Get real about real estate: Seller must disclose material facts such as roof leak

Dear Michael: We are a California limited liability company (LLC). We would like to know if we could purchase a residential property under the name of the company. We plan to use it as our primary residence and also conduct our business. Is there a risk of purchasing under an LLC?

 

Answer:  If your business is sued and loses in litigation, the assets of your business will be at risk and you could also end up losing your home. Under current tax law, if an individual owns a property, that individual can sell the property and exclude up to $250,000, $500,000 if married from federal income taxes if that individual or married couple used the property as his/their primary residence for two out of the last five years. If the LLC owns the property, the LLC is not considered a person for purposes of the primary residence exclusion. If you run your business out of this home, you may be doing so against zoning laws in your municipality. In some cities, you may not use more than 10 percent or 15 percent of a home for a home office. If you’re planning to own the home and obtain a loan, you may find it difficult to get a lender to commit to a loan on the basis that the home is a primary residence in an LLC. Because the home is owned by the LLC, most lenders may treat the home as an investment property and you may end up having to pay higher costs to close the loan and will have to pay a higher interest rate. Please consult with an estate planner or a tax adviser to help solve some of your issues. You’ll probably realize that the home should be owned separately from the business and that you and your wife can lease a part of the home to the LLC. The rent would be income to you on the personal side, but you would be able to deduct some of the home expenses as business expenses due to the rental portion of the home to the LLC business. Please consult with your accountant.

 

Dear Michael: An appraiser appraised my home for less than the accepted price; this is causing a problem with the sale. How I can get value at the accepted price rather than the appraised value?

 

Answer: The appraised value is not necessarily the same as the market value, which is what a buyer may be willing to pay for your home. The appraised value of a home is what appraisers conclude the home is worth based on sales of comparable homes in the area, and these figures are facts. The market value is how much someone will actually pay for your house, and can be based on some facts and emotions. The right buyer may decide to pay more for your home just because they feel it’s the right home for them. The buyer you can request an appraisal review. The buyer’s lender will send a new appraiser for a 2nd opinion. If the results stay the same, then you have little choice, you can reduce your sales price to the appraised value, negotiate a new purchase price or cancel the purchase.  If cancelling is your choice, I suggest you re-list your home right away with the hope that the next appraiser meets the purchase price.

Dear Michael: We just purchased a home three weeks ago. Before we purchased the home, the seller disclosed that the roof leaked. A few days later, the seller disclosure form was amended to state that the roof did not leak. The seller and Realtor said the original disclosure form was an error. We were in the home for just two weeks before the first rain. Now, we found that the roof leaked. What options do we have?

Answer: Something just doesn’t seem right! If you have proof that the seller knew that the roof leaked and not only did not disclose it but also lied to consummate the sale, then you may have ground to sue the seller for fraud. One question comes to mind: Did you (or a professional home inspector) inspect the roof before you bought the home? If you did not, you should have. Once the seller disclosed to you that there was a roof problem, you should have made sure before you removed your contingencies that he wasn’t hiding the leak. If you did in fact inspect the roof and found no leak, it may be that the roof problem you now have is a new problem. It would be wise to discuss the leak with your roofing contractor and find out what the issue is. He may be able to assess how long the problem has existed. Finally, take a look around the ceiling below the roof to see if you can tell whether there was prior damage that was painted over by the seller. If a seller knows of a problem and covers it up, the seller could get himself into big trouble. Seller disclosure laws are very straight forward. Please consult a real estate attorney.

 

Michael Kayem is a Realtor with Re/max Estate Properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or e-mail them to him at: homes@agentmichael.com