DEAR BOB: I especially related to that item you had some time ago about the home buyer whose realty agent tried to impose a $295 “transaction fee.” As a home seller, I had a similar “junk fee” incident when I sold my home. The listing agent received his sales commission of about $16,000. Until the closing, we were very satisfied with his services. But then he demanded an unexpected $495 “administration fee” at the closing. We told him $16,000 commission was enough. Only when I phoned his broker did the broker agree to waive the fee. Needless to say, I will never recommend that agent or his brokerage firm. Is this fee customary? –Norris W.
DEAR NORRIS: Unfortunately, many real estate brokerages are trying to impose unexpected transaction, administration, or other charges on unsuspecting home sellers and buyers at the time the sale closes.
Purchase Bob Bruss reports online.
We agree the home sales commission is extremely adequate compensation to pay real estate sales agents and their brokerages. Smart real estate agents whose firms demand these extra fees will usually pay these fees to maintain goodwill with their buyers and sellers if the agent wants future referrals from satisfied customers.
As you probably know, on a typical home sale the sales commission is usually split four ways. Let’s say the sales commission is $20,000 and there is a listing agent representing the home seller and a selling agent representing the buyer. That sales commission is usually split 50-50, with $10,000 to each brokerage in this example. Of that amount, each agent receives at least 50 percent, sometimes up to 90 percent, depending on the agent’s commission split with the brokerage owner.
In the above example, if the brokerage agreed to pay a super sales agent 90 percent of commission income, that gives the agent $9,000 and the firm only $1,000. To increase the brokerage’s income, some firms try to charge buyers and sellers unnecessary “junk” or “garbage” fees, called transaction or administration fees. Instead, brokerages shouldn’t agree to such outrageous commission splits with their sales agents.
CAN BUILDER FORCE BUYER TO BUY UNCOMPLETED HOUSE?
DEAR BOB: We signed a contract in May 2005 to buy a brand-new house. But the exterior paint, driveway, and landscaping are not complete. Can the builder make us now close the purchase of our uncompleted house? The real estate broker says the builder wants us to “walk” so he can sell the house for more money to another buyer. The new home market has greatly appreciated in the area. What should we do? –Colleen W.
DEAR COLLEEN: Run, don’t walk, to the office of the best real estate attorney in town. It sounds like your home builder wants to get out of your sales contract so he can sell your house to another buyer for a higher sales price.
Or, perhaps he has run out of cash to complete the finish work.
Depending on your sales contract and the exact facts, your real estate attorney might advise filing a specific performance lawsuit against the home builder for delivery of the completed home as agreed, and recording a “lis pendens” against the title to effectively prevent the builder from selling your home to another buyer.
RESULTS OF A VERY ODD PROPERTY TRADE
DEAR BOB: I bought a rental house in 1981. The land was worth $10,000 and the rental house was valued at $62,000. I fully depreciated the $62,000 house over the years. In 2005, I did an Internal Revenue Code 1031 tax-deferred exchange. The old property was valued at $173,000. I traded for another rental house with land valued at $30,000 and the building valued at $143,000 for a total of $173,000. What is my new depreciable and non-depreciable basis? –Richard N.
DEAR RICHARD: You have a very odd property trade. Something sounds incorrect.
If the fair market value of your old rental property was $173,000 and you acquired a replacement rental property valued at $173,000, neither property with any mortgage, you have an equal trade.
Your deferred capital gain on the old property was $173,000, minus its $10,000 basis, or $163,000. Subtracting this $163,000 deferred capital gain from the $173,000 acquisition price of the acquired rental property means your basis for the new property is $10,000, the same as your old property’s basis.
Therefore, you have no depreciable basis in the new property because the land value of the acquired property is $30,000. Please go over these approximate numbers with your tax adviser because even trades are extremely rare.
The new Robert Bruss special report, “Foreclosure and Distress Property Profit Secrets,” is now available for $5 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).
***
What’s your opinion? Send your Letter to the Editor to opinion@inman.com.
