DEAR BOB: On March 4, 2004, we placed a $5,000 deposit with a signed contract to buy a lot in a new manufactured-home development. We had up to one year to decide what type of house to build. Four days after signing the contract, we felt we made a hasty mistake and asked the sales manager if we could get our money back. He said, “Once the ink is dry, it’s a done deal,” because we had a signed contract. We were also told to hold on to our lot, because when the final phase is completed, it will be easier to sell to a potential buyer because it is close to the clubhouse. Two weeks ago, we took a ride to see how the final phase was progressing. To our surprise, a house was built on “our lot.” When I approached the sales manager about the situation, he said I told him I didn’t want the lot and then it’s gone! He has nothing in writing to show we cancelled our purchase, especially since we had up to a year to decide what type of home to build. Does the developer have a right to build a house on our lot? – Bill V.
DEAR BILL: Please consult a local real estate attorney to review your paperwork. You could be entitled to complete your purchase of that “lost lot,” including the house now located on it.
Purchase Bob Bruss reports online.
Depending on what your purchase contract says, you might have valid legal actions against the developer, the second buyer of your lot, and the title insurance company.
Your situation is a classic example why everyone should remember oral statements are not enforceable when real estate is involved. The fact you orally told the sales manager you wanted to cancel your purchase is not binding unless it was put in writing and signed by both parties.
If a lawsuit is required, be sure your attorney takes the case on a contingency basis so he or she has maximum incentive and you don’t have anything to lose.
MUST HOME EQUITY LOAN BE USED FOR HOME IMPROVEMENTS?
DEAR BOB: A few weeks ago you had a letter from a homeowner who wanted to get a home equity loan to pay off a car loan and some other non-deductible interest loans. You suggested it would be smart to do so because the home equity loan interest is tax deductible. But doesn’t a home equity loan have to be used for home improvements to make the interest tax deductible? – Harold B.
DEAR HAROLD: No. I received several letters regarding that item. A home equity loan up to $100,000 qualifies for personal itemized interest tax deductions on Schedule A of the homeowner’s income tax returns. The loan proceeds can be used for any purpose.
For this reason, many homeowners use their home equity credit lines up to $100,000 to pay for cars, boats, and even trips around the world. The result is tax deductible interest. For more details, please consult your tax adviser.
LIVING TRUST COULD HAVE AVOIDED PROBATE COURT WILL CONTEST
DEAR BOB: Last year, my dad died at age 88. His will left all his assets, worth about $1 million, to my sister and myself. He left only $1,000 in his will to our brother who had not been very nice to dad in the last years before he died. The will is now tied up in Probate Court. My brother hired a lawyer to prove our dad was not competent to write his will, so his prior will (which gave one-third to each of his three children) would prevail. Meanwhile, my dad’s house and other real estate deteriorate because there is no money to maintain or sell it. Would a living trust have avoided this problem? – Dorothy H.
DEAR DOROTHY: Yes. If your late father had placed the title to his real estate and other major assets into a revocable living trust, his assets probably would not be tied up in Probate Court today. Although it is possible to contest a living trust, it is rarely done.
This situation is a classic example of why probate avoidance is so important, especially for large estates.
You and your sister should discuss with your lawyer the benefits of reaching a settlement now with your brother since you stand to lose $333,000 if he wins the will contest.
The new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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