DEAR BOB: Due to the slow home sales market in our area, we are having difficulty selling our home. Our listing agent suggests we offer “special incentives” such as a monetary bonus and/or a vacation to the buyer’s agent who sells our house. She says this encourages other agents to show our house more often to their buyers. Is this ethical? It seems like blackmail to me, as we already signed a listing contract –Debra W.

DEAR DEBRA: To combat the slow “buyer’s market” in many communities, home sellers frequently offer special incentives to buyer’s agents to show and sell their listed homes. Vacations, TVs, etc. are often given to buyer’s agents to sell homes.

Purchase Bob Bruss reports online.

Recently, we had several items in this column where the home sellers raised the sales commission from 6 percent to 7 percent, with 4 percent going to the buyer’s agent and 3 percent to the listing agent. That is another incentive to consider.

However, before offering incentives to the selling agent, be sure your home’s asking price is correctly set. Ask your listing agent to prepare an updated CMA (comparative market analysis). This form, which you should have been given at the time of signing the listing contract, shows recent sales prices of similar neighborhood homes, asking prices of comparable nearby homes (your competition), and asking prices of recently expired listings (usually overpriced).

If necessary, reduce your asking price. Also be sure your listing agent is doing effective marketing, including newspaper and home-sales-magazine ads, Internet MLS (multiple listing service) and www.Realtor.com listings, weekend open houses, weekday tours for MLS agents, and agent networking.

There is nothing unethical, immoral or fattening about offering special incentives for buyer’s agents to sell your house instead of one down the street.

WHAT HAPPENS IF HOME BUYER DEFAULTS ON SELLER CARRYBACK MORTGAGE?

DEAR BOB: When a home seller helps finance the sale by taking back a second mortgage for the buyer, what happens if the buyer defaults on the payments? What is the best way to protect ourselves as home sellers? –Ronnie N.

DEAR RONNIE: As a sales incentive, smart home sellers with large equities often agree to carry back a first or second mortgage for their buyers. Of course, the buyer should make a reasonable down payment, such as 10 percent of the sales price, and the seller should check the buyer’s credit report and FICO (Fair Isaac Corp.) score.

As a home seller, your security for the buyer’s promissory note will be either a first or second mortgage or deed of trust (depending on custom where the home is located) recorded against the title.

If your buyer defaults and fails to pay the secured mortgage payments to you, or fails to pay the property taxes or fire insurance premium, then you can begin foreclosure on the home. You should hire a foreclosure attorney or specialist to handle the details.

Depending on state law, foreclosure can take as little as 21 days (in Texas) to a year in a few states. The average foreclosure time is four to six months.

At the foreclosure auction, the highest bidder gets the title to the property and you get your mortgage balance paid in full. Any excess amount goes to the junior lienholders or to the borrower who loses the property.

If no bidders show up at the foreclosure auction, you get the property title back so you can sell the property again for a second profit. For more details, please consult a local real estate attorney.

CAPITAL IMPROVEMENTS AND REPAIRS FOR RENTAL-HOUSE OWNER

DEAR BOB: I own a rental house that has greatly appreciated in market value over the years. I may be selling it soon. You often write about “adjusted cost basis” as being the original purchase price, plus capital improvements made during ownership, minus depreciation deducted. What are considered capital improvements? Would adding a deck and remodeling a kitchen be capital improvements? How about replacing the furnace and water heater? –David S.

DEAR DAVID: The cost of a new deck and kitchen remodeling are clearly capital improvements that you can add to the rental house’s adjusted cost basis. These expenditures become depreciable on Schedule E of your tax returns, just like the cost of the house (excluding land value, which never wears out) is depreciable.

If replacing the furnace and the water heater add to the useful life of the rental house, then they are capital improvements. However, your tax adviser might suggest deducting them as “ordinary and necessary” repair costs. Whether you capitalize them or deduct them as repairs, you benefit.

As you can see, determining if an expense extends the useful life of a rental property (a capital improvement), or merely replaces an existing component (a tax deductible repair) is often unclear. For more details, please consult your tax adviser.

MUST BUYER BE INFORMED ABOUT HOMEOWNER’S ASSOCIATION?

DEAR BOB: If I was not informed when I bought my house that a homeowner’s association existed for that subdivision, do I have to follow their rules and regulations? –Gary G.

DEAR GARY: Presuming the homeowner association (HOA) documentation was properly recorded when the subdivision was developed, all subsequent homeowners are subject to the CC&Rs (covenants, conditions, and restrictions) of the HOA.

Even if you were not told about the HOA, or the CC&Rs were not mentioned in your deed, if they were properly recorded they are binding on future owners. For full details, please consult a local real estate attorney.

WHERE TO SUE FOR MORTGAGE FRAUD

DEAR BOB: I am a victim of mortgage fraud. The developer is located in California; the mortgage lender is in Arizona; and the appraiser and the selling agent are located in Nevada. In which state can I file my lawsuit? –Donna Z.

DEAR DONNA: Because you have “citizens” of at least three states involved, if the amount in dispute exceeds $75,000, or if there is a federal law involved, you can bring a lawsuit in your local U.S. Federal District Court, or in any of the states involved.

However, if the dispute does not involve $75,000 or more, and no federal law is involved, the general rule is real estate lawsuits can only be brought in the state where the real property is located. But a potential problem then arises regarding service of summons on the out-of-state defendants. For details, please consult a real estate attorney.

HOW TO FIND OUT WHICH REALTY AGENT SOLD A HOUSE

DEAR BOB: We frequently receive offers to sell our house. One Realtor sent us the MLS (multiple listing service) list of recent sales in our neighborhood. How can I find out which realty agent sold an individual property on the MLS? Do I have to go through a Realtor? –Wilma H.

DEAR WILMA: Most local MLS members will be pleased to show you recent home sales prices, as well as the names of the listing and selling agents involved in the sale.

However, if you are not a serious seller, please don’t waste the time of an MLS member agent asking for details of a recently sold home if you aren’t a serious seller.

NEIGHBOR HAS NO LEGAL DUTY TO TRIM LEANING TREE

DEAR BOB: My next-door neighbor has a beautiful and very large tree in his front yard. One of the tree’s main branches extends over our driveway and over a corner of our 100-year-old Craftsman home. I’ve politely asked my neighbor to trim the branch above our home. He said he would take care of it. But that was months ago. I’m growing more concerned because a friend of mine pointed out what looks like rot in some of the tree’s branches. If the branch above our home falls on our bedroom due to wind or rain, it will definitely cause major damage to our little bungalow. Do I have any legal right to force my neighbor to trim back his tree and avert disaster? –Adrian J.

DEAR ADRIAN: The general rule is a property owner can trim overhanging tree branches (and roots) back to the property line at that owner’s expense. However, be careful. Don’t trim the tree so severely that it dies. Then you could be liable to the neighbor for the lost value of the dead tree.

Your neighbor has no legal obligation to trim an overhanging tree. In fact, if he enters your property without permission, that is a trespass.

If you or your insurance agent write a polite letter to the tree owner about the possibly dangerous condition, explaining the neighbor’s probable liability if damage results to your property, he will probably agree to remove the overhanging limb (although he is not required by law to do so).

If you want to file a lawsuit, you could argue the rotting tree branch is a “private nuisance.” After the court determines it is a private nuisance, the court can order the neighbor to remove the limb at his expense. However, try to avoid this alternative because your attorney fees could get expensive. For more details, please consult a local real estate attorney.

The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollars in a Buyer’s Market” 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
).

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

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