Q: I have a real estate investment property that is a single family home in a country club community. I bought this property about two years ago at a below-market price and have done some significant rehab to it.

I finally got it rented, but the rent doesn't cover the mortgage. The house has been on the market for more than four months without any offers. I have had it priced about 10 percent below the recent appraised value and almost 20 percent below appraised value a year ago.

I'm considering doing a deed-in-lieu of foreclosure to the bank but I'm trying to minimize or eliminate any effect on my credit score, which is about a 750. The bank cannot tell me how my score may be affected but said that it would be negatively affected.

They told me to call the credit agencies for more information. I called all credit reporting bureaus, and of them, was only able to speak to a live person at TransUnion. She offered no help other than stating that a computer figured all the scores on a variety of variables (which I already knew) and that no one there would be able to help me with any sort of estimate. She then said to "ask the bank." Full circle game.
 
I need to get rid of this white elephant to free up some credit and get it off my books and reduce my stress level. Do you have an estimate on how much a deed-in-lieu of foreclosure might affect my score? And do you have any suggestions on what else I may do to get rid of the property without taking more of a bath?

A: No one can answer your question specifically because a piece of negative information affects each person's credit history differently because of all the other pieces of information in it.
 
There isn't a set 100-point or 150-point for a bankruptcy or deed-in-lieu of foreclosure. You don't necessarily get hit with a 50-point every time you're late paying a bill. Some of these negatives are cumulative, meaning that the point s get steeper every time you do it, and some of them are based on length. For example, you'd get a sharper if you're 90 days late on a payment than if you're 60 days late.

Also, how the negative information is actually coded by the lender when the information is d to your credit history is crucial.
 
Here's how credit scores are generally calculated, according to MyFico.com, the website owned by Fair Isaacs Corporation, which invented the credit score: 35 percent of your score is based on your payment history 30 percent is based on the amounts that you owe on your various types of loans 15 percent of your score is the length of your credit history 10 percent is new credit that you've opened and the final 10 percent is based on the various types of credit used.
 
If your score is regularly around 750, a deed-in-lieu might knock that down significantly. It could be a 100 point but it could be more. The methodology to computing a credit score is proprietary, but you have to assume that a major event in your credit history would have a major impact on your credit score.

Don't forget that you usually don't have a deed-in-lieu situation without other negative events reported on your credit history. For example, some lenders won't consider a deed-in-lieu unless you have failed to make your mortgage payments for several months. By not paying your mortgage for several months, your credit history will take a severe hit. Add to that a deed-in-lieu situation, and your credit history will be severely hurt by the time you walk away from the property.
 
But if you can no longer afford the property, you can't sell it, and the bank has agreed to take it back, that's all you can do. You should make sure that the bank reports the deed-in-lieu as "paid in full" so that your credit score doesn't suffer further.
 
As for selling your property, unfortunately, some real estate markets are in the worst housing market since the depression. Banks are now selling repossessed houses for less than half of what they were "worth" three years ago. Other than ping your price further, stepping up your marketing efforts (including online video and photos), and making sure that everyone who sees the property knows what a great deal they are getting based on local comps, there is little you can do other than wait it out.

One positive note to your situation is that you have the property rented. While it certainly depends on where your property is located and how much rent you get and what other expenses you have, at least you have a tenant that is looking after the property and the rent can pay for some of the expenses for the property.

If you do find a buyer for the home and the buyer offers you less than what you owe on the mortgage, you may ask your lender to accept the money from the buyer to pay off the mortgage in full. This would be considered a short sale and could adversely affect your credit history, but should not be as bad a hit as failing to make your mortgage payments and then giving the property to the lender via a deed-in-lieu of foreclosure.
 
Good luck.

Summary: An adult child writes that his mother signed a quit claim deed to give her home to her children. The mother, who lives in a nursing home, needs to sell her home to support herself. The adult child wonders whether signing the home back to his mother and selling it will affect Medicaid benefits. Ilyce suggests contacting an estate planning attorney. Timely estate planning can help you avoid these kinds of dilemmas.

Q: My mother built a house in 1960 for about $12,000. She used a quit claim deed to gift the property to my two siblings and me. But now she needs to go into a nursing home and we need to sell the house to pay for her care.

We were told that because we own the property and don't live there, that we will have a large tax bill on our hands.

Could the house be gifted back to my mother for her to sell? It would still count as her primary residence, I think, since she only moved into the nursing home in March 2007. She would have lived in her house the requisite two of the past five years.

If she were to sell it then, she could accrue all gain tax free and we would be free of tax burden. It might play havoc with Medicaid if she is eventually forced into public care, since $200,000 doesn't go far in those places. But I doubt she would outlive the money, and we could inherit any remainder and just pay estate tax.

Sometimes I think we little people without many assets have bigger headaches with them than the multi-millionaires.

A: The problem with doing estate planning on the fly, without the benefit of a professional estate planner or estate attorney, is that sometimes you don't think about the long-term consequences and what might happen if something bad occurs.
 
Rarely is death the worst thing that can happen to someone who is a senior and has lived an active and good life. What terrifies the many seniors I've spoken with is the idea of dying slowly, painfully, and expensively in a place that isn't your own. That's why financial planners recommend that people in their 50s buy long-term care insurance. Of course, that option isn't available to your mom at this point in her life.
 
You and she have limited options at this point. You and your siblings can gift the house back to your mother, but I don't know if she would qualify to keep up to $250,000 in profits tax-free.

The question is, when did she gift the property to you? Even though she has lived in the house for a long time, she actually would have to own the property and live there as her primary residence for two of the past five years in order for the IRS rule to work. If she gave you the house over four years ago, you may be out of luck.

One thing to keep in mind is that if you can't transfer back the property to your mom but instead you have to sell the property and pay taxes, your tax bill this year will be approximately 15 percent of the profits from the sale of the home plus any state taxes owed.

How can you reduce that amount? While your mom may have built the home for $12,000, she may have made capital improvements (including any structural improvements, replacement of the roof, additions, etc.) to the home over the years and you might have made your own improvements to the home. All of these capital improvements would reduce the amount you might have to pay in taxes when you sell the home. You may also deduct from the sales price the cost of selling the home (including the agent’s commission) and the cost of purchase.

If your mom built the home for $12,000 and she invested $50,000 in capital improvements to the home over the years and you have $13,000 in closing costs to sell the home, your tax bill might be less than you otherwise might think. If you were to sell the home for $150,000, the capital improvements and closing costs would increase the basis for the home up to $75,000. You would have to pay capital gains taxes on the difference of $75,000. At a 15 percent capital gains tax rate, you could expect to pay about $11,250 in capital gains taxes, plus any state taxes owed. Depending on your circumstances, the rate might even be less as you and your two siblings split up the gain.
 
But now it's time to bring in the professionals. Please contact an estate attorney immediately for a discussion with him or her to determine your options.

Q: Our real estate agent informed us that she has a buyer for our home at the full asking price. There is a stipulation that we must offer the house at the asking price to the buyer, not the other way around. Do you know anything about this practice and why it is used?

A: I think this sounds very curious. Is it possible that you have misunderstood the agent? Or, does this strange turn of events have to do with her representing both sides of the transaction?

Generally a buyer comes to a home, sees a home and decides to make an offer to buy the home. The buyer would draw up an offer to purchase or a real estate contract or some other document that conforms to the local custom. Then the seller has an opportunity to accept the offer, reject the offer or counter with an offer.
 
I think you might want to ask your real estate agent a couple of questions about this situation. The first question to ask is whether the buyers have a real estate agent or broker helping them out. If they don't, your broker may want you to put the contract together for the buyer to sign. The second question to ask if the buyer does have a real estate agent is why the buyer has not made the offer. If you don't get a clear answer, there might be something strange going on.

If you can't get some good answers from your agent, you should place a call to the managing broker of her firm to ask why the buyers aren't making or won't make an offer for your home. Depending on the answer, if your broker is representing both sides of the transaction, I might ask the managing agent to reassign you to another agent in the office or get the buyers assigned to another agent in the office.

If you and the buyer have different agents, each of you can have an agent represent you in the negotiations for the sale of the home. Having two agents involved in your situation could eliminate a possible conflict of interest. If the managing broker refuses to get involved, then that would make me think something extremely strange is going on.
 
At that point, you might want to hire a real estate attorney (no matter what state you live in) to help make sure that your interests are being represented in this transaction.

**Real estate agents, if you have a different explanation for why this practice might be used, or can shed light on a situation in which this happened, please email me at my website, www.thinkglink.com, or comment below, and I will print your responses in a future column. **

Home improvement projects can be overwhelming, and if you are doing them in an effort to sell your home the stress may only get worse. Some people leave those small and large home improvement jobs to a licensed, professional handyman.

"I get a ton of calls from customers who are looking for the kinds of projects that will get them to the place where the house is ready for sale. The kinds of things that are small jobs that make a big difference," says professional handyman Andy Sjostrom from The Good Handyman company, based in Oak Park, Ill.

While Sjostrom encourages home owners to be involved in their own home improvement or do it yourself home repairs, he also warns some jobs are better left to professionals. "Don't get yourself in over your head. If this is something that you're not comfortable doing, take the time to find a good handyman," Sjostrom says.

There are two simple ways to find a good handyman to help with home improvement.

First, try the Internet. Run Web searches for a handyman in your area or to see who else can help you with home improvement work. Compare prices and services and check for licensing before hiring a handyman to help with home improvement.

One Web site you can use to find a handyman for your home improvement work is Angie's List. Sjostrom recommends the site, which provides user-generated comments about a handyman from previous customers. "It's a great way to get a sense for what they've done, who they've done it for, the size of the projects that they've done for those people so that that person is applicable to what you're looking for," Sjostrom said.

The second great way to find a good handyman to help with home improvement is to go to your local hardware store. Ask the store owners if they know any regular customers who are handymen or if they can recommend a good handyman to help you with home improvement.

"You can talk to somebody at your hardware store who sees someone on a regular basis. Sees what kind of things they buy, whether they look knowledgeable, whether they're the kind of person they would want to deal with," Sjostrom says. "And that's a great way to find out about local handymen in your neighborhood."

Juliet Holubowicz, a sales associate with Schiller Real Estate in Elmhurst, Ill., frequently refers clients to handymen for home improvement. Home improvements help turn houses into selling condition.

"If it's a bigger job, or if it's a smaller job, it's just nice to have it done professionally instead of doing it yourself, so you're not even more stressed because you're trying to sell your home," Holubowicz says.

"Handymen and contractors know the tricks of the trade," Sjostrom says. "They know what's going to make a job take half an hour instead of two hours." He believes that home improvement knowledge is what you are paying for. And if you decide to hire a handyman to do home improvement work, you should be getting the best home improvement job in the shortest time possible.

For more stories on home improvement, how a handyman can help you, real estate and personal finance, visit ThinkGlink.com.

When Suzanne went looking for a home earlier this year, she knew she needed to find a place that would accommodate her counseling service business.  

Ideally, the house would have a separate entrance leading to a room which could be used as an office, and which could be somehow cordoned off and kept separate from the family's living space. After two years of looking, she finally found the perfect house in Monticello, Indiana. It has an excellent first floor layout, including the hoped for separate entrance leading directly into the office.

There are a lot of wonderful reasons to locate your office in your home, include convenience, cost, a terrific tax deduction, and depreciation of the property. Millions of Americans currently have home based offices. For those of us who work out of our homes, there are several issues to keep in mind when looking for the right property.

• Size of the Home

Think about how much space you and your family need to live, and then think about how your business operates. Different types of businesses have various special requirements. A counselor, accountant or writer may only need a single room to work in. A growing public relations company or crafts manufacturing company may not only need several rooms, but an area to warehouse documents or product.

By the time Ray, a public relations executive in Chicago, had outgrown his home office, he had several employees working out of his basement. Suzanne, on the other hand, needed only a single room, preferably on the first floor of the home, in which to work with her clients.

Sometimes you might see a home you like better for your business than for your personal life. When my husband, Sam, and I were looking at single family houses a few years ago, I saw one that I thought I liked. True, the house itself wasn't much, but it had a heated four car garage with a soaring loft above it. A perfect spot for writing, I thought, completely ignoring the fact that the house itself was poorly constructed and too small for our living space requirements. Be careful not to make this mistake.

• How's The Neighborhood?

Once you figure out what size your home should be, it's time to think twice about the neighborhood in which it is located.

Safety is a big concern for those of us who work out of our homes. We're there all day, and if the neighborhood isn't safe, you're going to be concentrating on who might be breaking in through your window rather than your work.

Also, is it the kind of neighborhood that suits your professional needs? Is there access to the other businesses you serve? Is there access to copy shops or business supplies? Is there an appropriate place for a business lunch nearby? Is the home across from a school? Will you be distracted by children playing at recess and at lunch in the schoolyard?

• How Strict are the Local Ordinances?

Many municipalities have local ordinances which forbid the operation of home businesses in residential neighborhoods. Others may not necessarily ban the business, but they'll ban the tools of the business, including computers, typewriters, and copy machines.

While it's unlikely that your local officials will hunt you down, there may be neighbors who object to the daily traffic in and out. They might turn you in, which could result in a fine. It's best to check this out ahead of time.