Q-I just read a book about the advantages of a 15-year mortgage. Can`t I achieve the same results by prepaying the interest each month on my present 30-year mortgage without going through the hassle of refinancing with a 15-year loan?
A-That must have been a very exciting book you read about 15-year mortgages. I would think the entire subject could be summmed up in a few paragraphs.
The big advantages of 15-year mortgages versus 30-year loans are (1) huge interest savings and (2) owning the home free and clear in less time.
There is no need to refinance your 30-year mortgage with a 15-year home loan. Just pretend your loan is a 15-year loan and pay it off each month with the higher monthly payment required to retire the loan in 15 years.
You could add the next month`s principal payment to your regular monthly payment. Although this extra amount will increase each month, and you will need an amortization schedule to do this, it is a relatively painless way to gradually increase your monthly payments to get the loan paid off in 15 years. `Super-star` agents
Q-You often recommend that home sellers list their homes with the most successful agents in their areas. That`s a fine idea, but as a real estate agent, I think you should be aware that most of the ”superstar” salespeople list many homes but sell very few. For example, in the area where I work we have one of the top agents in the nation, who currently has about 80 listings. However, in an average month, only seven of those listings sell, usually by cooperating agents through the local multiple listing service. The reason for my pointing this out is home sellers should list their homes with a successful agent who has the time to devote to each listing. My wife and I work as an agent team and we sell one out of three of our listings each month. As you know, that`s very good. I think you should warn your readers about not becoming just another listing with a superstar agent, don`t you?
A-Yes. Until I received your thoughtful letter, I had never thought about listing a home for sale with an agent who is too successful. But your situation shows how that can happen.
For example, in my area I have a good friend and a former student who is a superstar agent such as you describe. Much as I like and admire this lady, I would never list my home with her because I feel it wouldn`t get much of her personal attention because she has so many other listings. Thank you for pointing out this problem of listing homes for sale with agents who are too successful.
Contested inheritance
Q-About two years ago, my aunt gave me a deed to her house. She told me not to record it until after she died. My aunt knew she had cancer, but wasn`t sure how long she would live. Two months ago she died. A few weeks later I recorded the deed. My father is the executor of her will, which left everything to her church. The only asset she left of any significance is the house. The church is claiming the house, even though I had the deed and recorded it. Can the church take the house away from me?
A-Perhaps. The general rule is a deed must be delivered unconditionally during the grantor`s lifetime. Since your aunt gave you the deed to her home on the condition you not record it until after she died, it appears that was a conditional delivery, which is revoked by the grantor`s death.
Suppose, for example, your aunt had sold her home before she died. Then your deed would have no effect. I`m afraid if the church brings a lawsuit to obtain the house, you will lose because you did not receive title to the house unconditionally during your aunt`s lifetime. For further details, please consult your attorney.
Lease options
Q-As a real estate agent, I was fascinated by the lease-option you described where you took a lease-option payment of $5,000 on a $295,000 house and allocated $3,500 as non-refundable option money and $1,500 as the first month`s rent. You said you give a $500 credit toward the down payment out of each month`s rent. At the end of the second year, the tenant-buyer will have
”saved” only $15,500, which is just 5.25 percent of the $295,000 sale price. This is hardly enough for a meaningful down payment. How long is your lease-option term? Five years? Are you counting on the house appreciating in market value to make it easier for the buyer to come up with a 10 to 20 percent cash down payment? I would find a five-year term to be onerous for the seller. Please clarify.
A-As a seller, I never enter into a lease-option for longer than 12 months. The reason is I want the right to adjust the option price and the monthly rent every 12 months. However, I often renew my lease-options for several years until my tenants get their acts together and buy their rental homes. No, I don`t count on market value appreciation. That is just a bonus when it happens.
As you know, I usually run a newspaper classified ad headlined ”$5,000 MOVES YOU IN,” followed by a description of the house, the address and my Sunday open house hours. I never put my phone number in the ad because my phone wouldn`t stop ringing. I usually take several $5,000 deposits and then pick the best qualified applicant.
As I greet each visitor at my Sunday open house, I hand them an information sheet that clearly explains that they will need an additional cash down payment, in addition to their rent credit, to meet the 5 to 10 percent down payment required by most lenders, plus closing costs. I usually carry back a second mortgage to fill any finance gap.
Seller financing
Q-About four years ago, we sold our home and carried back the first mortgage at 10.75 percent interest. Since we are retired, we enjoy a good yield that we cannot earn anywhere else with equal safety. However, last month we received a letter from our buyers indicating they plan to pay off our mortgage, so they can refinance at a lower interest rate. Do you think we should offer to reduce our interest rate to keep this desirable loan?
A-Yes. If I were in your situation I would immediately phone the borrowers to work out a modification to your mortgage. By offering to reduce your interest rate to perhaps 9 percent, you may be able to keep a desirable loan and the borrowers won`t have to go through the hassle of refinancing their mortgage.
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If you real estate agents have any listings that are about to expire, I suggest you talk your sellers into letting you offer their homes on lease options. It is the only technique I can count on to ”sell” houses in the current buyer`s market. Further details are in my special report ”How Home Buyers, Sellers, Agents, and Investors Can Profit from Lease-Options,”
available for $4 from Newspaperbooks, 64 E. Concord St., Orlando, Fla. 32801. 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.
