Q: I just made money from the sale of a property but I’m not ready to buy another place just yet. What should I do with the money? I don’t want to spend it, I just want to put it in a safe investment. What do you suggest?
A: Congratulations on your sale and your profit. Current tax law permits you to keep up to $250,000 if you’re single (up to $500,000 if you’re married) in profits from the sale of your home tax free, provided you’ve lived in your home for at least two of the last five years.
If you don’t meet these requirements, you may owe capital gains tax of up to 15 percent of the profits. And if you fall into this category, the first thing I’d do is separate out from your cash the money you will need to pay the IRS next year.
If you are able to keep the cash tax-free, you should spend some time thinking about what you’re going to do with the money, as that will drive your investment.
If you’re going to use this cash over the next couple of years to either purchase a new home or car, pay college tuition for yourself, a spouse or a child, or take a trip, you’ll want to invest the money somewhere very safe, so it’s there when you need it.
If some of the money is for your retirement, and you won’t need to touch it for twenty years or more, most financial planners would consider that to be long-term savings.
For short-term money, I suggest you look for a bank CD (certificate of deposit), or even just leaving it in a money market account. While you won’t get much in the way of interest, the cash will be there when you need it. A good place to check CD rates is at www.BankRate.com.
For longer-term investing, you should probably think about buying stocks. A relatively easy and painless way to do this is to invest in Index funds. These are mutual funds that mirror the index on which they are based, like the Standard & Poor 500, which consists of shares in the biggest 500 American companies.
Vanguard (www.Vanguard.com) is considered the grandfather of index funds, and they offer the least expensive index funds around, but since index funds are generally inexpensive to own, and most financial investment companies offer them, you can shop around.
You didn’t mention how much money you earned from the sale of your home, but if it is a significant sum, you might want to consider paying for a few hours of a financial planner’s time to go over your portfolio and help you make a smart investment decision.
For a list of fee-only financial planners in your area, call toll-free 888-FEE-ONLY, or go online to the National Association of Personal Financial Advisors (www.napfa.org)
Q: I am having a problem with the agent I used to sell my home and am preparing a complaint against him. I’m just not sure how the complaint process works. Do I just file a complaint against the agent or is it like the Better Business Bureau where you file a complaint and get a refund?
Also, I sold my house because I was getting a divorce, a fact I did not disclose to the agent. Did I do anything wrong by not disclosing that? When he asked why we were moving I simply said the house was not suitable and that my husband wanted something closer to work which were both true.
The agent now knows that we went through a divorce and I am wondering if that is why he isn’t responding to our calls.
A: Let’s take the second question first. You are not required to disclose to a real estate agent that you are getting a divorce. While the agent technically represents you, as a seller, personal financial information is just that — personal. It should not matter to the agent whether you have one husband, two boyfriends, three children or none.
That said, working with an agent is like being in a short-term, intense relationship. It’s possible the agent found out the truth about your impending divorce and felt left out of the picture. If so, too bad. On the other hand, perhaps this is one reason why the agent now is not returning your phone calls.
But given the first part of your question, it sounds like there is plenty of bad blood in this deal. And I’m sure there is more to the story than you simply keeping an impending divorce out of the mix.
Assuming your agent did something wrong, you can file a complaint by calling or writing the real estate commission or department of real estate that oversees and licenses real estate agents and brokers in your state. I’d copy the managing broker or owner of the real estate company on the letter, so he or she is aware of what happened to you.
You can also file a complaint with the Better Business Bureau.
In terms of getting a refund, is the agent sold your home, then he has successfully completed his end of the deal and you would receive no refund. If the agent did something wrong in your transaction, he could lose his license.
If you feel as though you overpaid for the service the agent provided, you should consult with an attorney who can guide you as to the legal options that may be available.
Jan. 19, 2009.