Q-We sold our old home for cash. The sale was due to a job transfer. We were not familiar with the new community and bought an overpriced home for cash in a poor location. Based on an appraisal and opinions from two other real estate agents, we overpaid by at least $40,000. Do you think the real estate agent who sold us the house had a duty to tell us the home’s true market value and its drawbacks?
A-The answer depends on who the real estate agent was representing. If the agent was acting as a buyer’s agent, he or she should have informed you of the home’s correct market value, as well as its poor location. However, if the agent was representing the seller, then it would be a violation of the agent’s fiduciary duty to the seller to disclose that the house was overpriced and in a poor location.
Your situation is a classic example of why home buyers should clarify who the agent really represents. About 30 states now require real estate agents to disclose to home buyers who the agent legally represents. This can be very important, especially in circumstances like yours, where you were unfamiliar with your new community. In the future, when buying real estate, you may want to hire a buyer’s agent to represent your best interests. For further details, please consult a local real estate attorney.
Overcoming bad credit
Q-I got married last June. I didn’t know my new husband has bad credit. Before he met me, he was quite a playboy. He ran up large credit card bills, which he paid only after collection agencies hounded him. Now I’ve got him shaped up on a strict budget and he loves every minute with me.
I think it’s time we buy a home to take advantage of the current bargain-basement interest rates. But when we applied for pre-approval of a mortgage, as you often suggest, the loan agent showed me my husband’s terrible credit report, for the first time. I was shocked. Naturally, we got turned down. Is there any way we can buy a house with bad credit? I love this man too much to divorce him just because he has bad credit.
A-Of course you and your bad credit husband can buy a home. Just rule out getting a new mortgage from a bank, savings and loan or mortgage banker. But that still leaves taking over a non-qualifying assumable mortgage, such as an older VA or FHA mortgage, as well as seller financing.
Try seller financing first. Ask your real estate agents to show you only homes for sale that are owned free and clear with no mortgage. There are thousands of such homes, many owned by elderly home sellers who would welcome the extra retirement income a seller carryback mortgage will bring.
When you see such a house you want to buy, make a purchase offer with seller financing. In today’s market, you should be able to get a seller to carry back the mortgage for you at around 7 percent interest. That’s a bargain, especially considering there are no qualifications required except a reasonable down payment and enough income to make the mortgage payments.
Price per square foot
Q-A realty agent has been showing us homes for sale. She tells us the square footage of each home and then informs us if it is a good buy. Is this a new way of pricing homes?
A-No. The market value of a home is usually based on the recent sales prices of comparable nearby homes. It is possible to use those sales prices from the agent, based on square footage, to estimate the probable sales price of a home you are considering for purchase. But additional factors are also involved, such as location, construction quality, and amenities. Square footage is not the only fact influencing market value.
When you see a home you want to buy, before making a purchase offer, insist the realty agent prepare a written comparative market analysis. This form shows recent sales prices of similar neighborhood homes, as well as the asking prices of nearby homes currently for sale. Then, with the agent’s help, you can add and subtract value for the pros and cons of the home under consideration for purchase to arrive at a fair purchase offer price.
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Address inquiries to Robert Bruss at Tribune Real Estate Features Service, P.O. Box 280038, San Francisco, Calif. 94128.
