoming super-technical. Photos illustrate his topics.

PurchaseBob Bruss reports online.

For example, he recommends upgrading home electrical service for both safety from fires and for greater enjoyment with no blown circuit breakers on overloaded circuits.

Having been involved renovating many houses, I related to most of the author’s suggestions and helpful shortcuts. However, if the book has a flaw it makes the do-it-yourself projects such as replacing old faucets seem too simple. Watching an experienced plumber grapple with that task a few weeks ago at my house, I know how difficult that work can be.

Especially valuable are the comparison charts of alternatives. For example, the chart showing exterior siding comparisons lists 10 siding types, such as vinyl, aluminum, wood, stucco, brick and natural stone, along with their pros and cons, plus the approximate installed cost of each. Information like that is invaluable to homeowners who are considering redoing their home exteriors.

After Davis explains the basics of home repairs and renovations, he moves on to more challenging topics such as hiring and checking out a professional contractor. I especially liked his comment, “If it isn’t in writing, it doesn’t exist.” Then he explains the importance of written change orders, a key profit center for most contractors.

But this book covers more than just the basics of home repairs and renovation. It includes profitable information including the tax aspects of owning a home, insurance considerations, property tax over-assessments, and even a chapter about avoiding the most costly house-repair problems.

As the book evolves, it goes from the physical aspects of home maintenance and improvements to equally important topics involving money aspects, such as saving on construction by choosing the right kind of contract, and getting the most benefits out of insurance policies.

Chapter topics include “Your Home’s Electrical System 101″; “Maintaining and Fixing Your Home’s Plumbing System”; “How to Create Great Looking Walls and Ceilings”; “Interior Improvements That Add Value”; “Exterior Maintenance and Improvements That Add Value”; “Your Home’s Landscaping and Curb Appeal”; “Hiring and Working with Contractors”; “Tax Aspects of Owning a Home”; and “Insurance Matters for Homeowners.”

Whether you are the do-it-yourself type or you prefer to hire professionals such as plumbers and electricians, this new book provides profitable information to save money and make the right choices. On my scale of one to 10, this superb book rates a solid 10.

“The First-Time Homeowner’s Survival Guide,” by Sid Davis (AMACOM Publishing, New York), 2007, $16; 216 pages; available in stock or by special order at local bookstores, public libraries and www.Amazon.com.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2007 Inman News

DEAR BOB: I am buying a new condominium in Waikiki, Hawaii, that will cost more than $1 million. It is being built by a reputable company. Should I pay all cash or should I finance a portion of the purchase price? I’m thinking why pay interest if I don’t have to. –Ronald H.

DEAR RONALD: Paying 100 percent cash for any residence is very risky, especially when you are buying in a vacation area where market values tend to fluctuate wildly.

PurchaseBob Bruss reports online.

No matter how wealthy you are, I hate to see you tie up a large amount of cash in one asset, which might be very difficult to sell if you need cash or it turns out to be a bad condo. Instead, I suggest you obtain a mortgage for 50 to 80 percent of the purchase price.

TITLE MUST BE CLEARED BEFORE SELLING PROPERTY

DEAR BOB: My dad inherited a two-family duplex from his parents’ estate, and title was in his name only. He passed away in August 2006. The duplex was left to my mom. She is 81 and wants to sell it to one of the renters. I presume she needs an attorney to change the title into her name. How would she find out about the stepped-up basis at the time of my dad’s death? How does the $250,000/$500,000 home-sale exemption enter into this? –Sharlene E.

DEAR SHARLENE: Presuming your mother is your late father’s heir for the house, she needs to clear the title of your late father’s name and put it into her name alone. Then she can sell the duplex and deliver marketable title to the buyer.

Her new stepped-up basis is the August 2006 market value when your father died. A professional appraiser should be able to determine this valuation for her at a cost of a few hundred dollars.

Your mother does not qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 because she has not owned and occupied the property for at least 24 of the last 60 months before its sale. However, thanks to the stepped-up basis, her capital gain probably won’t be large, and her capital gain tax will be minimal. For details, she should consult her tax adviser.

INVESTING IRA MONEY IN REAL ESTATE

DEAR BOB: I just learned of self-directed IRAs (individual retirement accounts), which can invest in real estate. What are your thoughts on investing IRA money for the purchase of a condo? –Elizabeth P.

DEAR ELIZABETH: You can use IRA money to acquire only investment real estate, not your personal residence. If you think the rental condo will appreciate in market value, then it might be a good investment for your IRA.

The new Robert Bruss special report, “Pros and Cons of Living Trusts to Avoid Conservatorship, Probate Costs, and Delays for Heirs,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his Real Estate Center).

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2007 Inman News

Dear Barry,

I bought a new house from an owner-builder about three years ago. The building consists of concrete block walls on a concrete slab foundation. For quite some time, I’ve noticed white mineral deposits on some on the interior walls around the doors and windows, and moisture on some of the walls when it rains. And recently, some new problems have developed. The Pergo floors are buckling, and some of the electrical outlets are no longer working. I’ve notified the builder of these problems, but he shows no interest or concern. What should I do? Oh, and by the way, the builder is also carrying the note on the property. –Jory

Dear Jory,

It appears that you have some serious construction defects. Groundwater, rainwater or both are penetrating the walls and possibly the slab floor, as well. My first suspicion, without seeing the property, is that portions of the walls and slab are below the outside grade level, that they were not sufficiently waterproofed, and that no ground drainage system was installed around the building. Correcting problems of this kind and repairing the consequential damage to the flooring and the electrical outlets could be very expensive. Without question, it is the responsibility of the builder to remedy all of these problems.

To begin, you need a comprehensive evaluation of the home by a qualified inspector. Given the severity of the current problems and the lack of concern by the builder, a comprehensive inspection is likely to reveal additional defects that have not yet come to your attention.

If the builder is not willing to rectify these issues, you should seek legal advice regarding remedies available by law in your state. If it becomes necessary to hire another contractor to make repairs, perhaps the builder’s note on the property should be reduced to offset your costs.

Dear Barry,

What recommendation can you provide concerning the proper drainage of water away from a foundation and crawlspace? My son is buying an older tract home without any type of drainage or gutters. I’m concerned about potential problems such as foundation settlement, cracking of walls, mold formation and other health concerns. Should we hire an inspector to make an evaluation and, if so, how thorough would such an inspection be? –Stan

Dear Stan,

Home inspectors, if they are competent in their work, routinely look for evidence of faulty drainage conditions, substandard or damaged foundations, moisture damage to building components, signs of leakage, condensation, stains, etc. If seasonal water buildup occurs in the crawlspace, there is usually some evidence of it, even during the dryer season.

For a more comprehensive analysis of ground drainage conditions and the design of corrective drainage systems, you can hire a geotechnical engineer. However, a good home inspector can usually let you know if there is a need for further evaluation by an engineer.

The key, however, is to find a highly experienced home inspector, someone with a reputation for detailed thoroughness. Not all home inspectors fit this description, so check around before hiring just anyone.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

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Copyright 2007 Barry Stone