Q-I have seen several of your articles advising home sellers to sign only 90-day listings. As a Realtor, I must inform you it takes a minimum of three weeks to get pictures, flyers and advertising for a new listing. I won’t take a listing for less than six months because we just get advertising started and then have to quit if the listing is any shorter.
You seem to have no concern for the Realtors and their problems. Where is your common sense? A caring Realtor can be with a client for their whole life. I have saved many of my people money by advising them when to refinance and when to sell. When are you going to show some concern for Realtors?
A-I regret having to disagree, but six-month listings are not in the best interests of home sellers. As you probably recall from reading this column each week, it is my policy to always list for 90 days my investment houses for sale with realty agents, although I am a licensed broker.
Having received many letters from home sellers who signed long, six-month listings with lazy agents who didn’t get the homes sold, I know 90-day listings best motivate agents to work hard, smart, and fast, yet providing plenty of time to get the residence sold.
For example, I recently listed a rental house for sale with one of my favorite agents (he sold two houses for me last year, both in less than 90 days). But he absolutely refuses to accept listings for longer than 90 days. Within a week, he placed newspaper advertising, prepared a brochure with color photo of the house, held a Multiple Listing Service broker tour, and hosted a Sunday open house. This agent is in the top 10 percent of agents with his brokerage which has over 1,000 agents.
Based on his past success, I’m certain he will sell this house in less than 90 days too. He is well worth his fee. I suggest you change your hostile attitude toward home sellers and look out for their best interests instead of just yours. You’ll be much happier and so will your clients.
A six-month listing is fine for sellers if it includes an unconditional right for the seller to cancel the listing any time without cost.
Q-My son, age 27, is moving to Pittsburgh, where he will live about seven years. He is considering buying a home. He has up to $40,000 to put down which will keep mortgage payments reasonable, as he will only be living only on about $15,000 per year. Do you think he should buy or rent?
A-Since your son expects to be in Pittsburgh for seven years, he should definitely buy a home. Throwing away money for seven years on rent would be a terrible waste. However, if he were planning to stay less than three years, then I would advise against buying a home.
But, with only $15,000 annual income, he will have trouble qualifying for a mortgage. Seller financing is his best alternative. But if he can’t find a home he likes where the seller will carry back the mortgage, perhaps you can co-sign on the mortgage to help him qualify.
Q-Now that our two sons are in college, my husband has encouraged me to “get out of the house.” Several of my best friends are real estate agents so I got my realty sales license. I am in a training program with their brokerage. But I’m so confused. I’ve read Danielle Kennedy’s excellent book about how to get listings, but my agent friends tell me I should concentrate on working with buyers. What do you advise?
A-The smartest real estate agents specialize in obtaining listings. The reason is then you will control the sale, always earning at least half of the gross sales commission, more if you also find a buyer for your own listing.
The realty agents who survive concentrate on obtaining listings. Occasionally, you will decide to work with a home buyer. But, after a while, you will learn how undependable buyers can be. Become a listing specialist and you will survive in real estate sales. An excellent new book to study is “Real Estate Prospecting, Second Edition,” by Joyce L. Caughman (Real Estate Education Co., Chicago), available in stock or by special order at local bookstores and libraries.
Q-We owe about $26,000 on various credit cards. My wife thinks we should cut up all our credit cards except one or two and concentrate on paying off these debts, which have about 20 percent interest. But I think we should take out a home equity loan and consolidate these loans to reduce the interest rate. What do you recommend?
A-Do both. By paying off your high interest rate credit card loans, you will be converting non-tax deductible interest into tax deductible interest secured by a second mortage on your home. More important, you will slash your interest rate by more than half.
However, the big danger is you won’t stop charging on your credit cards. Your wife is correct that you should cut up all your credit cards except the one or two you both use most, such as airline frequent-flyer credit cards where you earn free travel.
Q-My home is worth about $200,000. But I paid only $45,500 for it many years ago. Approximately four years ago, I refinanced for $150,000. The mortgage, of course, has been paid down slightly since then. Now I am considering selling.
But my CPA says if I do so I will owe tax on the difference between my net sales price and my cost price, rather than the difference between my mortgage balance and my net sales price. Is this true?
A-Yes. Your CPA is correct. The situation you describe is an “excess mortgage” which exceeds your adjusted cost basis.
Your mortgage balance has absolutely nothing to do with your home sale taxable profit. What matters is the $154,500 difference between your adjusted (net) sales price of about $200,000 and your adjusted cost basis (usually purchase price plus capital improvements added during ownership) of $45,500.
Of course, don’t forget the special tax avoidance rules. They include the “over 55 rule” $125,000 home sale tax exemption and the famous “rollover residence replacement rule” of Internal Revenue Code 1034 if you buy a replacement princial residence of equal or greater cost within 24 months before or after the sale. For full details, please consult your tax advisor.
Q-I am a licensed certified appraiser who has been in the appraisal business over 15 years. My little appraisal firm employs six licensed appraisers. Until recently, we had all the work we could handle. Then the federal government changed the appraisal rules. Now they allow unlicensed novice appraisers to appraise the less expensive houses.
The result has been the banks and S&Ls are hiring novice unlicensed appraisers to do their appraisals. We experienced, qualified, licensed appraisers only get the expensive houses to appraise, plus the “tough cases.” I have followed your comments about appraisers and you are 98 percent correct. Low-ball appraisals are a frequent excuse for the banks and S&Ls to avoid making mortgage loans. While I hesitate to say our appraisal industry is corrupt, it is the most self-serving of which I am aware.
A-As you probably know, I am on the “hit list” of the appraisal societies. They hate me. But I have nothing against them. However, I wish they would clean up the appraisal industry where the various appraisal groups are suing each other and it’s now impossible to tell the good guys from the bad guys.
———-
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. Letters should be addressed to Tribune Real Estate Features Service, P.O. Box 280038, San Francisco, Calif. 94128.
