Q–We are in the process of finding a house to buy. We’ve seen several we like but are hesitant because we don’t want to buy a lemon, like my father did many years ago. I know you recommend hiring a professional inspector. Is this done before making a purchase offer?
A–No. Having the house professionally inspected before making your written purchase offer can be a waste of time and money if you can’t make a satisfactory deal with the seller. Your first step is to make a written offer to buy the house. Expect to negotiate back and forth. Be sure your purchase offer contains a contingency clause for a professional inspection.
After your offer is accepted by the seller, your second step is to have the home professionally inspected. Be sure to accompany the inspector to discuss the defects discovered. If the seller refuses to repair any serious defects, then you can disapprove the inspection report and get your earnest money deposited, as long as your offer contained an inspection contingency clause.
Q–Several years ago, I recall reading your article headlined “Buy Now, Escape Later.” It was about the contingency clauses home buyers should include in their purchase offer when buying a home. Could you please repeat that article? I’m now in the market to buy my first home?
A–That memorable headline on an article about home purchase contingency clauses was first written in 1978, by the now-retired, legendary Chicago Tribune real estate editor George Westling. I’ve reused it many times since then. Without repeating the entire article, I can boil it down to two critical contingency clauses every home purchase offer should contain:
The first clause is a contingency that both the property and the borrower qualify for a mortgage. Be sure to specify the exact home loan terms you want, such as amount, interest rate and loan fees. If a mortgage proves to be unavailable even if you are preapproved (the home failing to appraise for your offer price), you can cancel the purchase and get your earnest money deposit refunded.
The second contingency clause every home purchase offer should contain is for the buyer’s approval of a professional home inspection report. After your purchase offer is accepted, you can hire a professional inspector to check the home. Be sure to accompany the inspector to discuss any undisclosed defects discovered. If the seller refuses to pay for repairs of serious defects, you can disapprove the inspection report and get your earnest money deposit refunded.
Q–I’m in the process of trying to buy a house. There was a 90-day closing time, during which the seller and listing agent got into a dispute about the sales commission, which the seller refuses to pay.
Even before the sale closed, the realty agent recorded a “lis pendens” against the home’s title. As a result, the title insurance company refuses to insure title for me and my mortgage lender.
Can the realty agent hold up the sale of the house to me, since I have nothing to do with the sales commission dispute?
A–No. The seller’s attorney should ask the court to remove the lis pendens (which means “litigation pending”), because the sales commission dispute has nothing to do with the home’s title. It is slander of title for the realty agent to wrongfully record the lis pendens. He could be liable for damages to the seller. For more details, please consult a local real estate attorney.
Q–I’ve been a Realtor over 15 years. Here’s a question I’ll bet you can’t answer. What should a Realtor do to prevent home sellers from overpricing their listing? It happens to me and I’m sure it happens to many others. Some sellers just won’t listen to us no matter how many comparable home sales prices we show them. They still want to overprice their listings. If I reject the listing, another Realtor will take it and eventually get the price reduced to the point where it will sell.
A–I heard this solution from a California Realtor. He tells sellers his normal sales commission is 6 percent, but if they insist on overpricing their listing, he charges 7 percent. He told me he’s never taken a listing at 7 percent, but this technique works to get his sellers to set their asking prices realistically.
Q–After my father died five years ago, my wife and I moved in with my 86-year-old mother, who was physically and financially unable maintain her residence of 30 years. We made substantial improvements, such as a new kitchen, paint, drapes and carpets.
We don’t want to change my mother’s living arrangement, but we do heed to protect our interests. What would be the best way to change or take title to the property? The home’s value, plus deferred profits, is well below the new $250,000 tax exemption. We have the rest of the family’s blessings.
A–Because avodance of profit tax is not an issue, perhaps you might talk with your mother about adding you and your wife to the title as joint tenants with right of survivorship. Another alternative is for her to put the house into a living trust that specifies you are to receive it when she dies. An estate planning attorney can guide you.
Q–My wife and I own a rental house we bought for its appreciation in market value, which increases about $5,000 annually. But we lose around $175 per month on the rental. Can we deduct this loss from our salary incomes?
A–Yes, if your adjusted gross income is less than $100,000 per year and your total annual loss from the rental house is less than $25,000, including depreciation. Ask your tax advisor for 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. You may need to consult a lawyer.
Write to Robert Bruss at Tribune Media Services, 435 N. Michigan Ave., Chicago, Ill. 60611.
