Q-I am trying to sell my home without incurring a real estate sales commission. But I’m not having much success. Most of the prospective buyers drive me crazy with all their stupid questions.
Many of my inquiries, however, are from real estate agents who want to list my home for sale. I’ve already offered them a 4 percent sales commission if they bring me a buyer, but so far no agent has even brought a prospect to inspect my house. One agent did offer to list the house on an “exclusive agency.” She says that means if I find a buyer for the house I owe no sales commission. However, if she or any other licensed agent produces a buyer, then I must pay a sales commission.
This sounds fair to me, but I have never heard of such a listing before. Is this good or bad for me?
A-Exclusive agency listings are a well-kept secret among real estate agents. The reason is they create a race between the seller and the realty agent to find a buyer. Most agents don’t like them.
From the agent’s viewpoint, an exclusive agency listing is not as good as an exclusive right to sell listing. With an exclusive right to sell listing, whether the seller or realty agent produces the buyer, the agent earns a full sales commission. But an exclusive agency listing is good for the home seller because you owe no sales commission unless a licensed agent produces an acceptable buyer.
Q-We are in the process of getting our house ready to sell. It should sell for about $65,000. We have talked with three Realtors and they all want a 7 percent sales commission. Doesn’t this seem high? Do all Realtors charge the same commission rate?
A-Theoretically, real estate sales commissions are negotiable between the seller and real estate agent. In reality, most agents charge about the same commission rate.
Nationwide, most agents charge 6 or 7 percent sales commissions. The higher the sales price, generally the lower the commission percentage. It’s negotiable.
You can probably find an agent who will take your listing at a 6 percent commission rate, perhaps even less. However, if the “going rate” for homes in your price range and vicinity is a 7 percent sales commission, the other agents won’t be eager to show your home to prospective buyers if comparable homes offer a 7 percent sales commission.
My suggestion is to list your home for sale with your neighborhood’s most successful realty agent at the “going rate” for your community. If your listing agent can get a buyer to pay close to your asking price, be happy to pay the full sales commission. However, if the agent brings in a purchase offer substantially below the agent’s recommended asking price, that is the only appropriate time to talk about a “commission adjustment” downward.
Q-Last April, a local Realtor sold our home. We couldn’t have been more pleased with his highly professional service. He even made sure the buyers obtained a mortgage although they had credit and income problems. This new agent is an asset to the industry.
Now we want to sell some land we own about 60 miles away in a semi-rural area. When I phoned our agent to ask if he knew any Realtors nearby, he said he would be glad to handle our listing for us. Although this agent did an outstanding job selling our home, the land we want to sell is completely different. It is located in “horse country” and appeals to an entirely different type of buyer than our home did.
Do you think we should hire our “city broker” to sell our farm property?
A-Most realty agents who sell city homes are not qualified to sell rural property. For example, does your agent know about your rural land’s zoning for home construction or farm use, water supply, soil conditions, and use restrictions? Probably not.
Unless your agent has success experience selling rural properties like yours, I would be very wary of listing your land with him because he might misrepresent it to prospective buyers. Talk with at least three nearby farm and land brokers who specialize in selling land like yours before you decide which agent should get your land listing.
Q-I think you owe it to your readers to warn about the marriage trap for old folks like me who sell their homes and use that $125,000 tax exemption. In 1991, my late husband and I sold our home and used the $125,000 tax break to avoid having to pay tax on our sale profit. But in 1993 my husband died of a heart attack.
In early 1995, I married a wonderful man. He owns a house which he wants to sell so we can travel together and not be burdened with a house. But his CPA tells him because he married me he is ineligible for the $125,000 exemption when he sells his home. If we had known this, he would have sold his house before marrying me. Why didn’t you warn us?
A-Your new husband, in addition to asking, “Will you marry me?” should also have asked you, “Darling, have you used your $125,000 home sale tax exemption yet?”
To qualify for the “over 55 rule” of Internal Revenue Code 121, at least one co-owner spouse must be 55 or older on the date of title transfer and have owned and lived in the principal residence any three of the five years before its sale.
When a married couple with at least one co-owner spouse over 55 uses their once-per-lifetime $125,000 home sale tax exemption, both spouses thereby become ineligible to use this tax break again.
To make matters worse, when a spouse who used his or her exemption marries a homeowner who has not yet used their $125,000 exemption, marrying the “tainted spouse” disqualifies the new spouse who has never used this “over 55 rule” tax break before.
Q-I read in the newspaper a few weeks ago the median sales prices in my town are going down. As I am getting ready to sell my home, I’ve been talking with several Realtors. But they tell me home prices in my neighborhood are rising slightly. Who is right?
A-Don’t be misled by the trend of median or average home sale price statistics. The median price means an equal number of homes sold for more and less than that amount. The average price is the total of all local sales prices divided by the number of home sales.
If the median price is dropping in your town, it does not necessarily mean market values of homes are declining. All it means is the less expensive homes are selling in greater numbers than are the more expensive homes, thus skewing the price trend downward. The opposite could happen if just a few more expensive homes sold, thus skewing the local price trend upward.
Unfortunately, nobody has come up with any better indicators of price trends so we still use these misleading statistics.
Q-I recently attended an auction of foreclosed houses being sold by a bank. The terms of the sale said “as is, where is, with no warranties or representations.” We were the only bidder for the house we bought for $1 more than the minimum bid.
The house is in good condition. But we learned it is not connected to the city sewer, which is about one mile away. A neighbor told us the septic systems operate very poorly and everyone has trouble with theirs.
Several other bidders are very upset and are refusing to close their purchases. Shouldn’t the bank have told us there is no sewer connection?
A-Yes. Despite the terms of the sale, the bank should have notified bidders the houses were not connected to the city sewer. This is a major incurable defect which would have taken great diligence by the bidders to discover. Surely, the bank knew.
Since the soil is inappropriate for a septic system and connecting to the city sewer will be prohibitively expensive, your only practical recourse appears to be rescission of the sale. Monetary damages are an inadequate legal remedy in this situation. If you have already closed your purchase and wish to rescind, if the bank won’t give you your money back you will need an attorney to bring a rescission lawsuit in court.
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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 Media Services, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611.
