Q–I recently bought a nice $480,000 San Francisco condo with a rent-back to the seller. My down payment was $250,000. My agent (a personal friend) said the rent should be based on my mortgage PITI (principal, interest, taxes and insurance). But since I made a large down payment, on which I am losing interest income, shouldn’t there be some other way of setting the rent?
A–Yes. That real estate agent was not looking out for your best interests. I wouldn’t consider her a true friend. Perhaps she’s out of touch with reality. The rental value of your condo has absolutely nothing to do with your mortgage PITI payment.
If that were true, a condo without any mortgage would rent for just the cost of taxes and insurance. Also, your agent neglected to include the monthly condo assessment fee.
Residential rental value is based on competitive rentals. You can determine what comparable condos rent for by checking the newspaper classified ads and asking your agent to check the local multiple listing service condo rental listings (if you’re still talking to her).
If I were you, I would cross that realty agent off my friendship list, as she totally misled you.
Q–My grandfather, a widower, lives in his house alone. His primary income is Social Security, plus a small pension.
My brother and I have tried to talk him into selling the house and moving to a retirement home, but he’s a stubborn old geezer.
Fortunately, he’s in excellent health for his age. He walks about five blocks each way every day to a Denny’s coffee shop, where he meets his same-age pals for breakfast.
But his house is in disrepair. The roof leaks into the attic, causing a musty smell and who knows what damage. The house needs at least $20,000 of repairs.
I’ve got him interested in a reverse mortgage, which would give him a $20,000 lump sum plus $423 per month. At his age, does this make sense or should he take one big lump sum payment to invest?
A–Congratulations on looking after your grandfather. It sounds like he’ll live to be 110, so the $20,000 lump sum plus $423 monthly payment reverse mortgage sounds ideal. If he takes one big lump sum now, he probably can’t invest it to earn as much income as he would receive with the other alternative.
If he should need an additional lump sum in the future, at least one of the reverse mortgage lenders allows such payments, but with a reduction in monthly payments.
Q–I thought we did everything right when we listed our home for sale. As you constantly harass readers to do, we interviewed three successful Realtors before selecting the best one. We even phoned their references of sellers. The agent who got our listing came highly recommended.
Nevertheless, she is not doing a good job for us. She is neglecting our $189,500 listing in favor of her more expensive houses of $350,000 and up. She hasn’t held any open houses for us or even advertised our home. Nor does she phone us.
We phone her at least once a week, but she takes forever to return our calls. We keep prodding her, in a nice way, but nothing motivates her to get some action on our home. Our listing has four months remaining. What should we do?
A–Perhaps I didn’t harass strongly enough! I also warn readers against signing a home sale listing for longer than 90 days. It sounds like you signed a six-month listing without a cancellation clause. No wonder your agent isn’t working very hard on your listing.
She knows the odds are it will sell within six months, so she’s promoting her expensive 90-day home listings to get them sold before they expire.
It’s time to get tough with your neglectful agent. Phone the manager or owner of her brokerage office for an appointment to discuss your poor treatment. Unless your agent will make you written promises of what she will do to get your listing sold quickly to satisfy you, push for either cancellation of your listing or transfer to an agent who successfully sells homes in your price range. Considering the high sales commission your agent will receive when your home sells, there is no excuse for the shabby way she’s ignoring your listing.
Q–A major reason I keep my newspaper subscription is your column; you keep me up-to-date, as a realty investor, on what’s happening. My wife and I own our home plus two rental houses. After reading your articles about the new $250,000 per seller ($500,000 for a married couple) tax exemption, we’re thinking of selling our three properties and moving to a better climate. We have about a $350,000 profit in our residence and meet the two-out-of-the-last-five-years occupancy requirement. Can we sell our home, take the exemption, move into one of our rental houses for two years, sell it tax-free, move into the second rental house for two years, and then sell it tax-free?
A–Yes. We’ll call you a “serial home seller.” The new $250,000/$500,000 home sale tax exemption of new Internal Revenue Code 121 can be used once every 24 months. The principal residence seller must own and occupy the home any two of the last five years before its sale. Your plan appears to qualify. Consult your tax adviser 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.
