Ed, and others Please Help, 1st offer on home/LOT - Posted by John

Posted by JohnBoy on March 18, 2001 at 14:14:16:

I think to get the full $500k you have to be married selling as a joint couple. If she is single the exemption is $250k.

Ed, and others Please Help, 1st offer on home/LOT - Posted by John

Posted by John on March 17, 2001 at 18:49:16:

I am pretty new to most of these concepts but am in need of some help. Here is the scenario:
An older woman lives in an older home, she also owns the lot next door. She is 95 and has lived there for many years.
I want to buy the lot and build a spec home on it (and I wouldnt mind getting the existing home also).
I asked her if I could buy the lot from her and she said she would definitely sell it BUT (her words) because it does not have a house on it - she would not be able to take her “one time” tax (capital gains) exemption/deduction and would need to sell the existing house WITH the lot to take the exemption… (as a side note, she is moving into a retirement home in the next year and will be selling both anyway).
This is a very hot community and buildable lots are very rare -AND- if an agent gets to her, it will be top dollar (that would eliminate me from the competition with builders with much more capital).

My questions:

  1. Regarding the exemption, I know this was the way it used to work but is that still the case? It thought the laws had changed with regard to the one time exemption.
  2. What would you suggest for making this situation work (i.e.- new laws re exemptions or purchasing now and letting her live there until she moves???)

Thank you very much for any advice - I am in desperate need of advice in this situation. Would like to take a clear, concise offer to her which could be a win win for both.

Thanks for any suggestions.

Re:Ed&others Please Help,1st offer on home/LOT - Posted by Ed Garcia

Posted by Ed Garcia on March 18, 2001 at 08:43:49:


I’m afraid the old lady is confused. First if all, you are correct the law has changed, you can sell your home after 2 years up to $500,000, however the problem is, that’s for a residence, owner occupied and wouldn’t apply to a vacant lot.

The thing that I would do immediately is get a copy of the tax change and show it to the old lady, rather then tell her, and then rely her taking the time to verify it. I would work her slowly for the obvious reason and make a friendship with her.

If I were to purchase the house as well, I would make sure that I obtained a loan on the house, but ask the old lady to carry the note on the vacant lot. I would also request that she subordinate her mortgage to a construction loan. As I said before john, work her slow, don’t make her feel pressured.

Ed Garcia