Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, April 2, 2006.
DEAR BOB: About six years ago, three of my college fraternity brothers and I agreed to invest in single-family rental houses. They put up the cash and I managed our six houses, arranged for fix-up and repairs, and obtained tenants. Needless to say, we have done very well. The houses have all appreciated handsomely in market value, and we each get some annual tax-shelter deductions too. All went very well until recently when one of the “brothers” got married. His wife is not keen on his further investing. In fact, she sweet-talked him into demanding he be bought out. His equity is around $175,000. We can’t afford to buy him out without selling or refinancing several houses. Unfortunately, she is a real estate lawyer and she threatens to sue us for a “partition sale” if we don’t come up with the $175,000. Can she do this? What should we do? –Jeff R.
DEAR JEFF: Congratulations to you and your fraternity brothers for making such profitable investments. However, you should have had a written partnership agreement to prevent problems like this.
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If you hold title as tenants-in-common, just one co-owner can bring a partition lawsuit to force the sale of all the properties.
The co-owners should have a meeting to resolve the problem before a lawsuit develops. Maybe one or two of the investment rental houses will have to be sold or refinanced to buy out the “bad brother.”
Your situation shows why I advise against group real estate investments whenever possible. Sooner or later, especially without a well-drafted partnership agreement, problems usually develop.
DON’T PAY ALL CASH WHEN MOVING TO A RETIREMENT HOME
DEAR BOB: Almost a year ago, I made the worst mistake of my life. I paid over $425,000 cash to buy into a relatively new retirement residence. The place looks beautiful and I like my apartment very much. However, the property is run by a bunch of crooks. They have already raised my monthly fee by $370 and the quality of the service and meals has declined greatly. We are treated like prison inmates. That’s almost our situation because there is no way I can sell and get my cash back. Now I know I should have taken the finance option where I could have moved in for as little as $75,000 cash up-front. You should warn retirees about these “old folks scams.” –Lucy R.
DEAR LUCY: Now you know why I constantly warn against paying all cash for any property, especially a retirement home. The situation you describe shows the high risk of paying a large amount of cash for retirement housing, especially a new retirement facility.
I suggest you consult a local attorney who specializes in elder law to see if you have any legal recourse against the owners of your retirement residence.
SHOULD HOME SELLER LIST WITH OUT-OF-TOWN RELATIVE?
DEAR BOB: We plan to sell our home within the next few months. We’re in no hurry, but we want to close the sale by the end of summer. Our lovely niece is a new Realtor in a town about 25 miles away. She has only made one home sale in her first three months after obtaining her sales license. We would like to help her gain confidence by selling our home. She says she can put our listing into the local MLS (multiple listing service). However, friends and neighbors advise against giving her our listing. What do you suggest?–Helen H.
DEAR HELEN: You have smart friends and neighbors. Listing a home for sale with a relative is always difficult. But it can be especially bad for any home seller to list with a novice out-of-area real estate agent. Putting a listing into the local MLS alone is not enough to get your home sold.
My suggestion is to interview several local real estate agents about listing your home for sale. Include your niece, but also interview two or three successful nearby Realtors.
Listen to their listing presentations, which should each include a written CMA (comparative market analysis) form and written marketing plans for your home.
Compare these valuable CMAs, which will show recent neighborhood home sales prices, the asking prices of nearby homes now listed for sale (your competition), and even recently expired listings, which didn’t sell. Each agent will include his or her opinion of your home’s market value.
Evaluate your niece’s listing presentation and her CMA with the other agent CMAs. If she did a good job, I would give her a 30-day trial listing. Explain you expect her to perform like a champion, performing all the services the other agents promised.
If she gets your home sold within 30 days, that’s great. But if she does a terrible job, you only lost 30 days and you can then list with a better local agent.
The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar With or Without a Real Estate Agent,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).