Q-I plan to put my house on the market next month. In preparation, I have interviewed four real estate agents about listing it. They all quoted me the same 6 percent sales commission and they all want six-month listings. I know you recommend only 90-day listings or a six-month listing with an
unconditional cancellation clause, which they will accept. But the inflexible 6 percent sales commission concerns me. I thought real estate sales commissions were supposed to be negotiable. Are they?
A-Yes. Many real estate agents will adjust their sales commissions, especially if they produce a purchase offer that is substantially below their recommended sales price for the home.
Just today I talked with a realty agent who charges a 5 percent sales commission. He can afford to do this because he owns the firm and doesn`t have to split his share of the commission with a broker. Customarily, if another agent sells the property the other firm gets 3 percent and he takes 2 percent because he has lower overhead.
However, I do not think it is wise to try to cut a real estate agent`s sales commission, with the one exception of when the agent produces a low offer. You want to give the listing agent maximum incentive to find a buyer for your home. A potential saving of 1 or 2 percent doesn`t make sense if your house doesn`t sell because agents are showing their prospective buyers other homes where they can get a full sales commission.
Purchase partnership
Q-My wife and I desperately need to buy a house. But we don`t have any money for a down payment. I understand this is a common problem. We can afford up to $2,000 per month for loan payments, property taxes and insurance and we pre-qualified with a mortgage company. A real estate agent introduced us to an investor who will put up the down payment in return for 50 percent of the house ownership. We would make all the monthly payments plus pay the maintenance and he would not make any payments. Is this a good deal?
A-Be sure you have an airtight equity sharing agreement with the investor. Consult a real estate attorney to review the partnership contract proposed by the investor to be certain it is fair to you. Paying $2,000 per month for half ownership in a house doesn`t sound like a very good deal, but it might be better than continuing to waste money on rent.
Loan transfers
Q-We recently received a notice that the second mortgage on our home has been transferred and we are to make our loan payments to an out-of-town address. Can a mortgage lender do this without our approval?
A-Yes. But don`t blindly send your payments to the loan servicer who wrote you that letter. Phone your current mortgage lender to verify that your loan truly has been transferred.
There is a nationwide scam going on where dishonest loan servicers write to borrowers directing them to send their loan payments to a new address. You should never send loan payments to a new loan servicer until you receive a letter from your old lender informing you your mortgage has been transferred to another firm. Also make certain the old loan servicer transfers the correct mortgage balance to the new loan servicer.
Taxable profit
Q-I want to sell my house, but my CPA says I can`t afford to sell. The problem is I refinanced the mortgage about two years ago. The loan balance is about $35,000 more than the price I paid for the house. He says when I sell I will owe tax on the difference between my net sales price and my cost basis. Although I received $35,000 of this amount when I refinanced, he says it is part of my taxable profit even though I won`t receive it at the time of the sale. Because I am not over 55 and do not plan to buy another home, I can`t use any of those tax avoidance rules you often discuss. Is my CPA right or wrong?
A-Your CPA is correct. You have an ”excess mortgage” balance that is $35,000 greater than your adjusted cost basis. The result is you owe tax on this part of your profit although you will not receive the $35,000 cash at the time of the sale because you have already received this money when you refinanced.
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The new special report ”How to Maximize Your Profit from Fixer-Upper Houses,” by Robert J. Bruss, is available for $4 from Tribune Publishing Co., 75 E. Amelia 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.
