DEAR BOB: I have been selling homes successfully for about three years. In 2005, I earned over $100,000 in sales commissions. But my earnings in 2006 will be much less due to the slowdown in the home-sales market. However, I’m not making as many sales as last year. As I read the newspapers and real estate trade journals, I’m wondering why the national home sales prices keep going up but the number of home sales is dropping. What is your view on today’s home sales market? –Susan R.
DEAR SUSAN: You raise very challenging questions. The number of closed sales of houses and condominiums determines home sales volume. In most cities, that number has dropped in 2006 compared to 2005.
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Nobody knows with certainty the reason. The modest rise in mortgage interest rates from the 5 percent to 6 percent range reduced buyer demand. Also, 2005 was a record year for home sales volume so those buyers aren’t in today’s market.
The increase in resale and new-home inventory has decreased home-buyer urgency to purchase. The result is a “buyer’s market” in most cities, with more homes for sale than qualified buyers in the market. Also, listings stay on the market longer than they did a year ago.
But don’t be misled by the month-to-month changes in home sales prices, which, in many cities, are still rising while home-sales volume declines.
Home-sale prices are reported as median prices, not average prices. That means an equal number of homes are sold above and below the median price. This number is easily skewed from month-to-month by an increased number of expensive or inexpensive home sales. It doesn’t mean the market value of a specific house or condo rose or fell.
The median price for homes is slower moving than average sales prices, which tend to be more volatile and are rarely reported in the media.
Having been involved as a real estate investor and broker for about 40 years, I’ve seen many home-sale-price peaks and valleys. In a few years, home-sale prices were flat.
Over the long term, the price trend has always been up (about 5 percent annually nationwide, according to the National Association of Realtors). But median home-sale prices don’t reflect the total volume of home sales, which is expected to be down in 2006 compared to 2005.
CAN HEIRS SELL PROPERTY “AS IS” WITHOUT TERMITE INSPECTION?
DEAR BOB: I have an elderly relative who has owned several rental houses for many years. These properties are not well kept. When she passes on and the heirs sell the properties, will the heirs have to have termite inspections or can the heirs sell them “as is”? –Larry W.
DEAR LARRY: Most states do not require a pest control (termite) inspection. But a few do. A local realty agent where the properties are located can tell you if a termite inspection is required.
But virtually every home buyer insists on such an inspection so you should expect the buyers to include inspection contingency clauses in their purchase offers.
Heirs frequently sell inherited properties “as is.” The very good reason is the heirs usually don’t know the condition of the properties so they don’t want to incur liability for incorrect statements.
An “as is” sale means the seller must disclose to the buyer all known property defects but the seller doesn’t have to pay for any repairs.
However, offering a property for sale “as is” is like waving a red flag in the buyer’s fact warning “watch out there might be something seriously wrong with this house.”
A better approach is to put a property on the market for sale, disclose all known defects, and see what happens. If the buyer’s professional termite inspection reveals serious damage, then the seller can decide to either give the buyer a repair credit or not.
CAN LANDLORD COLLECT DOUBLE RENT?
DEAR BOB: My tenant moved out on July 23 without giving me a 30-day notice. I re-rented the place on Aug. 1. Can I legally charge my ex-tenant rent for 30 days from July 23 to Aug. 22 even though I re-rented the place on Aug. 1? Can I take the unpaid rent from his security deposit? – Rory P.
DEAR RORY: A landlord is not entitled to double rent from two tenants for the same rental period.
However, you can deduct from the ex-tenant’s security deposit the unpaid rent for the days the property was vacant. For full details, please consult a local real estate attorney.
CONSULT ATTORNEY ABOUT HOW TO HOLD JOINT TITLE
DEAR BOB: What is the easiest way for me to add my husband to the title to my house? –Mary Ann W.
DEAR MARY ANN: The easiest way to convey a full or partial real estate interest is with a recorded quitclaim deed.
However, please don’t rush out to do so. First think about how you and your spouse want to hold title. Then discuss the alternatives with a local real estate attorney.
Depending on the state where the house is located, you should consider joint tenancy with right of survivorship, tenancy by the entireties, community property, and especially in second marriages, tenants in common. The legal consequences of each title method are vastly different.
IS REVERSE MORTGAGE GOOD FOR A STRUGGLING RETIREE?
DEAR BOB: I retired in March 2006 and have been struggling each month to pay my bills. Someone recently told me about a reverse mortgage. I am a 66-year-old single woman with no children. When I die, all my worldly possessions will go to my four nephews. I have about $35,000 left on my mortgage plus $5,800 on a home equity line of credit. Would such a mortgage be good for me? –Marie C.
DEAR MARIE: If the total debt now secured by your principal residence is 50 percent or less of its market value, then you are an excellent candidate for a reverse mortgage.
The reverse mortgage will pay off your existing first mortgage and that home equity loan so you will have no monthly mortgage payments.
The balance of the reverse mortgage funds can then be used for lifetime monthly income, a credit line, a lump sum (such as for home repairs or a new car), or any combination.
A reverse mortgage will give you the added income you need to enjoy retirement by solving your cash flow problem. To find a reputable local reverse mortgage originator, on the Internet go to www.ReverseMortgage.org. More details are in my special report, “The Whole Truth About Reverse Mortgages for Senior Citizen Homeowners,” 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.
IS AN INTEREST-ONLY HOME LOAN GOOD OR BAD?
DEAR BOB: I received information to refinance our first mortgage with cash out to pay off credit card debt. But my wife does not like the interest-only terms. Your advice please? –James H.
DEAR JAMES: There is nothing wrong with interest-only home mortgages, which do not allow negative amortization (which means your monthly payment is fixed but the interest rate adjusts monthly and unpaid interest is added to your mortgage principal balance).
The result of negative amortization is you can owe more than you borrowed.
Of course, with an interest-only mortgage, you won’t be building any equity from mortgage amortization paydown. That’s all right unless you plan to stay in your home “forever” and want to eventually own it free and clear with no mortgage balance.
WHAT RECOURSE AGAINST HOME INSPECTOR?
DEAR BOB: When my daughter bought her house, she hired a home inspector. He reported all was well. Three years later, she sold the house. The buyer’s inspector found the heater, located in the attic, installed incorrectly, causing a fire hazard. To close the sale, she had to spend $1,600 to have the heater reinstalled correctly. She contacted her inspector and he said that although he missed this, the contract she signed says he is not liable after one year. Should she take him to Small Claims Court? –Lorraine K.
DEAR LORRAINE: Anything can happen in Small Claims Court. Of course, the inspector will point to his contract as his defense. Her chances of winning don’t look great.
SHOULD HOME SELLER HIRE AN APPRAISER BEFORE SELLING?
DEAR BOB: I inherited an out-of-state house, which I want to sell. It is occupied by a tenant who says she wants to buy it. But I don’t think she can afford to do so. Should I hire a professional appraiser to determine the market value of this house, which I plan to list for sale if the tenant doesn’t buy? –Margo T.
DEAR MARGO: Your best assurance of determining the house’s fair market value is to interview at least three successful local real estate agents about listing it for sale.
Each agent should prepare a written CMA (comparative market analysis) showing you recent sales prices of similar nearby residences, asking prices of neighborhood houses now listed for sale (your competition), and the asking prices of recently expired comparable listings (usually overpriced).
After checking each agent’s recent seller references, then list with the best agent. However, include a “reservation” stating you will owe no sales commission if your tenant buys the house during the listing term.
The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar 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).