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The high cost of lowlife neighbors

Dear Steve,
My husband and I purchased a condo eight months ago, and according to a recent appraisal, the property has increased in value by $40,000. Unfortunately, I've had bad experiences in the neighborhood and with our immediate neighbors. We're at a crossroads. How do we determine if it's feasible to sell so soon? -- Gwendolyn

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Dear Gwendolyn,
You may have answered your own question. From what you say, there may be no better time than the present.

But there are a couple of things to think about first.

Ordinarily, I wouldn't recommend selling this soon under anything but the most dire circumstances. That's because your selling costs might put you below the break-even mark in the deal. But you indicate that you had a recent appraisal valuing the condo at $40,000 more than it was originally priced. Assuming you can fetch that much for the unit -- or at least close to it -- that would more than compensate for those expenses.

However, remember that a home's real value is always what someone will pay for it, regardless of what appraisals or tax assessments have been performed there. So, before you put it on the market, have an agent do a comparative market analysis to better indicate its true market value.

If the problem is noise or other nuisance issues within the complex, have you taken these up with the condo board?

There may be an open forum during regular condo board meetings where you can voice you concerns. If there are security, noise or harassment issues in the neighborhood, your local police department should be notified.

There's also a tax issue to consider.

The tax breaks involved in owning real estate are among the better reasons to invest in real property. But only if you make use of them. Gain on the sale of real property is categorized between long and short term, based on the date it is acquired and the date it is sold.

  • If you sell your condo that you've lived in for at least two years, you pay no tax on the first $250,000 of profit -- or $500,000 if you're married.
  • If you sell after you've owned it more than one year and a day, but have not used it as your primary residence for at least two years, your profit will be taxed as long-term capital gains -- 15 percent.
  • But selling in your situation could lead to the highest possible amount of tax on your profits. If you sell before owning it at least one year, it's considered a short-term capital gain and it's taxed as ordinary income -- which can be as high as 35 percent.

Do the math before making your final decision. Closing costs, real estate agents, advertising and taxes could eat up a great deal of the profit you think you will walk away with.

I get the feeling you value your independence and privacy to the point where a condo might not be for you, unless you are henceforth willing to do a lot of research and ask a lot of questions of -- and about -- your prospective neighbors. As you've discovered, your serenity level in a condo, co-op, apartment or duplex often hinges greatly on the habits of your immediate neighbors.

Consider moving to a small-lot single-family house in an area with low crime rates. Real estate agents or your local city hall can tell you where to find the information.

Good luck in finding better neighbors!

Bankrate.com's corrections policy -- Posted: Aug. 13, 2005
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