Q– We’re thinking of selling our home after Jan. 1, but we’re unsure of its market value. Should we use the tax assessor’s value? Should we hire a professional appraiser? We need to know because we will probably sell it ourselves, without an agent.
A–Don’t use the local tax assessor’s valuation of your home. It’s often badly out of date and rarely the true market value.
You could hire a professional appraiser at a cost of around $300. But in a rising or falling market, an appraiser’s information is often months behind, so you might be overpricing or underpricing your home. If you want to get your home sold quickly, it should be priced competitively right at market value.
The best way to evaluate your home’s current market value when you are ready to sell is to interview at least three successful local Realtors who sell homes in your vicinity. These agents should be up-to-date with the most recent comparable home sale prices.
Each agent you interview should give you a written CMA (comparative market analysis). This form shows recent sales prices of similar nearby homes, asking prices of neighborhood homes currently for sale (your competition), and asking prices of recently expired listings that didn’t sell. The form also includes the agent’s opinion of your home’s market value.
Even if you are considering selling your home without a professional agent, agents won’t mind giving you their listing presentations. There are several reasons: (1) Agents know most “for sale by owners” eventually list with a professional; (2) The agents want the opportunity to convince you to list with them; and (3) if you are willing to pay half a sales commission (called co-brokering), the agent might have a buyer for your home.
Q–I am considering refinancing my home loan, which has an 8.45 percent interest rate. I’ve been shopping for a fixed-rate “no cost” mortgage. Is it a good time to refinance?
A–Yes. At the recent National Association of Realtors convention in New Orleans, economist John Tuccillo predicted that home loan interest rates will remain steady and probably decline gradually in 1998. If he’s right, this is an excellent time to refinance. Should interest rates plummet, you can refinance in 1998.
By obtaining a so-called “no-cost” mortgage (where the refinancing costs are included in the interest rate), you spread the refinancing expenses over the life of the mortgage since loan fees on a refinanced mortgage are not immediately deductible in full, as are home acquisition mortgage fees.
Lenders are very anxious to refinance mortgages between now and Dec. 31, so get busy shopping for the best terms.
Q–How large an earnest money deposit does the law require when I make an offer to buy a house? I ask because in October I wanted to buy at a Sunday open house, but the Realtor said I must make a 10 percent deposit with my bid. I didn’t have that much in my checking or savings accounts. I was planning on making a 10 percent down payment after cashing in some mutual funds.
A–That Realtor gave you very bad information. A 10 percent deposit is not required. Perhaps there was a misunderstanding. There is no law requiring any earnest money deposit with a home purchase offer. However, I don’t think any home seller would accept your offer without at least a $1,000 deposit.
If you are buying an expensive home, a deposit of 1 or 2 percent of the purchase price is reasonable. Realty agents and home sellers know the larger the deposit, the greater the probability the buyer will complete the purchase as agreed.
Q–My home is listed for sale with an excellent Realtor. In early November, a buyer made a purchase offer that I accepted, which was contingent on a satisfactory professional inspection. The only problem the inspector found was that the roof will need to be replaced soon (it’s not leaking now). The buyer wanted me to put on a new roof, at a cost of about $3,500. I agreed to credit her $1,750, but she insisted on a new roof, so the sale fell apart. My Realtor thought this was the fair way to handle this. Were we wrong?
A–No. You were very fair with that buyer, who was probably testing you or looking for a way to get out of the sale. When a repair isn’t needed immediately, but can be expected to be necessary soon, splitting the cost between buyer and seller is very reasonable.
However, if you can afford to put on a new roof, that will make your home much more saleable to a prospective buyer (especially if the roof looks bad). You can probably raise the asking price a bit to compensate for the expense.
Q–I made an offer to buy a house. The only thing the seller didn’t like was that I specified a 90-day closing, because I need time to get my old home sold. She crossed out the 90-day closing and wrote in a 30-day closing with her initials. Then she signed it. When my Realtor brought the offer back to me, I told her I can’t accept the 30-day closing because I need cash from my home sale for the down payment on my new home. Now the seller is threatening to sue me if I don’t go ahead with the purchase. Can she do this?
A–You had no obligation to accept the seller’s counteroffer. Please consult your attorney for further details.
Q–I’m in the process of buying a new house. A Realtor is handling the sale for the custom home builder, but apparently they’re having a dispute about the sales commission amount. The house should be finished in about 30 days. The Realtor says if her commission dispute isn’t settled by then, she’ll sue the builder and delay the sale. Can she do this?
A–No. The Realtor’s dispute with the builder has nothing to do with the title. It is a simple contract matter. She has no legal right to record a “lis pendens” against the title to delay your purchase when the house is completed and ready to transfer to you.
The sale can close without the Realtor getting paid. If she feels the builder isn’t paying her the agreed commission, she can sue him. But you’re not a party to that dispute. Ask your attorney to explain further.
Q–Last August we took title to our home. We wanted to move in before school started, but our seller came up with one excuse after another why she couldn’t move out right away. Now she claims to be ill, yet we’ve seen her driving her car, so she can’t be too sick. I’m afraid to visit her because she has a vicious German shepherd dog. She offered to pay us monthly rent, but we just want to move into our home. We’re thoroughly frustrated with our Realtor, who is of absolutely no help, and the listing agent, who has given up. What should we do?
A–Your holdover tenant is legally known as a “tenant at sufferance.” You are the “sufferee.”
Hire the best eviction lawyer in town. Unfortunately, other than paying your seller-tenant $1,000 or so to move out, a court eviction is the only sure way to get her out. She’s living in your house for free so she has no incentive to move out. With luck, maybe you’ll get possession by 1998.
Q–I noticed you have answered many questions about the 1997 Tax Act. In one answer, you said if an ex-spouse who is living in the family home qualifies for the new $250,000 tax exemption, the other ex-spouse can also qualify for the exemption. Does this apply in the case of a separation, too?
A–Yes. If you have a separation agreement with your spouse, new Internal Revenue Code 121(d)(3)(B) says if one spouse meets the two-out-of-last-five years ownership and occupancy requirements, the other spouse also does.
This means the “out” spouse can qualify for up to $250,000 tax-free home sale profits as long as the “in” spouse qualifies. Please consult your tax advisor for details.
Q–Many years ago, my late uncle gave me a quit claim deed to his rural property, where he lived until he died last August at age 93. When I went to the county recorder’s office to record the deed, she refused to accept it because it’s about 20 years old. I then went to a title insurance company, but they refused to insure it for me because of some question about delivery before my uncle died. What should I do?
A–Consult a real estate attorney in the county where the property is located. Depending on state law, your deed might or might not be valid.
The issue is whether or not there was an unconditional delivery before your uncle died. If the deed was promptly recorded, proper delivery is presumed. But a delay of 20 years makes the validity of that deed highly suspect. Hopefully, a sharp real estate attorney can get your deed recorded and insured.
Q–I sold my principal residence in December 1995, so I come under the old Internal Revenue Code 1034 “rollover residence replacement rule” to defer my profit tax. However, I am unable to buy a replacement home of equal or greater cost due to illness and inability to qualify for a new mortgage. How can I get a time extension so I don’t have to pay tax on my net profit of almost $170,000?
A–Sorry, there is no provision to extend the 24-month replacement time for buying a principal residence under the old, now- repealed IRC 1034. If you are to defer tax, somehow you’ll need to buy and occupy a qualifying replacement principal residence by the 24-month deadline. Your tax advisor has further details.
Q–Thank you for encouraging that reader a few months ago to insist on making a low offer bid to buy a house. In September, we had a similar situation: We wanted to make a low offer on an overpriced house, but the listing agent we met at a Sunday open house refused to let us do so. So we contacted a Realtor friend, who prepared our purchase offer and phoned the listing agent for an appointment to present our bid to the seller. The listing agent was angry when she learned of our low offer. But the seller counteroffered, we counter-counteroffered and the seller accepted. We recently closed our home purchase at almost $27,000 below the asking price. Needless to say, we are very happy. Thank you for helping us buy our home.
A–That’s why I’m here. Thank-you letters arrive infrequently, but it makes my day when I learn readers benefited from the experiences of others.
Your situation shows why it is so critical for realty agents to present all purchase offers to their sellers. As occurred in your situation, your low-ball offer opened negotiations that resulted in the sale of the home.
I’ll bet that listing agent is kicking herself for not letting you make your initial offer through her; she would then have received the entire sales commission, not just 50 percent. Legally, she violated her fiduciary duty to her seller by not presenting your offer. She could lose her sales license if you report her to the state real estate commissioner.
Q–After studying your explanations of the 1997 Tax Act, my wife and I concluded we should move into a rental house we own and live in it for 24 months before selling it as our principal residence. That way, we can make our sale profit tax-free. This has been a rental house almost 10 years. Is any tax due at the time that the tenant vacates and we move in?
A–No. Since there has been no property sale, no profit is realized so no tax is due. Please consult your tax advisor for further details.
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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.
