Q–A friend at work recently bought her first home. I couldn’t believe it. She makes less than I do. But she bought a nice townhouse for only a 3-percent cash down payment. Recently, my friend had a small party at her townhouse to honor a co-worker who is retiring. The realty agent who sold the townhouse to my friend was at the party. My wife and I want to buy a house. Do you think we should call that agent to see if she can also find us a low down payment deal? Or should we keep going to the weekend open houses and hope we find something we like?
A–Referrals are the best way to find a superb buyer’s agent who can help you buy a home. By all means, contact that agent who showed your friend how to buy her townhouse for practically nothing down. Incidentally, many mortgage lenders now offer 97-percent and even up to 103-percent mortgage financing. All it takes is your good income and good credit.
Q–Recently you commented that a creative way for a home buyer to be certain of buying a home, in a competitive “hot market,” is to make a written purchase offer with a firm price but also offering to exceed any other legitimate offer received by, for example, $5,000. I believe this is called “relative bidding.” I am a realty agent and have not seen any article on this topic. My questions are (1) must the final sales price be written in the contract, (2) should the seller make a counteroffer to the buyer, (3) should other offers be counteroffered at the same higher price, (4) should the seller counteroffer the other offers at a higher price and wait for one to be accepted, then counteroffer it for $5,000 more, (5) is the buyer who will pay $5,000 more entitled to see the other offers, (6) what if several offers come in with relative bidding, and (7) is there a top dollar amount the $5,000 higher bidder will pay?
A–At this time, most of your questions have no definite answers. However, to create a binding sales contract, the terms must be in writing to be legally enforceable in court. If the terms are indefinite, the contract is not enforceable.
That means the final price agreed to by the seller and buyer must be in writing. Yes, the relative bidder could set a maximum price, unless price is no object. There’s no reason why such a bidder is not entitled to see the highest offer from another legitimate buyer.
The relative bidding situations I’ve seen usually involve bid opening at a specific time, such as two weeks after the house comes on the market and is placed in the multiple listing service. During this period, the listing agent heavily markets the home with advertising, Sunday open houses, Internet advertising and brochures.
Let’s suppose the asking price is $250,000. A relative bidder might offer $250,000, or $5,000 higher than the highest legitimate offer from another buyer. That means, for example, if another buyer offers $260,000, the relative bidder would then pay $265,000 for the house.
If the seller starts making counteroffers to several prospective buyers, the situation can get complicated. I saw one relative bidding situation on an expensive house where a relative bidder made an offer and said, “I’ll offer $50,000 above the highest price you receive from any legitimate buyer within two weeks.” When a higher offer came in, the listing agent phoned the relative bidder who then wrote a new offer $50,000 higher, and the seller accepted it.
Q–My husband and I are getting ready to buy a home. Although mortgage interest rates seem high now, a mortgage broker said we can still get preapproved for a mortgage since we have excellent incomes. Our problem is we have three blemishes on our credit reports. We never walked away from any debt we owed, but two credit card companies and one department store reported us late when we were on time. We received a letter from a credit counseling service, which offered to clean up our credit reports for a fee of $253. Is this a good idea?
A–Bad credit is a major reason for mortgage disapproval. You are smart to clean up your credit reports before applying for home mortgage preapproval and shopping for a home.
Most firms that offer to clean up your credit reports are rip-offs. My suggestion is to first obtain copies of your credit reports from the three national credit bureaus: Experian, Trans Union and Equifax. They are listed in your phone book yellow pages. The cost for each report will be about $8. If you were recently rejected for credit or are unemployed, however, the credit reports are free.
Then, write to each credit bureau to contest the unfavorable reports. Insist on verification of the incorrect information within 30 days and ask for corrected credit reports to be sent to you within 30 days. Follow up. Get tough.
If the unfavorable information is incorrect and cannot be verified, the credit bureau must remove it. Only if this method doesn’t remove the incorrect information should you consider hiring a credit counseling service.
Q–We bought five acres of land in Texas about 40 years ago. At the time, we lived in Minnesota. After seeing this land twice, we have decided to quit paying property taxes and let it go to the local government. This is done in Minnesota. But we keep getting the property tax bills and threats of a lawsuit for delinquent property taxes. Our attorney wrote to the Texas property tax collector, explaining we purposely abandoned this property and offering to give the county a quit claim deed. But we still get threatening letters. What should we do?
A–Your situation occurs frequently in many states. I presume you’ve tried to sell the five acres, but there is no buyer demand, especially with the unpaid property taxes.
Some local tax collectors can be especially vicious. They have recently discovered that if they report property tax delinquencies to the credit bureaus, many property owners will pay the taxes to protect their credit reports.
Since you do not live in Texas, the chances of the tax collector suing you where you now live are slight. However, the Texas tax collector could obtain a Texas judgment against you and, under the U.S. Constitution full faith and credit clause, seek to enforce that judgment where you now live. However, in most states the property alone is usually sole security for unpaid property taxes.
One “dirty trick” you might consider is to execute and record a quit claim deed to a charity to get the title out of your names. Please consult your attorney.
Q–I plan to retire in two years. Should we buy our retirement home now or wait?
A–There’s no right or wrong answer; however, I recommend you wait to buy because retirement plans often change due to problems that arise, such as illness or death of a spouse or loved one.
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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.
