Q–Due to a job transfer, we plan to put our home up for sale next month. We have already interviewed several Realtors about listing it. One suggests we deliberately underprice our home by about $40,000 to stir up buyer competition.
Two other Realtors who we interviewed don’t like that method. They said it can backfire and that we might wind up getting less than fair market value if we only receive one or two purchase offers. But I’ve seen several underpriced houses for which there were multiple purchase offers, and one house sold for far more than the low asking price. Is this risky?
A–Yes. The home sale market is still surprisingly strong in many areas even though mortgage interest rates have risen about 1 percent in recent months. But home sales activity usually slows in November and December as the number of potential buyers seasonally decreases.
What will you do if you only get one purchase offer for your home, let’s say, at your below-market asking price? Of course, you don’t have to sell, even at that price, but you and your agent will look foolish if you reject a full price offer.
Personally, I think it is dishonest to set a low asking price that the seller has no intention of accepting, just to stir up buyer competition and bid the price up.
Based on the CMA (comparative market analysis) forms prepared by the three Realtors you interviewed so far, you should have a good idea of your home’s true market value. Rather than setting the asking price $40,000 below that value, set it just slightly below the price you are willing to accept. Then if you only receive one purchase offer, you can accept and live with it.
Q–Our home loan has been sold four times since we got it about six years ago. This last time a Texas mortgage servicer has messed up our payments. For the past two months, although we always mail our payments on the first day of each month, they claimed we were 15 days late with our payments. I’m sure the mail service isn’t that bad.
When we phone to protest, the servicer quickly cancels the late fees. But this last time, the clerk said if our payment is received late again, the late charge won’t be waived. What should we do?
A–In the past few months I’ve received several letters similar to yours about mortgage late-fee scams. I know it’s a hassle, but next month mail your payment at the post office and get a proof of mailing receipt from the postal clerk. That’s much cheaper than sending your payment by certified mail.
If your lender says you were late, protest strongly and send a copy of your mailing receipt to both the loan servicer and that firm’s government regulator. Some dishonest loan servicers try to scam borrowers because they get to keep the late charge fees, which are 100 percent pure profit. It’s only a few dollars per loan, but the total adds up for borrowers and loan servicers.
Q–Suppose a home seller agrees to reduce his sales price if the buyer will accept the house “as is.” Is this legal? Would it be binding?
A–An “as is” home sale means the seller must disclose known defects but will not pay for any repairs. “As is” sales are perfectly legal when they are agreed to by both the buyer and seller in the sales contract.
If you already made a sale of your home but if defects were discovered by the buyer before the sale was completed, the buyer does not have to agree to an “as is” sale in return for a price reduction. Nor does the seller have to agree to pay for unexpected repairs.
However, many sellers will accept the house “as is” if the agreed price is reduced. For further details, please consult a local real estate attorney.
Q–About 10 years ago, we loaned money to our son. We agreed to a “standing mortgage” with no principal payments. Now he thinks we owe money to him. He only has paid the interest on the money he borrowed. Where can I get more information?
A–The two major types of mortgages are amortized and interest only (also called a “standing mortgage”). An amortized mortgage is fully paid off by the principal and interest payments, such as in 15 or 30 years. But an interest-only mortgage requires just interest payments until the balloon principal payment comes due, such as in 10 or 15 years.
I hope your son signed a promissory note to you, secured by a mortgage or deed of trust on his property. That is your proof of the loan terms when the balloon principal payment comes due.
If he paid you more than the interest due, however, the extra payments reduced the loan’s principal. I don’t understand how he could think you owe money to him. Please consult a local real estate attorney for more details.
Q–I am thinking about selling my house and carrying back a mortgage from the buyer to provide retirement income. If I do so, is this an installment sale? Do I still get my $250,000 home-sale tax exemption? Please clarify.
A–You can claim your $250,000 home-sale tax exemption in the year of your principal residence sale. I’m presuming you owned and lived in your “main home” an aggregate of two out of the five years before its sale. If you are married and both spouses meet the occupancy requirement, you and your spouse can claim up to $500,000 of tax-free home-sale profits.
However, if your home-sale profit exceeds your exemption, then that part of your profits will be taxable as an installment sale. A percent of each principal payment from the buyer is taxable, and calculating this gets complicated, so you’ll need your tax adviser’s help. Of course, the interest you receive is taxable as ordinary income.
Q–The roots from my neighbor’s tree have invaded my asphalt driveway, making it very rough. A contractor wants $6,500 to cut the roots and to repave my driveway. I asked my neighbor to contribute 50 percent. She refuses. Because her tree is the cause of my need to repave, how can I make her pay part of the cost?
A–You probably can’t. The general rule is a neighbor can cut back overhanging tree branches and roots to the property line. But I am not aware of any law requiring payment for such trimming.
Furthermore, a “rule of reasonableness” applies. If you cut the tree roots so severely that your neighbor’s tree dies, you can be held liable for damages to your neighbor. Please consult a tree expert before cutting those tree roots.
Q–Before buying my house, the mortgage lender made me pay $880 per year for flood insurance. Recently, my lender said I don’t need flood insurance. As of July 17, 1997, well before I bought my house, my house was excluded from a special flood hazard area. How can I get my $880 refunded? Nobody will refund my $880.
A–Your situation is ideal for small claims court. Name the lender and the insurer as defendants. Let the judge decide if you are entitled to a refund and who should pay.
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Have a question about real estate? You can write to Robert Bruss in care of Tribune Real Estate Features Service, 435 N. Michigan Ave., Suite 1400, Chicago, IL 60611. Answers will be provided only through the column. Please note that laws vary from state to state and area to area. Consult an attorney for specific legal advice.
