selling a house/ buying a house

[fmoore200]

My mother passed away this past year and as the executor of her estate, I have been given the responsibility of making some difficult decisions.

Her home in long island is completely paid for. I love the home and it is large enough for my family, so I was thinking about keeping it in the family. I would keep care of it and my younger brother could live in the downstairs portion.

I have a few problems, however. Firstly, my mother passed away in the house, and every time I go to the house I feel uncomfortable. Second, I don't live in long island, and really have no desire to. The taxes are WAY to high, I would have to pay a toll twice a day to get back and forth to work, and I don't want to set roots any further in New York.

If anybody remembers any of my posts, I have lived in Puerto Rico and have every intention of going back. So I've been thinking that I could sell my mother's home and pay down my debt and buy a house outright in PR.

I don't have any experience either buying or selling a house, as I have been renting my entire life (I'm sure my fellow NYers can relate). So I am asking my TB brethren for any advice, hints, insights, and any other synonym for assistance you can think of..

[PSPookie]

The market is horrible right now. If you can afford to hold the house (rent it out maybe) for a few years you will fare better financially.

Plus, who knows what will happen in that time? You could find yourself relocating to the Long Island area. Plus, the uncomfortable feelings will likely fade.

[Smokin' Toaster]

Sorry to hear about your mom.

If you’re not going to live in the house it boils down to two choices – keep it and rent it out or sell it. If you brother lives there is he going to pay the taxes and upkeep on it? I know he’s your brother, but is he responsible enough to do this? If not, are you ready willing and able to evict him? If you aren’t ready, willing and able to evict any tenant for good cause you don’t need to be a landlord, because you will be abused. If you sell it, look at what other similar houses in the neighborhood have sold for, spring for an appraisal so you know what the value is, and research the realtors in the Long Island area so you are informed and can pick a good one. I’d retain a lawyer who specializes in estate/real estate transactions too. Since you will be coming into some money from selling the house, you can afford it, and a lawyer (and possibly and accountant) can probably tell you ways you can keep more of the money by minimizing taxes, fees, and other costs. In addition, it’s a CYA (cover your A$$) precaution to have both.

Good luck!

[EricF]

Keeping it, and renting it out is a good idea...if you are willing to handle everything that goes along with being a landlord. Doing this would keep it as a family asset, and could provide your family with some extra income.

Has the house been willed to you soley? If not, I would assume that your brother would expect to benefit from half of whatever happens with the house.

If you decide to sell it, DEFINITELY work with a Realtor who knows the area.

[snappytom]

As Smokin Toaster suggested ... get it appraised. It's easy to hire an appraiser, should cost a few hundred. Regardless of what you do with the house you need to establish a cost basis, your cost basis is the value of the house on the day that your mother passed. You will need that information whether you sell today or 2 years from today, but it is a lot easier to establish now than in the future.

[fmoore200]

Thanks for all the info guys!

I am going to get the property and its contents appraised when the deed is put in my name. Why do I need to know how much it was worth when my mother passed?

My brother and I are both beneficiaries in my mothers will, but I am the executor of the estate and his portion until he reaches 25 <sigh>... Fortunately he has his own place, so my mothers property is not needed for living in. He lives and works in the Bronx and I live in westchester and work in the Bronx, and neither of us have much time to be a landlord.

Not only that, but renting in my mothers community is not that easy. The amount that I would have to charge a renter just to cover the taxes and insurance (there is an in-ground pool as well) would be very high. I also work too hard, and have a long and variable schedule so I don't want to travel to fix a leaky faucet or pay someone to do it..

That being said, here is what I have been mulling over: I do have some debt (student loans, irs, credit card, car note), but nothing substantial. I would like to completely pay that off. Also, I would like to take advantage of the poor housing market. Since I didn't buy the house, whatever I get for it, as long as it is fair, is pure profit. I would use that money to buy a house outright in Puerto Rico.

Then I would be debt free with a house that is completely paid off and a car that is paid for. Does that make sense? Please be honest...

[snappytom]

Originally Posted by fmoore200

...... Why do I need to know how much it was worth when my mother passed? .....

The sale of a large asset such as real estate will always have tax consequences. You will either have a loss or a gain, losses you can write off, gains you need to pay taxes on.
Establishing your cost basis is important. Don't worry too much about valuing the contents of the house, household goods, furniture, etc are generally not considered in valuing a property and are usually not worth $#@& anyway.

When tax time comes your accountant will rely on you to provide the information he/she needs to work with. Cost basis of major assets that have been sold is very important.

As for being debt free .... absolutely a good idea. Not an option for most of us, but life is a lot more fun managing assets than managing debt.

[fmoore200]

Originally Posted by snappytom

The sale of a large asset such as real estate will always have tax consequences. You will either have a loss or a gain, losses you can write off, gains you need to pay taxes on.
Establishing your cost basis is important. Don't worry too much about valuing the contents of the house, household goods, furniture, etc are generally not considered in valuing a property and are usually not worth $#@& anyway.

When tax time comes your accountant will rely on you to provide the information he/she needs to work with. Cost basis of major assets that have been sold is very important.

As for being debt free .... absolutely a good idea. Not an option for most of us, but life is a lot more fun managing assets than managing debt.

If the house sells for less than it was worth when my mother passed will affect my taxes? Can you explain that to me further?

[MJ5150]

Seems to me like since you did not invest any of your own money to purchase or maintain the property, anything you sell it for will be profit.

-Mike

[fmoore200]

Originally Posted by MJ5150

Seems to me like since you did not invest any of your own money to purchase or maintain the property, anything you sell it for will be profit.

-Mike

Yes, but I'm not a sucker either lol. I know the the market is bad right now and I don't want to ne taken advantage of by somebody with experience in the field.

Also my mom would be pi**ed if I got taken for a ride with her house.

[Bassamatic]

That is why you need the appraisal for the current value. Before you do anything, you need to know what is is worth.

If you have debt and don't want to be a landlord, then it is clear - you sell it and use the profits to pay off your own debts. This is probably the very best use of the equity in the house. Our economy is teetering on another recession, and the value is unlikely to go up for a long time.

Get the appraisal and meet with at least 2 local real estate agents that work the area and discuss it with them. Consider spending a bit to clean and paint and neaten the yard if necessary, and "stage" the house properly for sale. As hard as it will be, clean out most of your Mom's stuff and leave the house nearly empty - it''ll make it look larger.

Put your brother's half in some kind of interest bearing account that will at least make a FEW dollars until he can have it. Don't do anything exotic with it as he can make problems later if it loses value.

[snappytom]

Originally Posted by fmoore200

If the house sells for less than it was worth when my mother passed will affect my taxes? Can you explain that to me further?

In that case you have a loss, which can be used to offset any gains you may have from other sources including those unrelated to your mother's estate.

Losses may be carried forward to future years if they have not been exhausted by current gains.

I am not an accountant but I dealt with the same situation 5 years ago. My father passed and we sold the house for less than what it was worth at the time of his death. My brother and I are still carrying a loss from that but we can use up to $3k of it each year to offset any gains we may have.

If you don't have a tax accountant you should get one, not too expensive and worth the $$ in these situations.

If you have a will (or not) you should get an estate lawyer too. If your mother had a Trust and you understand it, a lawyer can be optional.

[OldDog52]

Dude, you need to get professional advice and not depend on what you're reading here, cuz I think you're being given some bad information relating to tax liability. My mom passed away last year; I was the executor and successor trustee. The only taxable part of the inheritance was her IRA savings, which of course was never taxed when she contributed to the IRA. The IRA dollars become taxable when the IRA is cashed out, whoever does that.

There was no tax on the remainder of her assets passed on to my sister and me. It has to be a pretty large estate before there are tax issues.

Selling a house does not AUTOMATICALLY trigger a tax event. Something like the first $250K received from the sale is not taxable (or maybe it's the gain). When my stepdad died and my mom sold her house, there were no tax consequences whatsoever to her. Nor to us when we inherited the money from the house.

We had an estate attorney and a CPA work with us so it was all done correctly. No tax except for the IRA being cashed out.

Consult with professionals.

[MJ5150]

Originally Posted by fmoore200

Yes, but I'm not a sucker either lol. I know the the market is bad right now and I don't want to ne taken advantage of by somebody with experience in the field.

Also my mom would be pi**ed if I got taken for a ride with her house.

I hear you. I was responding to the question about how it may affect your taxes, and the other post about profit or loss if you sell it. In my opinion, it would be viewed as all profit by the IRS if you were to sell it at any price. I may be wrong though since I'm not an accountant or tax expert.

-Mike

[bassrique]

I wouldn't necessarily spend the bucks on an appraisal. I would pull comparable sales in that subdivision and drive by them. Do they compare with your house? If so, you have a good idea of the home's worth. Is your Mom's house similar to the other houses in the neighborhood?

Does the house need repairs? If so, you'll likely be doing them to make the house financeable for a full-price retail sale. If the place needs repairs, but you don't want to do them, you could sell "as-is" to a cash investor or occupant with rehab skills, or you could be the bank, hold the mortgage for the income stream and down payment. Owner financing deals typically sell for more than regular retail deals. The obvious risk there is you may have to foreclose upon default. Or you can hold the mortgage until such time as you see fit to sell said paper, or portions of it.

[Thor]

Originally Posted by MJ5150

Seems to me like since you did not invest any of your own money to purchase or maintain the property, anything you sell it for will be profit.

-Mike

That is not at all true.

If he and his brother are the beneficiaries of a will, they will be able to exempt the current 2011 Estate Tax Exemption, which is 5 Million dollars, 2.5 million applicable to each from their taxes. This law sunsets in 2 years, by the way, and returns to 2002 levels unless other legislative fixes are made.
Want to see how conovulted it is, read Here.

Also, the under 25 exclusion for the brother may not be legal unless it was set up as an irrevocable trust for the benefit of the brother or the family including the brother. Selling the property now may have tax consequences to the brother, depending on the estate assets. If he is under 21, he may inherit anyway. If I was him and this was the case, I would consult my own attorney.

Even though you are the executor, you have no right to disburse any money to anyone other than what the will stipulates, (and those are usually written written per stirpes), filing the estate tax return with the IRS and then writing the checks. If you don't know what per stirpes is, you definitely need legal advice. You are allowed to continue to pay the Estate expenses, of course.

You will need the advice of an estate attorney and/or CPA familiar with Estates and Trust Tax law as the laws are a tangled web of regulations. Getting it wrong costs you money.

The cost of the advisors is payable by and deductible to the estate as are any costs dedicated to preserving and maintaining the estate.

Note that in terms of the IRS, your Mom is still paying taxes though she is deceased until her Estate is settled and the IRS has their pound of flesh. Having done this twice, I always find this somewhat less than amusing.

Also, it is the right of every taxpayer to take action to minimize their tax consequences in such transactions. Exercise that right.

Just note that if you, as executor, do not escrow or otherwise set aside properly the funds for your brother or other heirs as stipulated, you may open yourself to future legal action from him or them.. You must provide him with a copy of the estate return as well when it is filed. The term 'fiduciary responsibilty' comes into play here.

If the idea is to sell the house, take the proceeds, and use the money to pay down YOUR personal debt, it doesn't work that way.

You need appropriate legal estate advice and don't plan on getting that on TB, where all of us seem to get the best relationship, personal, business and legal advice. Much to our detriment in some cases.

Get a cheap lawyer and a good accountant.

[MJ5150]

Originally Posted by Thor

That is not at all true.

Thanks for the clarification.

-Mike

[fmoore200]

Originally Posted by Thor

That is not at all true.

If he and his brother are the beneficiaries of a will, they will be able to exempt the current 2011 Estate Tax Exemption, which is 5 Million dollars, 2.5 million applicable to each from their taxes. This law sunsets in 2 years, by the way, and returns to 2002 levels unless other legislative fixes are made.
Want to see how conovulted it is, read Here.

Also, the under 25 exclusion for the brother may not be legal unless it was set up as an irrevocable trust for the benefit of the brother or the family including the brother. Selling the property now may have tax consequences to the brother, depending on the estate assets. If he is under 21, he may inherit anyway. If I was him and this was the case, I would consult my own attorney.

Even though you are the executor, you have no right to disburse any money to anyone other than what the will stipulates, (and those are usually written written per stirpes), filing the estate tax return with the IRS and then writing the checks. If you don't know what per stirpes is, you definitely need legal advice. You are allowed to continue to pay the Estate expenses, of course.

You will need the advice of an estate attorney and/or CPA familiar with Estates and Trust Tax law as the laws are a tangled web of regulations. Getting it wrong costs you money.

The cost of the advisors is payable by and deductible to the estate as are any costs dedicated to preserving and maintaining the estate.

Note that in terms of the IRS, your Mom is still paying taxes though she is deceased until her Estate is settled and the IRS has their pound of flesh. Having done this twice, I always find this somewhat less than amusing.

Also, it is the right of every taxpayer to take action to minimize their tax consequences in such transactions. Exercise that right.

Just note that if you, as executor, do not escrow or otherwise set aside properly the funds for your brother or other heirs as stipulated, you may open yourself to future legal action from him or them.. You must provide him with a copy of the estate return as well when it is filed. The term 'fiduciary responsibilty' comes into play here.

If the idea is to sell the house, take the proceeds, and use the money to pay down YOUR personal debt, it doesn't work that way.

You need appropriate legal estate advice and don't plan on getting that on TB, where all of us seem to get the best relationship, personal, business and legal advice. Much to our detriment in some cases.

Get a cheap lawyer and a good accountant.

I have an estate lawyer. In fact that was one of the very first things I did after my mothers funeral. I am aware that I don't know all the legal specifics, so I trust that to a professional.

What I was really trying to ask the TB community is about the selling of a house and the buying of a house, as this will be my first time doing either.

[Thor]

Ok, sorry I mistook your point.

Appraisals.

Once you have that you have a cost basis.

List it with a realtor. A good realtor will help you arrange it and show it properly. They also take a commission for selling it.

The buyer will usually make an offer to the realtor, and if you accept it, sign a contract that is a purchase and sale agreement with typical contigencies and with a small percentage down payment. Contingencies usually include home inspection to exclude structural or hidden problems. It may also stipulate that the sale is contingent upon the purchaser selling their property within a certain period of time. I would avoid that if possible.

Avoid taking back financing or paper. You may become an unsecured creditor or have a second position behind the bank, neither is desirable in a future foreclosure. You are better of in an estate sale in lowering the price and getting everything in cash and being done with it.

All expenses connected to the sale of the estate are deductible to the estate, if you guys sell personally they are usually not.

If you sell and choose to take a loss below the cost basis, the loss maybe deductible to the estate. If you have closed the estate and the title is in both your names, the loss is deductible to you if you inherited based on the cost basis, but the gain is taxable to you also.

If you expect a gain over the cost basis, you are likely better off selling it from the estate and then distributing the proceeds which are subject to the estate exclusion thus avoiding a unnecessary gains tax to you.

Once the sales and purchase agreement has been signed, financing arranged, the inspection done, then there will be a closing at a lawyers or bank office.

The title to the property is then transferred to the purchaser or his financier, you get your check less any fees attributable to you, pro-rated utilities, closing fees, your attorneys fees, etc.

Then walk to your bank and deposit the check. All done.

[fmoore200]

Originally Posted by Thor

Ok, sorry I mistook your point.

Appraisals.

Once you have that you have a cost basis.

List it with a realtor. A good realtor will help you arrange it and show it properly. They also take a commission for selling it.

The buyer will usually make an offer to the realtor, and if you accept it, sign a contract that is a purchase and sale agreement with typical contigencies and with a small percentage down payment. Contingencies usually include home inspection to exclude structural or hidden problems. It may also stipulate that the sale is contingent upon the purchaser selling their property within a certain period of time. I would avoid that if possible.

Avoid taking back financing or paper. You may become an unsecured creditor or have a second position behind the bank, neither is desirable in a future foreclosure. You are better of in an estate sale in lowering the price and getting everything in cash and being done with it.

All expenses connected to the sale of the estate are deductible to the estate, if you guys sell personally they are usually not.

If you sell and choose to take a loss below the cost basis, the loss maybe deductible to the estate. If you have closed the estate and the title is in both your names, the loss is deductible to you if you inherited based on the cost basis, but the gain is taxable to you also.

If you expect a gain over the cost basis, you are likely better off selling it from the estate and then distributing the proceeds which are subject to the estate exclusion thus avoiding a unnecessary gains tax to you.

Once the sales and purchase agreement has been signed, financing arranged, the inspection done, then there will be a closing at a lawyers or bank office.

The title to the property is then transferred to the purchaser or his financier, you get your check less any fees attributable to you, pro-rated utilities, closing fees, your attorneys fees, etc.

Then walk to your bank and deposit the check. All done.

Wow, that was very informative. Seems like I have my hands full. :'(