Q-I am the buyer of a house. The sale is finally ready to close. But the seller and the listing agent are having a dispute about the amount of the sales commission. The realty broker threatens to delay the sale closing until the commission dispute is settled.
My attorney says the seller’s agent has no legal right to delay the closing. Is this right or wrong?
A-Your attorney is correct. The seller’s real estate agent has no legal right to delay the home sale closing just because the agent and seller don’t agree on the sales commission amount.
If the seller doesn’t pay the listing agent’s sales commission, that agent should sue the seller for the sales commission. But this dispute has nothing to do with your contract to purchase the home. The seller, not you, agreed to pay the sales commission.
Perhaps your attorney can talk some sense into the realty broker. If you threaten to walk away and not buy the house, maybe that will make the realty agent reconsider the consequences of losing the entire sale.
Q-I have about $500,000 to invest. But I don’t want to invest in the risky stock market. Certificates of deposit and treasury obligations don’t pay enough. How can I invest in real estate for maximum cash flow?
A-Real estate is not a cash flow investment unless you want to buy management-intense property such as low income housing. I know several wealthy owners of “flophouses” who earn tremendous incomes, but they have constant property management problems.
Yes, you can invest in realty and obtain a good cash flow from rental income. But you can probably do better with no work by investing in CDs and Treasury notes. However, you’ll never get rich doing that.
The primary reason to invest in real estate is for long-term market value appreciation of the property, especially if you buy fixer-upper property and upgrade to force its market value up. Sound, well-located but run-down rental houses, apartments and commercial buildings can provide this benefit.
Q-I stupidly signed a six-month listing with a lazy real estate broker. I’ve tried to cancel my listing but the agent refuses. A friend inspected my home at the agent’s Sunday open house. Since the agent is doing such a poor job, can I sell my home to my friend after the listing expires and avoid paying a sales commission?
A-If your agent is smart, he obtained your friend’s name at the Sunday open house and registered it with you during the listing term. The savings clause in most listings specifies if a prospective buyer who was registered with the seller during the listing term buys the property within 90 days after the listing expires, the home seller owes a sales commission to the agent. Please read your listing and then ask your attorney to further explain the savings clause.
Q-You are always telling readers to list their homes for sale with Realtors. Are you a Realtor? If so, I’m not surprised you are so enthusiastic about listing homes for sale with realty agents. However, I admire you for not hesitating to say when a Realtor did something wrong.
A-I am not a Realtor. That means I am not a member of the local, state or National Association of Realtors.To prevent any conflict of interest when answering questions for this column, almost 20 years ago I dropped my Realtor membership. However, I am still a licensed real estate broker and an attorney.
The primary reason I recommend listing a home for sale with a Realtor, after interviewing at least three successful local agents, is most sellers are not capable of selling their homes without professional help. One bad mistake can cost far more than a real estate sales commission.
Q-Thank you for your reply to another reader about six months ago. He had bad credit but good income. That was our problem, too. And we wanted to buy a home.
We followed your advice to buy a home with either an assumable mortgage or seller financing. Our first home purchase offer was made last October. All our offers were rejected or didn’t work out for one reason or another. But in March our 11th purchase offer was accepted by a sickly man, 82, who is selling his home to move closer to his daughter. She handled the sale for him.
Everyone is thrilled. The monthly payments from our mortgage will enable him to live with financial dignity in a convalescent home for the rest of his life. When he dies, as he probably will within a few years, the daughter will inherit the monthly payments.
Why don’t you emphasize seller financing more often to encourage home buyers like us?
A-There are so many real estate topics that can’t possibly discuss each one frequently enough. Thanks for giving me the opportunity to again emphasize seller financing is a great way, as you discovered, for home buyers with credit problems to buy.
Although there are now many lenders who say they make mortgage loans to home buyers like you with less than perfect credit, getting one of these B, C or D-quality mortgages is never easy. Obtaining a seller-financed home mortgage is usually much easier.
Based on my experiences buying rental houses with seller financing, I find the best candidates are vacant houses being sold by elderly sellers who need increased retirement income. These sellers often have not been counseled by their realty agent to consider the benefits of seller financing.
Until an offer like yours comes along and the seller studies it at the kitchen table (where all great household decisions are made!), most home sellers never consider seller financing.
Q-We own a weekend house in a small town about a two-hour drive from our primary residence. The town is growing rapidly because three new factories have located there in the last year.
We know of a 20-acre parcel just outside town whose owner will sell to us at a reasonable price because we are friends.
However, our problem is financing. There are only two banks in town and neither will give us a mortgage to finance our land purchase.
Do you think this land, currently zoned for agriculture but within the city limits, would be a good investment to hold for 10 years? If so, how can we finance it?
A-There is a very good reason those two banks won’t finance your highly speculative land purchase. They know vacant land is probably the riskiest investment. Today, it is almost impossible to obtain commercial financing for vacant land.
Your best finance source is the land seller. If he or she won’t finance your purchase, you probably can’t obtain a mortgage on that land except at a very high interest rate from a loan shark.
If you can finance that land acquisition, how will you make the monthly payments and pay the property taxes? Even if the land is leased for crops or animal grazing, it probably won’t produce enough income to pay the expenses while you hold for possible future appreciation in value.
I suggest you stay away from land speculation.
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Robert Bruss’ report “How to Successfully Negotiate Your Home Sale or Purchase” is available for $4 from Tribune Media Services, 435 N. Michigan Ave., Room 1408, Chicago, Ill. 60611.
Please note: Real estate laws differ from place to place, so you should check local laws 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.
