Q–I am in the process of buying my first home. The seller accepted my offer. The Realtor asked if I want to buy a one-year home warranty policy for $350 with coverages such as the wiring, plumbing, furnace, water heater and built-in appliances. Should I buy?
A–The home seller and/or the listing agent usually pay for a one-year home warranty policy as a sales inducement. Since you didn’t ask for such a policy, they didn’t offer. Something usually goes wrong with a home within a year after purchase, so I think your $350 will be well-invested in buying that policy.
Q–My wife and I have been debating whether or not to sell our home without a real estate agent. We hope to get our home sold by December 31 so we can move to Florida.
Saving the sales commission is mighty tempting. Since we are both retired, with lots of free time, we’ve decided to give it a try. We’ve studied four “how to sell your home without a real estate agent” books from the library.
A friendly real estate agent, who wants our listing, has even given us the sales contract and disclosure forms we’ll need. If he finds us a buyer, he says he will only charge us a 3 percent sales commission.
But we’re puzzled as to whether we should put up a “for sale by owner” sign on the front lawn. Several neighbors say “no” because they think it cheapens the home. On the other hand, if someone sees the sign and stops in, we might make a sale. What do you advise?
A–Your decision about putting up the “for sale by owner” sign is just the first of many important decisions you’ll have to make. Although I agree with your neighbors, I see no harm in posting such a sign. But be prepared for prospective buyers to ring your doorbell at any time, even if your sign says “By Appointment Only.”
If you want your home sold by yearend, I strongly recommend you list your home for sale with a professional agent now. We’re going into the slowest time of the year for home sales. To be more specific, if your home isn’t sold by Thanksgiving, it will be very difficult to sell by December 31. The reason is serious home buyers disappear between Thanksgiving and New Year’s Day (in many areas, until after Super Bowl Sunday).
Did those do-it-yourself home selling books tell you most “for sale by owner” sellers eventually wind up listing their home for sale with a professional real estate agent? If you’re willing to pay that helpful agent a 3 percent commission, why not give him (or another agent) your listing so you’ll receive full professional marketing services?
Are you prepared to draw up a legally enforceable sales contract? Do you know how to handle the contingencies most buyers want, such as for mortgage financing and professional inspections? Can you qualify the buyer for a mortgage so you don’t waste time with a “flake”? Can you negotiate the sales price and terms without becoming emotionally involved? Do you know how to get the sale successfully closed after you find a buyer? If you answered “no” to any of these questions, you need a professional agent.
Most important, do-it-yourself home sellers lack access to the most powerful sales tool, the multiple listing service. You have only one home to sell, but MLS members can show their buyers hundreds of homes for sale. You’ll find it very difficult competing with the MLS unless you drop your asking price below market value. Wouldn’t you be better off signing a 90-day listing with a successful realty agent to get your home sold as quickly as possible?
Q–My husband and I just started looking for a home to buy. We’re in no hurry and we really enjoy visiting the Realtor open houses on Sunday afternoons. However, some of the part-time agents we’ve met are more ignorant than we are.
Last Sunday we saw a house we really liked. When we asked the Realtor about how much of a deposit we would need to make with our purchase offer bid, she said 10 percent. Since the asking price was $178,500, isn’t a $17,850 deposit rather large?
A–Yes. Although I started out as a part-timer in real estate sales, I now feel there ought to be a law against part-time agents such as you encountered.
Unless you are making a purchase offer far below the asking price, a 10 percent good faith earnest money deposit is too high. I don’t blame that agent for trying to get a large deposit, but she cost her seller a home sale.
More typically, home buyers make a modest good faith deposit, such as $1,000 to $5,000, with their purchase offer. Many home purchase contracts specify that after all contingencies are removed, such as for obtaining a mortgage and having the home professionally inspected, the deposit will be increased. This is reasonable.
In the future, make a modest good faith deposit with your purchase bid. The reason you shouldn’t make a large deposit is you don’t want it tied up if the seller doesn’t meet the sales terms but refuses to promptly refund your deposit. If you make a purchase offer far below the asking price, however, a big deposit can often impress the seller into accepting your low offer.
Q–I am a Realtor with an ethics question. My speciality is home listings. Rarely do I represent home buyers. About a week ago, I had a “hot listing” at a bargain price because the seller wanted a quick sale. The day the listing hit the multiple listing service, which was also the day of my tour for local agents, I had offers from six different buyers by 5 p.m.
After consulting my office manager, we decided the best way to handle the situation was for me to allow each agent 15 minutes to present an offer to the sellers at their home. We started at 7 p.m. and went until about 8:30 p.m. Some of the agents were miffed at me for allowing so little time.
After the agents left, my sellers and I discussed each offer and they chose the one they liked best. However, unknown to me, about 6:30 p.m. another agent brought in a seventh offer which he didn’t get to present. It wasn’t as good as the one which was accepted. He is now bringing me up on an ethics complaint before the Association of Realtors grievance committee. Do you think I did anything wrong?
A–No. The general rule is all purchase offers must be presented to home sellers, even if the listing agent thinks the offer is ridiculous. However, if you didn’t know about an offer and weren’t available at your office, you did nothing wrong by failing to present that seventh offer. I am shocked the seventh agent would waste his time and yours filing a grievance.
Q–My mother is 64, in good health, and doesn’t want to be a burden to me. My father died last year, leaving her with a big pot of cash. She insists on buying a small apartment building where she can be the manager. I must add she is very domineering so she will love apartment building management.
I am helping her to find a suitable building for purchase. We’ve looked at about 10 buildings so far. All either have serious deferred maintenance or we don’t believe the low expenses reported by the sellers and their realty agents. How can we find out the true income and expenses?
A–That’s easy. When your mother finds an apartment building she wants to offer to buy, her purchase offer should contain a contingency clause making the offer contingent upon her inspection and approval of the seller’s Schedule E income tax return for the property. Few rental property owners overstate rental income or understate expenses on their income tax returns.
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PLEASE NOTE: Real estate laws vary from place to place. Be sure to check the laws of your state and municipality before making decisions on real estate matters.
Write to Robert Bruss at Tribune Media Services, 435 N. Michigan Ave., Chicago, Ill. 60611.
