The argument against reverse mortgages

Risks, upfront costs can outweigh benefits

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Aug. 31, 2009

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And even if you can't take advantage of the deductions for the mortgage interest, I cannot see any real benefit to your plan. You have a decent first trust, so my inclination is to keep the status quo.

DEAR BENNY: We purchased a home in the Colorado mountains. Because we were in Indiana selling our other home, our real estate agent did the final walkthrough the day before closing. She found everything to be in order.

When we moved in, the refrigerator/freezer was missing from the kitchen. The (Multiple Listing Service) sheet stated that it was included in the purchase price. Our Realtor discussed this with the seller's Realtor who said it was not part of the purchase because we never stated in writing (on the legal contract) that we wanted it to stay. We didn't know that we had to since it was on the MLS sheet, and our agent said she had never encountered that before. During the walkthrough the day before closing it was still there, even though all furniture and personal items had already been moved.

Do we have any legal avenues? We had to quickly purchase a new refrigerator/freezer at mountain prices when we feel we already purchased the original one. We think we were scammed. --Barbara

DEAR BARBARA: Many years ago, I had two clients. One was selling their house in California and moving to Maryland, and the other was selling their Washington, D.C., house and moving to Oregon. We all learned the hard way that local customs and practices are quite different. As I understand it (at least then), out West, refrigerators normally do not convey (i.e. stay with the house) unless specifically spelled out in the contract.

In my area of the country (Eastern U.S.), refrigerators convey with the house unless they are specifically excluded from the contract.

The typical real estate contract generally contains language that only what is written in the contract is binding on all parties, and that no other representations -- oral or written -- are binding. Accordingly, it is possible that you are legallyunable to rely on the MLS statement unless it is specifically incorporated by reference into the sales contract.

Perhaps your real estate agent should have advised you of this local custom, since she knew that you were not from her area.

Suggestions for readers who plan to enter into a sales contract: Incorporate all written documents (such as the MLS or promotional material) into the contract. If you want a particular item, such as a ladder or fancy chandelier, write that into the contract.

If you are unsure whether an item is a fixture, which normally does convey, ask the agent or consult an attorney. I once had a buyer client who was upset that the built-in bookcase was removed by the seller; we took the position that since it was affixed to the wall it was a fixture, and the seller capitulated and returned the item.

DEAR BENNY: This is a 1031 (Starker) question. If you originally bought the property as a rental property and then traded up for another rental property and now wish to move into to it, how many years do you have to live in it to qualify for the $500,000 exclusion? I have been told that if the original property was purchased as a rental then the owner needs to live in the property for five years. --Howard

DEAR HOWARD: That is partially correct. As a result of the American Jobs Creation Act of 2004, you may exclude gain (up to $500,000 for married couples filing a joint tax return or up to $250,000 if you file a single return) only if (1) you meet the ownership and use tests and (2) you have owned the replacement property for a period of five full years ending on the date of the sale or exchange.

In other words, you only have to live in the property for two out of the five years before sale, but you must own the property for five years.

For additional information, go to the Internal Revenue Service Web site ( and get a copy of Publication 523, entitled "Selling Your Home." For more detailed information, get a copy of IRS Revenue Procedure 2005-14.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to


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