DEAR BOB: As a Realtor for 19 years, I do not agree with your comment that a listing agent who refuses to hold open houses is lazy. A more appropriate response would have been for the home seller to ask that agent to prove by his success record he can sell property of that type without open houses. I have sold hundreds of condos and I never hold open houses. I feel they are an imposition on the neighbors, especially within gated communities. I work with clients who are often elderly widows, single women, and mothers with newborns. These clients are rarely comfortable with public open houses. But I always conduct office and MLS (multiple listing service) tours. Then I advertise like crazy on the Internet and in print media. Your response? –Beth B.
DEAR BETH: Congratulations if you are successful without open houses, especially in a buyer’s market.
Purchase Bob Bruss reports online.
As a real estate broker for 39 years, I’ve held my share of open houses. We agree they don’t always work. But they work often enough — especially to meet prospective buyers and sellers for other properties — to make them worthwhile. Unless you have a more profitable use for your Saturday and Sunday afternoons, give open houses a try.
$500,000 HOME-SALE EXEMPTION REQUIRES JUST ONE SPOUSE ON THE TITLE
DEAR BOB: My husband and I have been married and filing joint income-tax returns for the 10 years we have lived in the house that I purchased in my name alone. His name is not on the title or the mortgage. We continue to live in the home and plan to sell it within the next year. Are we eligible for the $500,000 tax exemption? –Nancy V.
DEAR NANCY: Yes. Although the title is in your name alone, if both you and your husband have occupied the house as your principal residence for at least 24 of the last 60 months before its sale, then you qualify for up to $500,000 tax-free capital gains.
Internal Revenue Code 121 does not require the names of both spouses on the title or on the mortgage obligation. For more details, please consult your tax adviser.
LIFE ESTATE OR PURCHASE OPTION CAN TIE UP NEIGHBOR’S HOME
DEAR BOB: I would like to acquire my elderly neighbor’s house so I can build a large new home across his lot and mine. But he refuses to sell to me. I want to present him with an offer for an open-ended purchase option or a right of first refusal. His health is deteriorating. I am willing to wait for the property to become available as part of his estate. He has no children and is unmarried. What strategy can I suggest without being perceived as the grim reaper? –Allan G.
DEAR ALLAN: If the neighbor needs money, perhaps he will sell you an option to buy his property at a time to be determined by him within the next 10 years. Nonrefundable option money, applicable to the purchase price, is negotiable. Customarily, it is 1 to 3 percent of the option purchase price.
However, you do not want a right of first refusal. That gives you the right only to match any purchase offer the neighbor receives from another buyer. It ties up the property but doesn’t give you the right to acquire the property until someone else offers to buy it. Rights of first refusal create messy situations and are not recommended.
Or you could buy the property now, giving the neighbor a life estate so he can remain in his home as long as he wishes, or until he dies. A local real estate attorney can explain further.
TOO MANY RENTERS MAKE A BAD CONDO COMPLEX
DEAR BOB: We are considering the purchase of a three-year-old condo in a building that has a 48 percent rental population. The homeowners association has no rental restrictions other than a six-month minimum lease. There are 334 units in the building. We plan to live in our condo for a long time, want a stable living environment in a well-maintained building, and are interested in making a solid investment. Do you recommend we proceed with this purchase? –Kathleen L.
DEAR KATHLEEN: No. Forty-eight percent renters is extremely high for a fairly new condominium. That is a very bad sign because there are too many absentee owners.
Your interest rate, if you can obtain a mortgage in that building, will probably be much higher than for a condominium complex where there are few renters. Because there are more than 20 percent renters, my best advice is keep looking for a better condo complex.
A high percentage of renters shows that owner-occupants steer clear of that property. When the building was constructed, maybe the developer couldn’t find enough owner-occupants and he had to sell to absentee investors who want to keep maintenance expenses as low as possible. Also, renters tend to cause behavior problems whereas owner-occupants want to maintain the property to higher standards.
TRUSTEE NEED NOT CONSULT BENEFICIARIES ABOUT HOUSE SALE
DEAR BOB: My mother died. She had a trust. My sister is now trustee of the estate. I also have a brother. Who decides the sales price for the house when a purchase offer comes in? Is it my sister alone or all three of us? –Joe S.
DEAR JOE: If your sister is the only trustee, she alone can make important decisions such as the acceptable sales price for the house. Although you and your brother are also beneficiaries of the trust, she is the one who makes the decisions.
However, as a beneficiary of the trust, you are entitled to an accounting if you suspect anything improper.
Frankly, your mother made a wise decision to have just one trustee. When two or more co-trustees get involved, if they don’t all agree, trouble can result. For more details, please consult a local trusts and estates attorney.
HOW MUCH SHOULD HOME BUILDER DROP THE PRICE?
DEAR BOB: I have a contract to buy a brand-new house that is under construction with completion planned for next month. I put down $76,000 to begin construction. At the time, the base price of the house was $697,900. Now, because of housing woes, the base price in the development has dropped to $556,900 for similar houses, a difference of $141,000. How much reduction in the base price should I expect the builder to offer? –Joseph A.
DEAR JOSEPH: Ask for as much as you can get. It sounds like the builder should drop your base price by $141,000 if that is the lower price he is now offering on his similar nearby new houses.
Unfortunately, the builder has your large $76,000 deposit so he has some negotiation power over you. That was an abnormally large deposit. If you can’t negotiate a satisfactory price reduction in the current buyer’s market, don’t hesitate to hire a local real estate attorney to assist with your negotiations. A key tactic to emphasize is the house probably will appraise only for the lower amount so he should reduce his base price.
MUST LISTING AGENT COOPERATE WITH HOME BUYER’S AGENT?
DEAR BOB: We have a buyer’s agent to help us find a home to purchase. On our own, we found a new-home community we like very much. When we told our buyer’s agent, she was informed it was a “family affair” with the father, daughter and son-in-law representing the builder. They refuse to split the 6 percent sales commission with our buyer’s agent. Is this illegal or just unethical? –Maureen R.
DEAR MAUREEN: Unless a property is listed in the local MLS (multiple listing service), real estate listing agents do not have to cooperate with other agents who represent home buyers. There is nothing you or your buyer’s agent can do to force the listing agent to cooperate.
Frankly, in the current buyer’s market in most cities, it is foolish for a home builder’s real estate agent to refuse to cooperate with your buyer’s agent. Most home builders would be thrilled to pay a 3 percent sales commission to your buyer’s agent.
CAN HOME BUYER REFUSE TO PAY MORTGAGE JUNK FEES?
DEAR BOB: After reading your recent article about mortgage junk fees, my question is can my son, who is buying a new home, refuse to pay a $495 processing fee and a $350 underwriting junk fee? Also, why is he being asked to pay three months of “hazard insurance” at the closing and monthly thereafter? –Chris K.
DEAR CHRIS: The $495 processing fee and $350 underwriting fee are classic examples of unnecessary mortgage junk fees. If your son refuses to pay them, the lender might waive them or at least reduce them.
Remember the definition of a mortgage junk fee is a charge that does not give the borrower any direct benefit. Examples of valid mortgage fees include appraisal fee, credit report fee, title insurance fee, and recording fee. Junk fee examples that confer no borrower benefit include loan application fee, administration fee, documentation fee, warehousing fee and miscellaneous fee.
As for the hazard insurance, that is another name for a homeowner’s insurance policy. The mortgage probably includes an escrow impound account for property taxes and hazard insurance. The lender usually requires one-twelfth of these charges to be paid each month, with three months of prepaid charges at the time of loan origination.
The new Robert Bruss special report, “How to Profit from Lease-Options (Rent to Own) If You are a Property Buyer, Seller, or Realty Agent,” is available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 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).