Homebuyer’s contingency could be turnoff for seller

The nation’s housing market is still strong, so there’s little reason for most sellers to accept an offer that hinges on a buyer’s unusual contingency.

Q. We want to buy a larger house, and we found one that we really like. The problem is that we have not put our current home up for sale and will not have the money to close the new purchase until we sell our home.

Can we still make an offer on the new house, contingent upon selling our current home first?

A. You can, but it’s doubtful that your offer would be accepted.

I understand your problem.

Like many homeowners, you can’t afford to buy a nicer or larger house until you get the proceeds from the sale of your current property. And even if the purchase is completed, you don’t want to get stuck paying for two mortgages — the one that’s for your new home and the other that is owed on your current property.

From the sellers’ standpoint, though, your proposed contingency would likely be a big turnoff.

The sellers probably have a timetable of their own and wouldn’t want to risk messing it up if your own house takes longer than expected to sell. And with sales in most parts of the nation still strong, they shouldn’t have any trouble finding a different buyer who wouldn’t make such an unusual request.

Though 74 percent of all home sales that closed in January involved at least one type of contingency, according to a new survey by the National Association of Realtors (www.realtor.org), only 5 percent of offers included a provision that the buyer would get to sell his or her own home first.

The most common contingencies allowed the buyer to get a satisfactory home inspection (58 percent), required an appraisal high enough to justify the sale price (44 percent) and would allow the buyer to cancel the deal and get the goodfaith deposit back if suitable financing couldn’t be arranged (43 percent).

Your best move now would be to get your house in tip-top shape as soon as possible, then put it up for sale.

For-sale homes were on the market for an average of a scant 42 days in January, according to the NAR, so keep that in mind if you decide to make an offer.

REAL ESTATE TRIVIA

Even though property prices have climbed to record highs in many parts of the nation, the NAR reports that 22 percent of buyers in January paid all cash for their new home.

Q. You recently wrote that a bankruptcy can stay on a consumer’s credit record for up to 10 years. But how long does good information about past payments stay on file?

A. Positive information, such as prompt payments on active credit-card accounts or an automobile loan, remains on a report indefinitely and continues to gradually increase a consumer’s credit score.

Fair or not, info about accounts that officially were closed in “good standing” generally stay for only 10 years — just as most bankruptcies would.

Q. What does the term “effective age” mean when it comes to the real estate market?

A. A home or other building’s effective age is basically a professional appraiser’s estimate of a property’s current physical condition. The effective age can be much shorter or longer than the structure’s “actual age,” which is a number that reflects the year it was built.

For example, I toured a 110-year-old Colonial-style home a few years ago that an appraiser deemed to have an effective age of only 40 years because its loving owners had restored the home’s entire electrical, plumbing and even framing systems.

The next year, I visited a house that was built in 1982 but was found to have an effective age of 50 because the owners had never repaired the roof that had partially collapsed or the ancillary damage that the roof’s failure had caused.

Q. My husband and I are getting divorced.

He has a good job and wants to keep our house, so he said he’ll make all of the future mortgage payments if I agree to sign a quitclaim deed that would give my halfinterest in the home to him.

This seems OK to me, but what do you think?

A. I don’t know how much you trust your soon-to-be ex-husband or the future of his job that would be needed to make the payments on the house.

For legal purposes, though, the lender of the home that you and your spouse currently share can hold you personally liable for the entire balance of the mortgage if it goes unpaid. You and your soon-to-be ex each signed for the loan, which means that you must pay the entire bill if he cannot pay his share.

Signing a quitclaim deed won’t help — it would simply mean that you have given up all your legal interest in the property, but you would still be on the hook for its future payments.

In a worst-case scenario, the quitclaim would cede your half-interest in the home to him, allow him to stop making the monthly payments, then permit the lender to insist that you continue making regular installments on a house that you no longer own. If the bank must eventually foreclose, it would leave a scar on your credit record that would last for several years.

Your letter states that your husband has a good job, so I believe that he should try to refinance the current mortgage in his own name. Doing so would sever your financial ties to both the home and the bank.

Of course, the simplest solution would be to sell the home. The lender would be paid from the sale proceeds, you wouldn’t have to worry about any future loan payments, and any profit that’s left could be split however your husband and you decide.

Q. We own a house and also own a second home in another state. If we create the type of simple living trust that you recently wrote about, should we put both our properties into the trust or include only our primary residence?

A. It would probably be best to put both homes into the trust.

Many homeowners have bought or inherited a house, land or other property in a different state. When they die, their estate usually must go through separate probate proceedings — one for each state in which the properties are located.

If you instead create a simple and inexpensive trust to hold title to both properties, your heirs will save money and get the homes faster because trusts (unlike wills) are exempt from the long and costly probate process. Talk to an estate planner and other experts for details.

ABOUT LIVING TRUSTS David Myers’ booklet “Straight Talk About Living Trusts” explains how even low- and middle-income homeowners can now reap the same benefits that creating an inexpensive trust once provided only to the wealthiest families.

For a copy of the booklet, send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405. Net proceeds will be donated to the American Red Cross.

Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231-2960, and we’ll try to respond in a future column.