Expert: Connie Wildasinn-Broker,GRI,Realtor® - 11/4/2010

Question
QUESTION: Hello, I am aware of the Capitol Gains Home Sale Exclusion up to $250k.  I was wondering if I lose that portion of the benefit if I finance the balance.

I have a buyer with $50k cash and would like to finance $70k over ten years.  Will I have to pay taxes on that $70k ?

ANSWER: Hi Nikki,

the capitol gains is for money realized at the sale after capitol improvements and expenses to sell... I don't know the price you are selling, but that carry portion most likely is not covered, I don't know what terms you and the buyer have arranged but it can be a very lucrative deal ... carry for say 5.95% into only amortrize over 5-7 years with a balloon... better than what you get at the banks and most stock/mutuals today...

Check with your accountant and tax man see where this all puts you.. but I always look for ways to grow money...and this can be a great option..

You don't mention sales price...you need to make sure the buyer is vested and all fees covered before you carry anything... don't go in unless it is a win situation for you ... otherwise you may be better off taking less money in the sale,but having sure money over a buyer who bellies up... and you are carrying 20% more than they are putting down... he goes into default you will have to take over the payments on the first and resell the property... and the first may foreclose and knock you out totally if you can't make it happen in time...

Look for a buyer who has money but is consecrative in how they spend it... if this is because the buyer is penniless...may not be such a good idea...

Good luck

---------- FOLLOW-UP ----------

QUESTION: I have to ask a followup, sorry !

You used the phrase "carry over'.  Does that mean the amount I would finance ?

It's a 120k deal with 50k down, 70k financed over 10yrs.  I'm offering 3% interest (it's raw land).  I will have many protections for timber, legal and the like.  I will pay off the note and hold the deed so there's not a first mortgage.

Thanks for a tune-up !

Answer
Oh raw land... take the deal... I would try for perhaps 3.5% to help cover costs (booking, making sure taxes are paid that type of thing) but take it... land is tricky at best... and sometime really worth nothing... good luck...

be sure to have the deed recored ... and check with the county on how you get notified if the taxes are deliquent...

good luck!!!! just courious... how much is the note? hope you get something out right off the bat...