QUESTION: Recently, I have seen ads on TV for several real estate seminars. I also saw one where a fellow advertised a set of tapes for $99 that were guaranteed to show me many ways to buy real estate for no down payment. Recently, I heard about a one-week real estate course for $5,000 that is guaranteed to set me up in business buying foreclosured properties. Do you think I should go to one of these seminars or buy the real estate tapes? Or should I just read some good books on how to make money in real estate?
ANSWER: Over the years I have attended most of the real estate seminars and listened to most of the real estate tapes commercially available. For my book review column I have to read one real estate book every other week so I have read most of the real estate books published during the last 12 years. However, I have not taken the new, very expensive courses, costing several thousand dollars, which also provide follow-up consulting service.
Thousands of people have taken the Al Lowry and Robert Allen real estate seminars. I did too and thought they were well worth the fees. However, it is too bad the sponsors didn't stick to earning real estate profits instead of going broke in the seminar business.
We all need motivation. For some people, attending seminars, listening to tapes or reading books provides that motivation. Yet, there are thousands of very successful real estate investors who never took one of these courses, never listened to a real estate tape or read any of the books, but they just went out and started investing in real estate.
If you are a highly motivated individual, you probably don't need these courses. But if you want to learn fast and will apply what you learn, then spending money on this education may be what you need. I suggest you begin by studying all the real estate books you can get at local bookstores and at the library. Then get started by investing in your first property, preferably your personal residence. Also, check out the excellent real estate courses offered at low cost from local community colleges.
Set Short Time-Limit to Acceptance Offer
Q: I am having trouble buying a lot where I want to build my home. The seller lives about 50 miles away and the listing real estate agent refuses to drive to the seller's home to present any purchase offers. She insisted on telephoning the offer to the seller. I made an offer which the listing agent explained over the phone to the seller in my presence. The seller said he wanted 30 days to consider the offer so I amended my offer to make it valid for 30 days. Now I am afraid the seller and agent are "shopping" my offer to get a better price from another buyer. What can I do as I want that lot but am very upset with the realty agent?
A: Shame, shame, shame on that lazy realty agent for presenting your offer over the telephone. I have never yet seen an offer signed over the telephone. Have you? The agent should have driven the 50 miles to the seller's home to deliver and discuss the offer. If the seller lived far away, your offer could have been sent overnight via Federal Express.
You can still revoke your offer but that won't accomplish anything other than to make the seller mad. But you might want to inform the seller you will keep your offer open for only three more days so you can consider other property. This will put pressure on the seller to either accept or counteroffer your offer.
It is very difficult to know how to handle sellers and their real estate agents, but in the future you may want to add to your offers: "This offer to be presented to seller in person only in the presence of buyer or his real estate agent."
A similar situation like yours happened to me a few years ago. Fortunately, the agent through whom I made my purchase offer insisted he and the listing agent drive together to the seller's home which was about 120 miles away. The seller was very impressed that the two agents would drive so far. The agents explained to the seller why my offer was a good one and, after a few minor changes, the seller accepted although he had earlier rejected several similar offers.
Mortgage Priority Set by Recording Date
Q: We are thinking of selling our home. It has an assumable VA first mortgage of about $74,500. If we carry back a $100,000 mortgage for the buyer, since it is larger, will it have priority over the VA mortgage if the buyer doesn't make the payments and foreclosure occurs?
A: No. Mortgage priority is determined by the recording dates, not by the amount of the mortgages. The VA mortgage will remain a first mortgage and your new loan will become a second mortgage. For further details, please consult a real estate attorney.
Don't Let Borrower Fall Behind on Bill
Q: About four years ago we sold our home and carried back a second mortgage for the buyers. All went well until several months ago when the monthly payment didn't arrive. When I called the buyers I learned they had moved out of the house due to a divorce. The house is now listed for sale. How long should I wait before foreclosing?
A: Not a minute more. You have already waited too long. If a borrower cannot make the monthly payment, you are not doing the borrower a favor by delaying foreclosure. The further behind the borrower gets, the more home equity the borrower loses. Another consideration is the borrower probably also is not paying the first mortgage, thus jeopardizing your second mortgage. Please consult a real estate attorney for more details.
How Does a Recession Affect Home Prices?
Q: If a recession occurs, what do you expect will happen to home prices? How much of a price decrease do you expect?
A: In the last recession, home prices in most cities did not decrease. Instead, they plateaued. But nationwide, home prices actually increased. The reason is most property sellers don't sell unless they can get at least the price they paid for their property plus a little profit.
Ways for Two People to Hold Joint Title
Q: I am concerned about your recent article where a joint tenant discovered her joint tenancy had been ended without her knowledge and as surviving joint tenant she wound up being a tenant in common. What do you think is the best way for two people to hold title to real estate?
A: The big benefit of owning property as joint tenants with right of survivorship is when one joint tenant dies, the survivor automatically receives the deceased's share of the property without probate.
However, in most states it is possible for a joint tenant to convey away his or her share without the permission of the other joint tenant. A notable exception occurs between husband and wife in states that allow joint tenancy by the entireties, which requires approval of both spouses to convey any ownership interest.
Since you didn't indicate if you plan to own real estate with a relative or friend, and if you want that person to automatically receive your share when you die, or vice versa, I can't completely answer your question. Please consult a real estate attorney for further details.
What Determines Rates on Sales Commissions?
Q: How are real estate sales commissions set? We plan to sell our home in a few months so are shopping around for a real estate agent. The two agents we have consulted so far both want a 6% sales commission. We also talked to one so-called discount broker who charges a fixed fee of about 3% percent. However, the discount broker expects the home sellers to hold weekend open houses and negotiate with prospective buyers. What puzzles us is how the sales fees are determined?
A: Theoretically, real estate sales commissions are freely negotiable between the realty agent and property sellers. But in the real world most full-service real estate agents all charge the same commission rate. However, as you discovered, the so-called discount brokers charge less but they usually offer fewer services too.
Incurable Home Defect Has an Up Side Too
Q: We are having trouble buying a home we can afford. However, out of sympathy I'm sure, a real estate agent called to tell us about a new listing which we can actually afford. But the big problem is the fairly nice house is located adjacent to a busy six-lane street. We like the house, but the noise from the street is pretty bad. Everything looks good, especially the top schools for our kids, except for the location. What do you advise?
A: The problem you describe is called an incurable defect. That means you have virtually no control over the drawback which affects the desirability of the home.
As you probably know, location is the most important factor to consider when buying a home. However, beggars can't be choosers. Over the years I've learned highway noise is not as big a problem as most people think. Inside the house you can minimize the noise by using insulation and double-pane windows. Outdoors, you can plant trees and bushes to absorb sound. A perimeter fence will give you privacy.
Of course I can't give specific advice to buy or not buy, but if that house is the only one you can afford in the vicinity where you want to live, perhaps you can learn to live with its big drawback. However, don't pay too much because someday when you want to sell you will encounter the same incurable defect problem that the current seller has. In the meantime, I'll bet you get used to the noise.
VA Home Loans Are Based on Appraisal
Q: We are receiving conflicting advice about VA home loans. One real estate agent told us to forget about VA mortgages because, she says, the appraisals are too low. But another agent says he has sold many homes with VA mortgages. He agrees the appraisals are often lower than the sales price but usually only by a few thousand dollars which the vet can pay in cash. What do you think about VA mortgages?
A: I think VA home loans are the best deal in home financing. Their advantages include (1) no or very small down payment, (2) fixed interest rate, (3) attractive interest rate, (4) prompt funding if you deal with a lender who has approval authority, and (5) liberal qualification rules.
However, one drawback to consider is the loan discount fee cannot be paid by the VA buyer. That means the seller can either pay the fee or elect not sell to the VA buyer. But I think this is outweighed by the little or no down payment required. Yes, if the appraisal comes in lower than the sales price the seller will accept, then you have the option of either paying the difference in cash or not buying that home.
When an Easement May Not Be Valid
Q: About two months ago, we bought a house that has a shared driveway with the neighbor. However, our deed says nothing about any easement. What irritates us is that the neighbor leaves for work about 6 a.m. in her noisy old car. We asked her to park her car on the street and not to wake us, but she wasn't very nice and told us to go someplace I don't want to go. The neighbor could build a driveway on her property to the back alley. Is there any way we can stop her from driving over our property?
A: Perhaps. Please consult a real estate attorney. If there is no recorded easement over your land, then you can deter the neighbor from using your land by erecting a fence.
However, the neighbor may argue she has a prescriptive easement to continue driving over your property. But a prescriptive easement can only be created by long-term use that is open, notorious and hostile.
If you can prove the previous owner allowed permissive use, that defeats the neighbor's prescriptive easement claim because the use wasn't hostile. Because the neighbor has access to the street, she couldn't claim an easement by necessity, so you might win if the case goes to court.
Letters and comments to Robert J. Bruss, a San Francisco-area lawyer, author and real estate broker, may be sent to the Real Estate Section, Los Angeles Times, Times Mirror Square, Los Angeles 90053.