DEAR BOB: You often warn about junk fees in the mortgage industry. What about real estate agent junk fees? I am selling my home with a reputable agent and negotiated a fair sales commission completely in line with the local market. However, the agent is insisting on charging me a $495 “transaction fee.” He justified it by saying it all goes to his assistant for handling the paperwork and the fee is “in line with the market.” Isn’t this profit padding like the junk fees mortgage brokers charge? Shouldn’t the agent be responsible for paying his own overhead? This agent’s insistence on this fee is extremely annoying – Rob P.

DEAR ROB: Unless that outrageously high $495 fee was included in the listing agreement you signed with the realty agent, you are not obligated to pay it when the sale closes.

Purchase Bob Bruss reports online.

Listing agents are very well paid when the property sells. That $495 fee is an unnecessary junk fee that comes out of your pocket and adds to the brokerage profit. If you protest enough, most agents will pay the fee themselves to retain your goodwill.

Smart successful agents realize they will survive over the years from referrals of prior satisfied buyers and sellers. I hope you don’t recommend that agent.

HOW TO OBTAIN A FANNIE MAE HOME LOAN

DEAR BOB: Your column is always a wealth of valuable information. I would like to take out a Fannie Mae home loan in case I have a prolonged illness. How does a homeowner locate a local Fannie Mae office? – Mario F.

DEAR MARIO: Nationwide home mortgage lenders Fannie Mae, Freddie Mac, FHA and VA all originate their home loans through local mortgage brokers, mortgage bankers, Internet lenders and banks. They do not directly originate mortgages with homeowners.

Most local mortgage lenders can help you compare the offerings of these major nationwide lenders who purchase, insure, or guarantee home loans originated locally. These loan originators handle the paperwork details such as your loan application, appraisal, and title insurance.

However, if you don’t really need money now, instead of borrowing money on which you probably can’t earn as much as it costs, why not instead obtain a home equity credit line?

That’s what I did recently. I obtained a $200,000 home equity credit line secured by my home just in case I ever need that money. JPMorgan-Chase couldn’t have been nicer. Your local bank probably has a similar home equity plan which costs nothing until you use your credit line.

TAX RESULTS OF LEASE TO SELL FEES

DEAR BOB: The “Mortgage Professor” Jack Guttentag suggested I ask you my question about lease purchases. If I pay my son $10,000 in 2005 as part of a lease-to-sell agreement that we have reached, will he have to pay taxes on the $10,000? Or will the monthly rent I pay him to cover his mortgage until I exercise my option to buy the property in 2008 be taxable? – Beth L.

DEAR BETH: I am honored my esteemed colleague referred your question to me. Professor Jack Guttentag, semi-retired from the esteemed Wharton School at the University of Pennsylvania, knows virtually everything about mortgages. His Web site at www.mtgprofessor.com is superb.

If you pay $10,000 to your son for rent to use his property with an option to purchase it, that rental income must be reported by your son on Schedule E of his income-tax returns. This is where he also can deduct applicable rental property expenses such as his mortgage interest, property taxes, insurance, repairs and depreciation.

However, if the $10,000 is non-refundable option consideration paid to your son, he doesn’t have to immediately report that option money as income. If you exercise your purchase option in 2008 as you expect, at that time the $10,000 becomes part of the sales proceeds taxable as a capital gain. Or, if the option expires unexercised in 2008, then the $10,000 is taxed as ordinary income to your son.

More details are in my special report, “How to Profitably Use a Lease-Option to Buy or Sell Your Home or Investment Property,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant internet PDF 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
).

***

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