Q-As an avid real estate reader of your columns every week I look forward to learning from you. May I make a suggestion? You often advocate home sellers invite at least three realty agents to give their listing presentations. I suggest home sellers select these three agents from recommendations of friends and business associates who have recently sold their homes. Then it doesn`t get into a competition among agents who estimate the highest sales price for the home. In addition, sellers should dismiss any agent who doesn`t prepare a written marketing plan for the home, including weekly advertising, open houses, multiple listing service and direct mail to targeted buyers.
A-Thank you for the valuable suggestions. I can`t emphasize enough that home sellers talk with at least three local real estate agents before selecting the best.
The most important criteria is the client references of each agent. Before signing a listing with any agent, a home seller should phone their seller references to ask, ”Were you in any way unhappy with your agent and would you list your home for sale with the same agent again?” This method will tell you which agent should receive your listing.
Q-I sold my home to a nice young couple. They are getting an FHA mortgage and it is taking forever. Since they moved here from out of town and are staying in a motel, they want to move into my house before the mortgage papers are ready. Do you think I should allow them to do so?
A-No. The big problem of allowing home buyers to occupy the residence before the sale is recorded is the buyers will surely discover some little defect that will hold up the closing of the sale. Another difficulty is you must keep up the insurance while the buyer occupies your home. If a loss results, there can be problems.
Q-Following your advice we negotiated a terrific lease-option. The home seller is giving us a 100 percent rent credit toward our down payment. However, he does not want us to record our purchase option. It occurred to me the seller, a rather slippery character, might try to sell our home again. We definitely plan to exercise our purchase option. Do you think we have a big problem?
A-No. The buyer of any property takes title subject to the rights of the occupants. Since you have a valid lease-option agreement, you need not be concerned. Please consult a local real estate attorney for more details.
Q-I am trading my commercial building for an apartment house. However, the Realtor who arranged the three-way trade didn`t put any price tags on the property. I know I am trading up, but how does the IRS know this?
A-Don`t worry. Price tags are often left off the properties in an IRC 1031 tax-deferred exchange. As long as you are trading up for investment or business-trade property of greater value and equity without receiving any
”unlike kind” property such as cash or net mortgage relief, you have a tax-deferred exchange.
Q-I have heard options are a great way to acquire real estate. But how do I go about finding options to buy?
A-I don`t know. Frankly, I have never seen an option advertised for sale. You have to negotiate for them. The only options I have ever acquired involve a lease with option to purchase. I usually pay $1 or nothing for the option to purchase. However, I understand straight options without a lease should cost from 1 to 3 percent of the option price, depending on the length of the option.
A-Not much. I will receive angry letters from auctioneers, but I do not think auctions bring the best prices for homes. The people who show up at auctions are bargain hunters. If you have a distress property to sell, perhaps an auction will help. But if you want to receive top dollar, listing your home for sale with the best local real estate agent is the way to go.
Q-For several months my husband and I have been looking at a larger home for our growing family. Following your advice that now is the time to buy, we have been going to the Sunday open houses. I am surprised at all the nice, but very lazy agents we met. Most just hand us an information sheet and offer to answer any questions. But about a month ago we met a sharp young lady who not only gave us an information sheet about the house, but she had another sheet showing us recent sales prices of similar nearby houses. It was titled ”Why this house is a bargain.” That got our attention. It seems the seller is retiring and she doesn`t need to get top dollar, so she lowered the price for a quick sale. This technique worked. We made an offer and the seller accepted. But my point is the agent used some old-fashioned saleswomanship to get us interested in the house. We must have looked at 50 houses before we met the first really enthusiastic salesperson. Then she helped us arrange a mortgage and we closed our purchase last week with just a 10 percent down payment. Only then did this agent tell us this was her first sale. I just thought your many realty agent readers might enjoy our happy experience.
P.S. We listed our old home for sale with the same agent.
A-Thank you for sharing that inspiring story. I`m afraid many realty agents have become discouraged by the lack of sales volume in the current buyer`s market. Fortunately, there are many agents like yours who are doing just fine.
For example, just recently I had lunch with one of my favorite real estate agents. Joe (age 73) and his wife just returned from a month`s vacation in Europe. He told me this is the best year he has had in his 15 years selling real estate.
Q-Last April we sold our home to a building contractor. He constructs commercial buildings, but knows all about construction. Before he closed the sale, he checked out our home completely. But shortly after he moved in we had a very heavy rain and windstorm and the roof leaked. A few of the shingles were blown away. He had a new roof installed and it cost him $2,800. He is now suing us for this amount because, he says, we didn`t disclose the roof was defective. Is this legal?
A-Anyone can sue anyone. However, it seems to me you have no liability, since the roof was apparently in good condition when you sold the house. If he thoroughly inspected the house before purchase I`m certain he would have spotted a defective roof.
Incidentally, you might want to have your lawyer intimidate the buyer`s lawyer by expressing his intent to bring a malicious prosecution lawsuit against the buyer`s lawyer for a frivilous lawsuit like this. As an attorney, I am seeing more and more winning defendants suing the plaintiff and their lawyer for malicious prosecution when the lawsuit was frivilous and a waste of the court`s time, like the one you describe.
Q-Our home has been on the market for sale almost four months without any purchase offer except a flakey offer way below market value. We were approached by an auction company, which showed us an impressive sales record. What do you think of auctions?
A-Not much. I will receive angry letters from auctioneers, but I do not think auctions bring the best prices for homes. The people who show up at auctions are bargain hunters. If you have a distress property to sell, perhaps an auction will help. But if you want to receive top dollar, listing your home for sale with the best local real estate agent is the way to go.
Q-I am interested in learning about real estate investing. I have already read Robert G. Allen`s book ”Nothing Down.” Any other suggestions?
A-I very highly recommend you attend real estate classes at a nearby community college. Most offer excellent courses in real estate principles, finance, appraisal, law, management and other topics. You also might want to read my book, ”The Smart Investor`s Guide to Real Estate,” available at local bookstores and your public library.
Q-I started reading your columns in the Washington Post years ago when I used to live near Washington, D.C. You said it is smart to buy real estate when you are young and when you are old sell it on installment sales and carry back mortgages for retirement income. That is what I did about five years ago. Every month the payments come in like clockwork. But a few months ago one of my buyers was going to pay off my loan. I had to talk fast, but I convinced her not to pay me off. Where else could I earn such high interest?
A-I greatly appreciate your sharing that success story. When I sell property I love to carry back a first or second mortgage for the income. Once in a while, if the buyer doesn`t make the payments, I have to foreclose and either get paid off at the foreclosure sale or get the property back to sell for a second profit.
I can`t understand why more property sellers don`t help finance their buyer`s purchases. Sorry, I don`t know anyplace else you can earn as high interest as you can by financing a real estate sale.
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Please note: Real estate laws differ from place to place, and laws of your area should be checked before making decisions on real estate problems. Robert Bruss will answer inquiries addressed to Tribune Real Estate Features Service, P.O. Box 280038, San Francisco, Calif. 94128.
