Q-I plan to sell my home soon. A neighbor suggests I send listing information about my house to the 10 largest nearby brokerages, offering to pay a 4 percent sales commission for finding me a buyer. This would be cheaper for me than paying a full sales commission, but a higher commission than a sales agent usually receives when they sell a house listed by another agent. What do you think of this idea?
A-Not much. The idea your neighbor suggests is called an open listing. However, most realty agents will work on open listings only on rainy days when there is nothing else to do. The reason is the agent lacks control over the property. Another agent might find an acceptable buyer and earn the full sales commission. Or, you might take your house off the market or find a buyer on your own without any agent’s help. Still another drawback is your house won’t be submitted to the local multiple listing service.
I suggest you drop that open listing idea and instead sign an exclusive right to sell listing with your area’s most successful real estate agent.
Q-Some time ago you said home loans for 90 and 95 percent of the sales price are available. Where? I talked with the loan officer at the bank where I have my checking and savings accounts, but they don’t offer such mortgages.
A-FHA offers home loans for approximately 95 percent of a home’s market value, but the maximum FHA loan limits are too low for high-cost areas. PMI (private mortgage insurance) home mortgages are available from thousands of banks, S&Ls and mortgage bankers. Mortgage brokers also can arrange these mortgages.
However, you will need excellent income and credit to qualify for a PMI mortgage. Also, please be aware you will be charged a PMI fee. The reason is the PMI company insures the loan for the amount above 80 percent loan-to-value, the riskiest part of the mortgage.
Q-If I enter into a lease-option on a home and put up, say, a $5,000 option payment, do I ever see that money again? If so, how is it accounted for when I exercise my option to buy the house?
A-Non-refundable option money paid to obtain a lease-option is usually credited toward the down payment when the purchase option is exercised. Be sure your lease-option is properly written, so your option money becomes part of your down payment, along with your rent credit which also should be part of your down payment.
Q-When we listed our home for sale, the real estate agent said we could cancel our listing at any time. About 30 days later we changed our minds about selling and notified our agent to cancel the listing. She said we could do so, but would have to pay advertising costs which, she says, total more than $650. There is nothing in the listing contract about having to pay any costs. Can the agent do this?
A-If the listing agreement does not require you to pay the agent’s advertising costs when you cancel the listing, then you are not obligated to pay those expenses. I suggest you send the agent a written letter cancelling your listing. If she thinks she is entitled to payment for advertising costs, let the agent sue you in small claims court, but she will need written proof to win.
Q-We are trying to sell our home. My wife works as a paralegal in a law firm, so she asked a real estate lawyer in her office to review a purchase offer bid we received from a buyer. The lawyer found many things wrong with the pre-printed offer form. So he wrote a 16-page counteroffer, which the seller rejected.
Our agent told us it was a big mistake to consult an attorney because he cost us the sale of our home. In the future, how can we best protect ourselves without losing the sale?
A-Apparently you and your wife consulted a “deal killer” lawyer. He was looking out for your best interests but, in doing so, he killed the sale. Unless the home sale is very complicated, a 16-page counteroffer is unnecessary.
Most home sellers and buyers don’t consult real estate attorneys. The best real estate attorneys review a proposed transaction and make suggestions about any problems they see. But I can’t imagine a home purchase offer being so unacceptable that a 16-page counteroffer would be necessary.
In the future, if you want your attorney to review a purchase offer, let him or her know you wish to get your home sold and want the attorney to advise you only on any legally unacceptable clauses. A one-page counteroffer is usually sufficient to change any terms in the original offer which you find unacceptable.
Q-Our home has four bedrooms and three bathrooms. But we now have four children and want each child to have their own bedroom. Our choices are to sell and buy a five-bedroom home or add another bedroom and bathroom to our home.
The problem is our home is already the largest house in a neighborhood of two and three-bedroom houses. Our neighbor is a real estate agent and she advises us not to add to our current home. But we think maybe she just wants to sell us another house and get the listing on our current home. Do you think we should add another bedroom to our present home?
A-I presume you like your current neighborhood; otherwise you wouldn’t be considering building the addition.
But owning the only five-bedroom house in your neighborhood will be an “overimprovement.” That means the cost of adding a new bedroom and bathroom will probably exceed the increased market value which will be added to your home.
However, if you realize the improvement costs will not be a smart investment and you might not be able to get your costs out when you eventually sell the house, you still might wish to go ahead.
However, I recommend you seriously consider selling your house and buying a five-bedroom home.
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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. Letters should be addressed to Tribune Real Estate Features Service, P.O. Box 280038, San Francisco, Calif. 94128.
