DEAR BOB: When we put our home on the market for sale last August, the Realtor recommended we have it professionally inspected. She suggested a home inspector she said was very good. Neither my wife nor I was able to accompany the inspector. We later learned from your articles that that was a major mistake, as home buyers and sellers should always accompany their inspectors. But our realty agent accompanied him. He came up with a “laundry list” of repairs, which should be made before putting our house up for sale. Reluctantly, we agreed to hire his company, which cost us about $6,500. We have no complaints about the work quality, just the high price. The home sold quickly for nearly our asking price so we were happy. Since then, I talked with several local Realtors about our home sale. They were shocked that the home inspector is also in the repair business. Was it a mistake to hire the inspector to do the repairs? – Roger R.
DEAR ROGER: Yes. It is a gross conflict of interest for a professional home inspector to also be in the home repair business. Especially since you weren’t present to discuss the recommended repairs with the so-called inspector, you should have at least consulted either another inspector or another contractor for the repair needs.
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In most states, regulation of professional home inspectors is minimal. Virtually anyone can become a home inspector. However, any home inspector who also does repair work is obviously using the inspections to create work for his repair business.
The best inspectors are members of a professional home inspection society with tough requirements. Home inspections should be a full-time operation, not a lead generator for a home repair business.
SHOULD ATTORNEY CHARGE $1,000 FOR LIVING TRUST DISBURSAL?
DEAR BOB: Last October my mother passed away at age 92. Following your frequent advice, she had a living trust including her house, a rental property, and other major assets. I was the successor trustee. Not being familiar with living trusts, a few weeks later I went to see the attorney who prepared her living trust. He said he would handle the asset distributions from the living trust for me. His fee was $1,000. I reluctantly agreed. He took about a month to prepare a few deeds and papers for me to sign. He also published a Notice to Creditors in the newspaper although mother had no debts other than a few bills, which I paid. Do you feel I was ripped off? – Jon B.
DEAR JON: After the trustor dies, it is usually a very simple matter for the successor trustee (you) to distribute the living trust assets without probate to the persons named in the living trust. Unless there were complications, as successor trustee you could have done the easy work yourself.
Although not required in most states for living trusts, I like the attorney’s idea to publish a Notice to Creditors in the local newspaper. Depending on state law, this is usually done when an estate goes through probate court. It did no harm.
You might feel the $1,000 fee was high for very little work to distribute your mother’s living trust assets. But you can feel secure knowing everything was handled correctly. More details are in my special report, “Living Trust Pros and Cons for Avoiding Probate Costs and Delays for Your Heirs,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
SHOULD REALTY AGENT REDUCE FEE FOR QUICK EASY SALE?
DEAR BOB: When we listed our home for sale, we followed your advice to interview three successful local agents. I’m sure glad we did. The agent recommended by a neighbor turned out to be a part-time agent and full-time schoolteacher. We selected another excellent agent who gave very professional service. Our listing went into the local MLS (multiple listing service) and on the Internet at www.realtor.com. The first weekend our agent advertised an open house, she sold our home for $7,500 over the asking price. There were multiple offers. Since she had our listing less than a week, and sold it at the open house without having to split the fee with a buyer’s agent, we asked her to reduce the 6 percent sales commission. She refused and became very indignant. Except for that, we were very pleased with her service. Do you think she should have cut her commission for an easy quick sale? – Reneta H.
DEAR RENETA: No. When you listed your home for sale with that agent, you signed up for full service and you received it. Just because your agent was quickly successful and able to “double end” the sale by earning a full commission by obtaining a purchase offer from an open house prospect doesn’t mean you should cut her fee.
But I don’t blame you for asking. If I were in your shoes, I also would have asked for a commission reduction.
Depending on the amount of the commission, if I were in the agent’s shoes I might have agreed to “adjust” the fee a bit to make you a very happy seller who would refer your friends.
Experienced realty agents know their best source of buyers and sellers is happy past clients. If that agent had cut her commission by $500 or $1,000, you probably would have been satisfied and she would get your referrals.
MORTGAGE BROKER SAYS FEES ARE NECESSARY
DEAR BOB: As a mortgage broker, I resent your frequent reference to our charges as junk fees and garbage fees. We have to make a living too. I work hard to find my borrowers the best mortgage for their situation. Especially for “credit challenged” borrowers, I often have to shop their loan applications to a dozen or more lenders until one will give an acceptance. But just last week I had one of your readers waving your article saying she shouldn’t have to pay the underwriting fee, processing fee, warehousing fee, and the administration junk fees. Most of these fees are imposed by the lenders, not by my firm or me. Please explain this to your zillions of readers – Mark S.
DEAR MARK: For readers not familiar with junk fees, they are 100 percent pure profit to lenders. Examples include underwriting fee, processing fee, application fee, administration fee, and even miscellaneous fee (when the lender runs out of names). A legitimate loan charge is for a third-party service such as the appraisal, credit report, and title insurance.
I appreciate your viewpoint, but I notice you conveniently forgot to mention your loan fee, typically one or two percent of the amount borrowed, plus the “yield spread premium” the lender often pays you for producing a loan at a higher than market interest rate.
If you received those fees, and disclosed them to your borrower, I don’t blame her for complaining about unnecessary extra lender junk or garbage fees, which weren’t disclosed on your good faith, estimate of loan costs.
Wise mortgage lenders are eliminating last minute junk and garbage fees, which smart borrowers justifiably resent if they weren’t previously disclosed. Lenders are earning record profits from loan originations so there’s no need to gouge borrowers with unexpected pure profit lender junk fees.
BEWARE OF SOME TENANT-IN-COMMON EXCHANGE COMPANIES
DEAR BOB: Last week my realty agent sold my apartment building, which will result in a net profit of almost $800,000. I’ve owned the property many years. To defer the capital gain tax, I plan to do an Internal Revenue Code 1031 Starker tax-deferred exchange. But I am having trouble finding a suitable property to buy. As I only have 45 days to designate replacement property, my agent suggests I do a tenant in common exchange for a part interest in a large commercial property. Are tenant in common exchanges safe? – Herman G.
DEAR HERMAN: There are many excellent companies offering solid tenancy in common (TIC) shares in commercial properties. But there are also a few quick-buck slippery sharks who have recently entered the TIC business.
Please investigate the TIC marketer and the property offered very carefully. Ask lots of questions such as how long have you been in business, may I have the names and phones of your current client references, what are your success examples, and have you had any failures?
Many new firms recently entered the TIC exchange business. You can’t be too careful. More details are in my new special report, “How the New Tax-Deferred Real Estate Exchange Rules Can Make You Very Wealthy,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
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