Q–My wife and I stupidly signed a six-month listing for the sale of our home. The Realtor was recommended to us by her uncle, a family friend. She did a terrible job. All she did was put our listing into the local multiple listing service and held two Sunday open houses, which weren’t even advertised in the newspaper. She just put up some signs, hoping they would attract buyers. They didn’t. Then she went off on a trip to Europe with friends without even telling us.
When she got back, we told her we want to cancel our listing. She seemed agreeable. but the next day, her broker phoned to tell us if we canceled our listing he’d sue us for the entire sales commission. Can he do this?
A–Yes, because anyone can sue anyone. But winning such a lawsuit is another matter. To win, the broker must prove he used “due diligence” to get your home sold. Under the circumstances, that might be difficult. Nobody has ever really defined what due diligence means in a real estate listing. Putting your listing into the MLS and holding two unadvertised Sunday open houses, in my opinion, is not due diligence. However, a jury might disagree.
I don’t blame you for wanting to cancel that listing. If you were a regular reader of this column, you would have interviewed at least three successful local realty agents and checked their seller references before selecting the best agent. Your unsatisfactory agent probably would not have passed this test. In addition, you would have known not to sign a listing for longer than 90 days unless it contained an unconditional cancellation clause (in case you picked a lousy agent).
If you try to list your home with another local agent, he or she will refuse your listing because your home is currently listed for sale. You might wish to contact the executive director of the local Association of Realtors to see if his organization can help mediate this problem. Also contact a local real estate attorney.
Q–I bought two Florida time-shares about four years ago for a total “investment” just over $23,000. They cost me about $470 each per year, plus various use fees, plus the payments. I want to get rid of these time-shares. The developer refuses to buy them back. There is virtually no resale market, as he is still selling to new suckers. I was contacted by a real estate firm that wants to list my time-shares for six months in its national databank for $370 each. When I asked for references of successful sellers, the answer was “That’s confidential information.” Would you pay the $370 each?
A–The situation you describe sounds like a typical advance fee time-share rip-off scheme. Reselling timeshares is virtually impossible, except at a very deep discount from original price. I hope that $23,000 was money you’ll never need again. My best advice is to trade or give those timeshares to someone who will keep up the monthly payments. Reselling for even 10 percent of the price you paid would be a miracle.
Q–I own about 12 acres of land, which will be suitable for commercial development when a sewer line is extended to the area in a few years. Meanwhile, the property taxes are eating me alive. If I sell, I’ll have a net profit of about $175,000. Instead of paying tax, can I trade this land for income property such as apartments?
A–Yes. Your situation is ideal for an Internal Revenue Code 1031(a)(3) Starker delayed tax-deferred exchange. Details are in my special report “How to Profit from Starker Delayed Tax-Deferred Exchanges” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010. Credit card orders are welcome at 1-800-736-1736.
Q–About a year ago, you wrote an article about the different types of listings for home sellers. My wife and I decided we want to try finding a buyer, but we’re also willing to give a Realtor an “open listing” in case the Realtor has a buyer. If a Realtor brings us a buyer, we’re willing to pay a 3 percent sales commission. But I phoned several Realtors and none wants to work on an open listing. Why? How can we get a Realtor to work on an open listing?
A–An open listing is really no listing at all. It is only the seller’s promise to pay the realty agent a sales commission if that agent brings the seller an acceptable purchase offer. Meanwhile, the seller is free to sell the home alone without professional help and not owe any sales commission.
Since the realty agent lacks control over property on an open listing, most refuse to work on them. At best, agents will work on open listings on rainy days when there’s nothing else to do. Don’t expect an agent to spent time or money advertising your open listing.
Another problem is the very low 3 percent sales commission offered to sell your home on an open listing. That isn’t enough of an incentive to motivate most realty agents, unless they happen to have a buyer for a home like yours. After a few months of trying to sell your home alone, you’ll probably give up like most do-it-yourself home sellers do and list with a professional agent. An exclusive right-to-sell listing gives the listing agent the maximum incentive to get your home sold.
Q–I am a dentist who rents an office in a 10-office dental and medical building. The owner recently died. His widow asked if I might like to buy the building, since I am its longest-term tenant. It needs some repairs, but it would mean I won’t have to worry about raises in rent or having to move. Also, I could remodel to suit myself and the other tenants. Do you think a medical building is a good tax shelter real estate investment?
A–No. Medical buildings have very limited investment appeal. They usually require high maintenance, especially janitorial and cleaning services, and rent potential is limited if the tenants have other choices of nearby medical buildings.
However, the advantage of controlling your own medical office building might outweigh these disadvantages, especially if your colleagues would agree to extend their leases so you don’t have to worry about vacancies. Of course, you’ll probably have to fix up the building to retain them as tenants.
As an investor, don’t look for any tax shelter from the depreciation if your annual gross income exceeds $150,000, as it probably does. Under current tax law, rental income is considered “passive activity” and loss deductions are “suspended” for investors earning over $150,000 annually. Ask your tax advisor for details on the tax pros and cons.
Q–We live in an older neighborhood of well-maintained houses. Within a few blocks of our home, there are at least four vacant lots for sale. Would these lots make good investments to buy and hold for future appreciation in market value?
A–Not unless you can buy for very little cash and at a very low purchase price. Vacant land, especially a lot, is probably the worst realty investment because of limited resale potential and the carrying costs. The lot cost should be not more than 25 percent of the market value of a home.
For example, if homes in your neighborhood sell for $100,000, don’t pay more than $25,000 for a lot. Unless you plan to build on the lot within six months after purchase, I think you can find better investments.
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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. Visit the Robert Bruss Real Estate Center at www.inman.com/bobbruss.
