House Calls: Becoming Owner
Edith: My mother died earlier this year, and I inherited her house. I sold it two months later. At closing, I received a 1099-S form from the title company for the amount of the sale. I was surprised that I am going to have to pay taxes on my inheritance. Wouldn't this be the same as an inheritance tax? -- L. D.
Answer: That 1099 doesn't necessarily mean you'll owe capital gains tax on the sale of your mother's house. When you inherited it, you received a new cost basis: the current value of the home. You should report the sale in your income tax return, but given the costs of selling, you may even have a capital loss.
It's a good idea to use professional help with your tax return for the year in which you sell a house.
Buyer's Engineering Inspection
Dear Ms. Lank: We are planning to look for our first home, and our friends say it's a good idea to get an engineering inspection. What advice do you have about that? -- P. I.
Answer: You won't want to spend several hundred dollars on an inspection until you're sure you can buy that specific house. On the other hand, you may not want to be legally bound to buy if the report turns up some major problem. So your written purchase offer could contain what is known as a contingency; it would contain a promise to secure an inspection engineer's report within a few days and give you an out if you're unhappy with what it turns up. Rather than setting a specific standard, you'd simply ask for a "satisfactory" report.
In some states, home inspectors are licensed; in others, they're not. Those who belong to the American Society of Home Inspectors, or ASHI, have met specific standards of education and experience.
Your friends may have someone to recommend. Real estate agents know which inspectors are active -- and prompt -- but may avoid responsibility by suggesting several names rather than one specifically.
Hire someone who welcomes you to come along, and plan to take notes. You'll hear interesting bits that may not make it into the written report. The engineer won't advise on how much the house is worth or whether you should buy. Instead, you'll hear, "That roof looks as if it has about five more years on it. If you had to replace it today, it might cost around X." From the seller's point of view, the property is off the market and tied up until you decide whether the report is satisfactory. You'll have to act promptly.
You can firm up your offer by dropping the contingency. Or you can drop out of the whole thing -- in writing. Or you can start to renegotiate on the basis of what the inspector found. The seller could either respond to your new offer, or ignore it and put the property back on the market. But by then, of course, the seller could have official knowledge of defects that might need to be disclosed to potential buyers.
Contact Edith Lank at www.askedith.com, at firstname.lastname@example.org or at 240 Hemingway Drive, Rochester NY 14620.Copyright 2017 Creators Syndicate Inc.