Archive for Friday, October 16, 2009

Sellers may be limited in paying for costs

October 16, 2009


My wife and I signed a contract to sell our home last month. Because sales in our area are still slow, we agreed to pay $6,000 of the buyer’s closing costs for mortgage points, an appraisal and the like. The preliminary closing statement we received said the buyers’ closing costs would total only $4,200, but the bank would not allow us to write the buyers a check for the $1,800 difference. What can we do now?

Many sellers in neighborhoods where sales are still tepid now offer to pay some or all of a buyer’s closing costs. It’s a wise marketing decision that can make a house sell faster, primarily because it can reduce the amount of hard cash that a buyer must have to complete a purchase.

Several banks, however, prohibit their home buyers from accepting a seller’s credit that exceeds the amount of the buyer’s actual closing expenses. Some lenders also require that any seller-paid closing credits be used to cover a buyer’s one-time-only “nonrecurring” costs — such as title insurance or upfront loan fees — rather than “recurring” charges, such as fire insurance or other items that must be paid on a monthly or annual basis until the loan is eventually retired.

Because the bank won’t let you offset the $1,800 difference by writing a check to your buyer, the simplest solution may be just to drop the agreed-upon asking price by the same amount.

We spent almost $5,000 last month to buy a hot tub and have it installed. Can we deduct this amount on our next tax return?

No. The cost of your new spa cannot be deducted on your next return. However, you can add it to the cost-basis of your home, which will reduce any taxes on the profit when you sell.

We have had our mortgage for 13 years and have never missed a payment. Last month, however, our bank did not send us our monthly statement, and we subsequently forgot to pay the bill. We received a late notice, but the bank charged us a $125 late-payment fee and a $35 processing charge. Are we legally required to pay these costs, considering that it was the bank’s fault that we did not get the bill on time?

Yes. The bank has the right to levy both fees even though it didn’t send you a reminder.

Few contracts require the lender to mail out a monthly statement. Many banks still do so, but it’s a courtesy that is not required by law.


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