DEAR BOB: Can we fire our real estate agent? We (and four others) are in the process of selling our property to a commercial buyer. Our agent never shows up for meetings and is so out of the loop. He calls us to see what is going on with the sale. We don’t think he deserves the 6 percent sales commission because his involvement ceased after finding the buyer. We want to fire him, or at the very least, cut his commission. Can we do that? –Harrison Y.
DEAR HARRISION: No. If your real estate agent has a valid exclusive right to sell, exclusive agency or open listing and he or she is the “procuring cause” of the sale, or found a “ready, willing and able” buyer, but you owners took control after that, the agent is still entitled to the agreed 6 percent sales commission.
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When the sale closes, if you refuse to pay the full sales commission, the listing agent can sue for any unpaid commission. Just because the agent doesn’t attend meetings of the sellers is no reason to deny a sales commission for producing an acceptable buyer. For more details, please consult a local real estate attorney.
PERSONAL HOME PURCHASE WON’T QUALIFY FOR TAX DEFERRAL
DEAR BOB: Can I use Internal Revenue Code 1031 dollars to buy a home to live in? It is a two-family house. What are the mechanics of tax deferral? –Linda Jo E.
DEAR LINDA JO: If you own a rental property and want to avoid paying capital gain tax upon its sale, you can only make an Internal Revenue Code 1031 tax-deferred exchange for another investment or business property of equal or greater cost and equity.
If you use part or all of the sales proceeds to buy your personal residence and don’t use the entire amount to acquire another qualifying “like kind” property, you will owe capital gains tax on that portion of your capital gains that you receive from the sale. For details, please consult your tax adviser.
WHO MUST PAY EXPENSES OF A JOINTLY OWNED HOUSE?
DEAR BOB: Three siblings are tenant-in-common co-owners of our family property. One sibling put in a large amount of personal money to improve the property. Two siblings don’t want the property. One wants to keep the property. She is negotiating to buy out the two-thirds shares. How should the buyer be compensated for her personal expenses for the improvements? Who pays to cure the problems found during the pest inspection and professional inspection of the whole house? –Mr. C.G.
DEAR MR. C.G.: Real estate co-owners are obligated to pay in proportion to their ownership shares for ordinary and necessary property expenses such as mortgage payments, property taxes and necessary repairs. That means all three co-owners are obligated to pay for the pest control repairs and the professional inspection.
If the property improvements made by one co-owner weren’t necessary or agreed to by the other co-owners, that individual might not be entitled to reimbursement. However, if the improvements added to the property value, it is the right thing to do for the other two owners to pay their one-third shares. This can all be worked out in the buy-sell agreement. For full details, please consult a local real estate attorney.
The new Robert Bruss special report, “Five Easy Ways to Buy Your Home and Investment Property for Nothing Down,” 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 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).