Ask The Crusader!

Michael King...THE HOME IMPROVEMENT CRUSADER!

Buying Parent's Home Can Be Tricky

MY PARENTS

QUESTION: My parent still live in the home that I grew up in and they paid off their mortgage in 1999. We have been exploring the idea of my buying the house and renting it back to them until they are ready to move into a retirement community. This could work out well for the three of us, in part because my folks would get a lump sum of cash when the sale closes without having to leave right away, and I would be able to lock in the purchase price at today’s depressed levels. What do you think of our idea?

ANSWER: It’s a pretty good one, provided that you structure the deal properly. The transaction that you’re considering is called a “sales/leaseback”.

                    As you mentioned, your parents would get their ash out of the property as soon as the sale closes without having to move. They probably wouldn’t even owe taxes on the profit, provided they are joint tax-filers and the net proceeds are $500,000 or less.

                    In the meantime, you could collect monthly rental payments and take all the tax deductions that other landlords enjoy. Plus, you have the flexibility to move into the property yourself or rent to new tenants when your parents leave.

                    Though, the sales/leaseback can provide important benefits to everyone involved, it also can raise some sticky tax and legal issues. For example, all three of you could run into trouble with the IRS if you parents don’ pay fair-market rent for the home, meaning that you can’t cut a sweetheart deal in which your folks would pay, say, only $1 a month.

                    And heaven forbid you ever finding yourself facing the prospect of evicting your parents because they cannot pay the rent, or a family dispute prompts them to refuse to pay.

                    Because of such concerns, it is important for the three of you to consult a knowledgeable attorney and a tax expert before entering a sales/leaseback transaction.

ONE-HOUR DOORS

QUESTION: An advertisement for a large home in our area states that the property has several “one-hour doors”. What are they?

ANSWER: A one-hour door or a one-hour wall is made of fire-resistant materials that can hold a fire at bay for at least 60 minutes.

The doors and walls are more commonly found in commercial buildings, from banks to chemical plants, where fires can pose an unusually high threat to the company’s assets or to public safety.

But some people also install them in their homes, especially if they want to protect a room that’s filled with valuable paintings, precious antiques or even a wine cellar.

TRACT HOME

QUESTION: We own a tract home in a development that was built in 2001. Lately, we’ve noticed that some hairline cracks have appeared in the concrete patio in our backyard and in the concrete that surrounds the two crawl spaces under the house. Is this normal?

ANSWER: It’s hard to say. The crack could simply be a result of the concrete curing or the home gently settling, neither of which a cause for alarm.

                   But the worse-case scenario, the cracks could be a sign that the foundation is starting to slip, and it could ultimately cost thousands of dollars to have a professional shore it up.

                   Experts at Consumer Reports suggest that you put weather-proof tape across the cracks that you recently discovered and then check them again in a few months.

                   If the fissures have widened, you’ll need to call a structural engineer or similar professional for recommendations.

                   If the cracks have remained stable, you can simply fill them with one of the relatively inexpensive epoxy injection systems available at many large home-improvement stores.

                   Consumer Reports’ experts also suggest that you keep the area where the cracks have developed clean of leaves or other debris in which rodents can nest, and to regularly check for pellet-shaped droppings or termite wings.

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