Q. I have been told that the contract for the sale of my home is subject to contingencies. What are the typical contingencies in a sale?
A: Contingencies are quite normal in a sale but be aware that there are a variety of contingencies. The most common contingency is for financing. Basically, what this means is that the buyer will be applying for a mortgage; if by some chance they do not get the mortgage, then they are not obligated to close.
The best way to make sure that this is not an issue is to have your agent review the buyer’s mortgage pre-approval plus their financials.
Another contingency that often comes up is “the purchase is subject to the sale of another property.” Again, to avoid issues, it is highly recommended that you have your agent review the other purchase to make sure that in all likelihood it will close.
Also, if you are selling a co-op, then your sale will be contingent upon board approval. Once more, rely on your agent to review the buyer’s financials.
I am often asked if a contract should be subject to a home inspection. I do not recommend ever doing this. The inspection should always be done before contract, and any issues should be negotiated prior to signing.
The following question is a repeat question. Because many people have been considering moving out of state temporarily or permanently, I thought this would be an important topic.
Q. I’m going to be moving out of New York, but I’m thinking about selling my home in a few years and renting it out for a while in the meantime. Are there any drawbacks?
A. There are several considerations, and all options should be discussed with your accountant. However, you should be aware that when you sell a home that is a primary residence, you can avoid paying capital gains tax by deducting $250,000 for yourself and another $250,000 if you have a spouse. Once the house is rented and becomes an investment however, you might lose that option.
To qualify for the exclusion, you must have used the home you sell as your principal residence for at least two of the five years prior to the sale. Additionally, if you establish your residency in another state and then sell your property, you will be subject to a New York State non-resident tax of 10.90 percent on any profit earned; this would be on top of normal capital gains tax.
A final consideration is that if you do rent out the property, you will either have to monitor the property and take care of any issues that come up or you will have to hire a property manager, which can cost approximately 6 percent of the monthly rent.
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