Jawanna P.

Sacramento

A: Don’t bury your head in the sand, as many borrowers who are in mortgage default do. Instead, call your mortgage lender immediately.

Explain your situation politely. Ask for a forbearance and a loan workout plan. That is presuming you can now afford to pay at least the regular monthly mortgage payment.

Ask that your unpaid mortgage payments, probably totaling several thousand dollars, be added to your mortgage principal. The result will extend your mortgage by several months but then your mortgage can be reinstated in good standing with the lender.

Lenders do not want to foreclose. They lose money on virtually every foreclosure. But lenders will insist their borrowers make the monthly payments on time. If you are unable to resume the regular monthly payments, then ask the mortgage lender for time to sell your home to pay off the balance. But do everything you can to avoid a foreclosure sale.

Q: We had our house on the market almost four months with no offers. All the houses in our price range have not sold in our upper-middle-class neighborhood. It shows well, according to the local agents. We are thinking of taking our house off the market for a short period and then re-listing it to “start clean.”

How long should we keep it off the market? Should we use the same agent? She has been great but won’t give us a straight answer on this.

Jan L.

Washington, D.C.

A: It used to be possible to “start clean” so your home would look to buyers and agents like a new listing. However, most MLS (multiple listing service) computers can now report how many days a house has been on the market for sale within the last 12 months, both in its current and previous listings.

If you are satisfied with your agent’s services, then relist with her, but never for longer than 90 days at a time. However, if she wouldn’t give you a straight answer, interview at least three other successful local realty agents to ask them why, in their opinions, your home didn’t sell.

The obvious problem is your home might be overpriced. But some sellers are shocked to discover their listing agent is the obstacle. Perhaps she is uncooperative or disliked by many local agents. Maybe she makes your home difficult for other agents to show to their prospective buyers.

By interviewing other agents, you will get their comparative market analysis forms to show your home’s market value based on recent sales prices of comparable nearby homes and the asking prices of similar neighborhood residences (your competition).

Q: I am considering investing in rental property. Is each property considered an entity, eligible for the $25,000 annual tax loss deduction from ordinary income? Or is the loss limited to $25,000 for all investment properties?

Martin S.

Antioch

A: Unless you or your spouse qualifies for unlimited annual investment property deductions as a real estate professional spending at least 750 hours per year on your real estate activities, you are limited to a $25,000 total annual loss deduction from all your investment properties against your ordinary taxable income.

However, unused losses (mostly from the noncash depreciation deduction for wear, tear and obsolescence) are “suspended” for use in future tax years, or when you sell a property you can use suspended losses to cut your taxable capital gain.

Q: Do I need to sell my house before the one-year anniversary of my husband’s death in order to preserve that $500,000 home-sale tax exemption? My capital gain will be in excess of $250,000.

Gloria R.

Rohnert Park

A: The anniversary date of your spouse’s death is irrelevant for tax purposes. To qualify for the $500,000 principal-residence-sale tax exemption of Internal Revenue Code 121, presuming both spouses met the 24-out-of-last-60-months occupancy test, the principal residence must be sold within the same tax year as the spouse’s death.

The reason you don’t need to rush to sell your home is, presuming you inherited your late husband’s share of the residence, you will receive a new stepped-up basis as of the date of his death.

If the principal residence is in a common law state, you will receive a 50 percent stepped-up basis to market value as of the date of death. However, if the house is in a community property state, as the surviving spouse you will get a new 100 percent stepped-up basis so you will have little or no capital gain tax if you sell the home within a few years after your spouse’s death.

Q: I own an unusually shaped lot that juts in front of my neighbor’s house. I am willing to execute an equal land swap with him. What is the process to document this arrangement? Will this affect our title insurance?

Denis McG.

Potomac, Md.

A: This is not a do-it-yourself project. Please consult an experienced real estate attorney to guide the land swap through the bureaucratic maze, such as recording new parcel maps and insuring the new boundaries for each parcel.

The special report, “2007 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, or by credit card at (800) 736-1736 or at www.bobbruss.com. Questions for this column are welcome at either address.

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/02/18/REGB4O4LOV1.DTL