Q–We plan to put our home up for sale within the next 30 days. A friend who recently sold her condo, after five months on the market, told me her inept realty agent horror story. I don’t want that to happen to us. Since we don’t know any realty agents, how can we choose the best one to sell our home?
A–Most real estate agents do excellent work for their clients. If they didn’t, they wouldn’t remain in business. But your goal should be to select the most successful agent who sells homes in your vicinity.
Before listing your home for sale, interview at least three top agents in your area. Ask friends and business associates for recommendations. Look for names of listing agents on neighborhood for-sale signs that quickly become “sold” signs. Check the newspaper ads for agents advertising homes for sale near yours. Attend weekend open houses to meet realty agents and inspect homes competing with yours.
Each agent you select to interview should prepare a written CMA (comparative market analysis). This form shows recent sales prices of comparable nearby homes, asking prices of neighborhood homes currently listed for sale (your competition), and asking prices of nearby expired listings that didn’t sell.
Don’t necessarily select the agent who estimates the highest sales price for your home (that’s called “buying your listing”). If you overprice your home, you’ll eventually have to reduce the asking price to get a sale.
Look for agents who volunteer a list of their recent home sellers with phone numbers you can call to ask, “Were you pleased with your agent? Would you list another home for sale with the same agent?”
Then list your home for sale with the agent with the best qualifications. Ninety days is the ideal listing period to get your home sold quickly and still give the agent plenty of time to properly market it. Just in case you select a lazy agent, 90 days isn’t too long to be stuck with the wrong agent.
Q– We are among the unfortunates who sold a home in March 1997. Do we have a chance of getting in on the 1997 Tax Act bonanza? Are we still eligible for the “over 55 rule” $125,000 home sale tax exemption?
A–Sorry, the 1997 Tax Act is retroactive only to principal residence sales made after May 6, 1997. Sales made before that date can qualify only for the “rollover residence replacement rule” of old Internal Revenue Code 1034 and the “over 55 rule” $125,000 home sale tax exemption.
I’ll presume you qualify for the old $125,000 tax exemption by being 55 or older, owning and living in your principal residence any three of the five years before its sale, and never having used this tax break before.
If your sale profit exceeded the $125,000 exemption, you can defer tax on the balance of your profit by buying a qualifying principal residence replacement within 24 months before or after the sale, using old now-repealed IRC 1034. Ask your tax advisor to explain the details.
Q–Regarding the new 1997 Tax Act, does the required two-years-out-of-last-five ownership and occupancy time have to be continuous? If I lived in my house five months a year for the last five years, will this qualify? Does the house have to be the primary residence or would the two-years-out-of-last-five qualify for the $250,000 exemption ($500,000 for a married couple)?
A–New Internal Revenue Code 121 says “Gross income shall not include gain from the sale or exchange of property if, during the five-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating two years or more.”
That means the 24-month required occupancy time need not be continuous. But this new tax break can only be used once every two years (with exceptions such as job location changes and health reasons) for the sale of a principal residence.
The new law does not define “principal residence.” If an owner moved out of his home as long as three years ago, he still meets the two-out-of-last-five year test, but perhaps not the principal residence requirement. As usual, this new tax law has many gray areas. Ask your tax advisor for further details.
Q–My husband died in March 1997. I’ve decided our large house is too expensive for me to maintain so I plan to sell it. As I understand the new tax law, it gives a $500,000 home sale exemption for a married couple but only a $250,000 for a single person. Since my net profit will be about $325,000, will I owe tax?
A–You can file a married person filing jointly tax return for 1997. That means, if you sell your principal residence in 1997, you can claim the new $500,000 principal residence tax exemption.
However, if your home sale doesn’t close until 1998, then you only get a $250,000 home sale tax exemption and will owe tax on the $75,000 profit. Get busy and sell your home in 1997. Your tax advisor has details.
Q–We are novice home buyers. Last weekend we made our first purchase offer bid, through the listing agent who was holding a Sunday open house. She said she would be acting as a “dual agent,” representing both seller and buyer. That was fine with us. At first, she didn’t want to prepare our offer because she thought it was too low. Eventually she relented. However, she wrote in the contract that our offer was valid for seven days. Five days later, she phoned to tell us another couple bid higher than we did. We’ve been thinking this agent took advantage of us by making our offer valid for so long. A friend told us when he bought his house, his offer was good for only 24 hours. Were we misled?
A–A real estate agent acting as a disclosed dual agent for both the home seller and buyer is in a precarious but perfectly legal conflict-of-interest situation. By making your purchase offer valid for seven days, the listing agent had plenty of time to “shop” it to see if another buyer would pay more.
The seller, not you, benefited from the long offer time. If no better offer materialized within seven days, the seller could still accept your offer or make a counteroffer. Of course, you could have revoked your offer any time before its acceptance.
In the future, to prevent offer shopping, make your purchase offer valid for one or two days.
Q–My home sale profit will be about $300,000. The sale should close by Nov. 1. I was planning to buy a larger house and rolling over my profits. But the new tax law only gives me a $250,000 home sale tax exemption. Can I elect to use the old residence replacement rule to rollover my profits without owing tax?
A–Unless you had a binding sales contract signed by Aug. 5, 1997, you cannot elect to use the now-repealed “rollver residence replacement rule” of old Internal Revenue Code 1034. Sorry.
Q–I have received a temporary, two-year job assignment in Europe. I don’t want to sell my house because I’ll probably return to this area. Is there an agency that will rent my house and collect the rent while I’m gone? How much will it cost?
A–Most property management companies do not want to manage a single-family house. However, local Realtors often have a rental department or a realty agent who manages single-family rentals.
But the fees won’t be cheap. A typical rental fee is 5 or 6 percent of the annual rent. The fee for collecting the monthly rent might be around 10 percent of the gross monthly rent. For that fee, the property manager should also arrange for routine repairs.
To find a local real estate office to handle your home rental, make a few phone calls to nearby realty brokerages.
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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.
