DAVID W. MYERS: Savvy sellers always offer buyers a home-warranty plan
Most home sales today involve the use of a home warranty, which can protect both parties from a myriad of costly problems that could occur after a transaction closes. Sellers willing to pay for the policy can add a valuable tool to their marketing efforts.
DEAR DAVE: I am getting ready to put my home up for sale, and the agent I have chosen to market the property thinks that I should offer to purchase a one-year home-warranty policy that would protect my eventual buyer against various types of problems that could arise after the sale closes. The agent says that homes that are covered by warranty policies usually sell faster, but the policy would cost about $600, and money is very tight for me right now. Should I purchase the policy, or can I afford to skip it?
ANSWER: I would pay for the policy, even if it means dipping into your savings account, borrowing from relatives or putting the warranty's $600 cost on your credit card.
Prospective buyers favor homes that are covered by warranty policies because they know that such a policy will reimburse them for several things that might go wrong after a transaction closes, whether it's a built-in appliance that goes kaput or a heating system that suddenly breaks down. Paying $600 now to offer home shoppers such peace of mind could not only help you sell the home faster, but could literally add thousands of dollars to the price that your property will eventually fetch.
Most agents realize that offering a home-warranty policy can be a valuable marketing tool, and many will offer to reimburse the seller for some or all of the policy's cost when the sale is consummated and the agent gets the commission check. So, before you agree to pay for the warranty yourself, ask your agent if he or she will agree to pay for at least part of the tab.
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DEAR DAVE: Is it true that mobile homes are so named because they got their start in Mobile, Ala.?
ANSWER: Yes, it's true. Most folks think they're called "mobile" because they can be easily moved from one place to the next. But in reality, the majority of the homes are moved only once — from the factory where they were built to the park where they are settled.
James and Laura Sweet, who lived in a tiny town just outside Mobile, are generally considered the inventors of the mobile home. They started building them in the mid-1940s as an affordable housing alternative for all the men who were coming home from World War II and starting families.
Though the Sweets initially limited their sales primarily to Alabama and Mississippi, the nationwide highway construction boom that began in the 1950s allowed the couple (and their fast-growing number of competitors) to begin shipping the homes to virtually every part of the country. Many of the manufacturers were based in or around Mobile, where labor was both cheap and plentiful.
It's interesting to note that one of the most popular songs of all time — "Sweet Home Alabama," recorded by Southern rock group Lynyrd Skynyrd in 1974 — is actually a reworking of a radio jingle that James and Laura Sweet used to market "Sweet Homes, Alabama" back in 1951.
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DEAR DAVE: We have lived in our home for several years, and it is probably worth about $150,000 more than we paid for it. If we create the type of living trust that you recently wrote about so our home can avoid probate and pass quickly to our heirs, would we also have to forfeit the right to keep all of our resale profits tax free if we sold the home before my husband or I died?
ANSWER: No. If you form a living trust and put your home into it, you and your husband will still get to keep up to $250,000 in resale profit tax free if you file your taxes singly or up to $500,000 if you file jointly, as long as you meet the standard Internal Revenue Service requirement that the home served as your primary residence for at least two of the five years before the sale.
Unlike wills, living trusts do not have to go through the long and costly probate process. This means that the home and other assets that you place into the trust can promptly be passed to your heirs, thus avoiding large attorney fees for your estate.
Creating a trust, however, would have little or no impact on your personal tax situation. In addition to keeping all of your eventual resale profit tax free, you would also be able to continue deducting all of your mortgage-interest payments, property taxes and similar expenses that you have written off in the past.
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Our booklet "Straight Talk About Living Trusts" explains how middle-class homeowners can now reap the same benefits that forming an inexpensive trust once provided only to the wealthiest of families. For a copy, send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960. Send questions to that same address and we'll try to respond in a future column.