Q-When I leased my former residence to a tenant about six months ago she talked me into a “right of first refusal” in case I decided to sell the house. I now have decided to sell.
My tenant made me a ridiculous low purchase offer which I rejected. I then listed the house for sale with a fine Realtor. But the tenant is very uncooperative.
Whenever the Realtor brings prospects to inspect the house, the tenant knocks it, telling the prospect that she has a right to buy the house. Naturally, this kills buyer interest and there have been no offers in the almost three months the house has been listed for sale.
My tenant’s lease doesn’t expire until January so I can’t evict her. What should I do as I want to get the house sold?
A-I do not recommend that owners give their tenants a right of first refusal. As you learned, it kills possible sales. Also, you have another serious problem in that the tenant can’t be forced to move out before her lease expires next January.
A right of first refusal means when the owner decides to sell the property, the tenant has the right to match any acceptable purchase offer which is obtained from another buyer. When a prospective buyer learns the tenant has a right of first refusal, most prospects suddenly lose interest in purchasing that property.
My suggestion is for you and your Realtor to discuss with the tenant the price at which you are willing to sell to her. If an agreement cannot be reached, then make the tenant an offer to pay her an amount, such as $1,000, for her canceling her right of first refusal, fully cooperates in selling the house and agrees to move out if the buyer so requests.
Be sure the agreement is in writing and amount is payable only on the closing of the sale. Your attorney can give you further details.
Q-I’ve heard most homes are priced 10 to 20 percent above what sellers will accept.
But when my wife and I tried to make a bid to buy a home at 20 percent below the asking price, our real estate agent refused to even write up the offer. She became very arrogant and indignant that we would offer such a low bid.
How much below the asking price is it customary for home buyers to offer?
A-Your question is frequently asked. But there is no answer to fit all situations.
The asking prices of many homes correctly are set very close to their market value. Those homes usually sell quickly for virtually their full asking prices. Occasionally, if several buyers want the same house, the house will sell for more than its asking price.
But most homes sell at least 5 to 10 percent below their asking prices. However, I’ve seen expensive homes sell for hundreds of thousands below their original asking prices.
When I bought my current residence, I offered about 15 percent below the asking price and the final negotiated sales price was approximately 10 percent below the asking price.
The best way to avoid overpaying for a home is to ask your real estate agent to prepare a written CMA (comparative market analysis). This form shows recent sales prices of comparable nearby homes as well as the asking prices of similar neighborhood residences currently listed for sale.
With the help of your agent, you then can add or subtract value for the pros and cons of the home you want to buy, as compared to the recently sold residences.
It’s possible that the CMA will show you that the home you want to buy is a bargain at its full asking price. Or, the CMA may confirm the residence is grossly overpriced. Until you have a CMA to review, don’t make a purchase offer.
As for your agent who refused to present your offer 20 percent below the asking price, she breached her fiduciary duty to you and to the home seller. I hope you have switched to a better agent and will report the matter to the state real estate commissioner for possible disciplinary action of the agent.
Q-I see the Federal Reserve recently reduced the prime rate. What is the relationship between the prime rate and mortgage rates? Will mortgage rates drop significantly? Should I wait to buy a home?
A-The Federal Reserve does not control the prime rate, which is the interest rate at which banks supposedly lend to their best customers. As I write this, most banks recently have lowered their prime rate to 8.75 percent.
However, in recent years the prime rate has become a false, inflated interest rate. A bank’s best customers, such as General Motors, can borrow for less than the prime rate.
It is, however, a benchmark rate used for loans to “little people,” such as consumers like us. Many consumer loans are pegged at 1 or 2 percent above the prime rate, which is an artificial rate set by the banks.
There is no direct relationship between the prime rate and home mortgage rates. About all that can be said is they usually move in the same direction at the same time. Most mortgage rates now are tied to the bond market, which determines interest rates tied to U.S. Treasury bills, notes and bonds.
Q-I recall several months ago you gave the best day of the month to close a home purchase. I am in the process of buying my first home, but I misplaced your article. On what day of the month should I close my home purchase?
A-For home buyers, the best day to close the purchase is the last business day of the month. The reason is you then only have to pay mortgage interest for one day in the month of purchase. Your first mortgage payment on your new mortgage won’t be due until the first day of the second following month, because mortgage interest is collected in arrears.
For example, suppose you close your home purchase on Aug. 31. As part of your closing costs, you will have to pay one day’s mortgage interest for Aug. 31.
But your first mortgage payment won’t be due until Oct. 1 for the September interest collected in arrears by the lender. However, if you close your home purchase on Sept. 1, you must pay closing costs for 30 days of that month’s interest. However, your first mortgage payment won’t be due until Nov. 1.
Q-I am getting ready to list my home for sale. I had the house painted in August 1993. It looks pretty good, but the Realtor suggests painting the house again. The cost will be almost $2,000.
If I take the Realtor’s advice do you think I will get $2,000 more for the house than if I don’t paint it?
A-Paint is the cheapest and most profitable improvement you can make to your home. When in doubt, paint.
I can’t guarantee you will get $2,000 more for your house than if you don’t paint it. But a fresh coat of paint will increase your chances of a quick sale. Painting the interior in an off-white color also is highly advisable.
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The new Robert Bruss special report “The 10 Key Questions to Ask Before Selling Your Home” is available for $4 from Tribune Media Services, 435 N. Michigan Ave., Room 1408, Chicago, IL 60611. Please allow 6 to 8 weeks for delivery.
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, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611.
