Negotiating for Lower Commission With Agent May Have Been Error

QUESTION: When we listed our home for sale we negotiated the agent’s sales commission down to 5%. We signed a 90-day listing, but our house has only been shown a few times to prospective buyers. When we press the agent to hold a weekend open house, she reluctantly does so. But her broker refuses to advertise our home because the agent reduced the commission without the broker’s prior approval.

Even though the house is listed in the local multiple listing service, I don’t think any agents have shown our house, although it is priced slightly lower than other nearby houses for sale. Do you think we made a mistake cutting the agent’s commission?

ANSWER: Yes. It was not wise to cut the real estate agent’s incentive to get your home sold. Not only is your listing agent reluctant to show your home when she can earn a larger commission showing other homes to prospective buyers, but when other agents see the fee is lower on your home than for other similar homes listed for sale they show those homes first.

In my opinion the only time to cut the agent’s sales commission is when the agent brings a purchase offer substantially below the agent’s recommended sales price for your home. Then the agent should be willing to adjust the commission.

Profitable Sale of Recreation Lot Hard

Q: About four years ago, we bought a 2-acre lot at a recreational area and planned to someday build our retirement home there. But now our plans have changed and we are no longer interested in building on our lot. We looked into selling our lot, but find it is virtually impossible to sell because the developer is still selling lots and has a huge advertising budget to attract buyers.

We are told many of the lots in our section are for sale, but the developer takes down all For Sale signs. Local realtors aren’t interested in selling these lots because the prices are only about $15,000, and the agent’s sales commission isn’t worthwhile. How can we get out of this bad deal?

A: Now you know why I suggest not buying vacant land you won’t personally use within six months after purchase. Your situation is not unusual at recreational land developments, so don’t feel bad.

After consulting your attorney as to any possible personal liability and income tax problems, you may want to abandon the lot by stopping mortgage payments and not paying the property taxes.

If you had purchased the property for investment, rather than for personal use, you might qualify for an abandonment tax loss deduction.

Risk of Properties With Limited Use

Q: Several years ago, I bought a light-industrial warehouse-type building. It was leased to an AAA-rated national corporation. In January, the lease was up for renewal, but the corporation decided not to renew. I listed the property for sale or lease with our area’s best commercial broker, but she hasn’t found either a tenant or buyer yet. There is a big surplus of vacant warehouses in my town. Any ideas?

A: Now you know why limited-use properties can be risky. Perhaps you and your agent can think creatively about another use for the property. To illustrate, perhaps the building might be suitable for a discount-type retail operation such as a warehouse store.

You were wise to list the property with your area’s best commercial agent. However, please be sure your agent is fully cooperating with other commercial agents who might have prospects for your property.

Pros and Cons of Buying Condominium

Q: I cannot afford to buy a single-family house because my income is not high enough. However, I have been looking at condominiums and I can easily afford to buy one. But several friends tell me condos are not good investments. Yet, I have no other alternative if I want to own my residence. Do you think I am crazy to buy a condo?

A: No. Condos can be wonderful personal residences. My mother lives in one and enjoys it very much. In addition, it has been a very profitable investment for her because she bought in a desirable complex where the market values have appreciated nicely.

However, condo buyers must be more careful than buyers of single-family homes. You can’t ask too many questions before buying a condo.

Since poor soundproofing is the number one condo owner complaint, be sure to test the soundproofing of the condo you are considering by asking the neighbors to turn on their TVs and stereos.

If you are considering buying in an older condo complex, ask your prospective neighbors what they like best and least about their condo. Then ask the key question: “Would you buy here again?”

If the condo complex passes these preliminary tests, find out the ratio of renters to owner-occupants. If you find more than 25% of the condos are occupied by renters, that is not a good sign.

Over 50% renter occupancy is a red flag to stay away. The reason is that absentee owners usually are unwilling to pay adequate maintenance fees, whereas owner-occupants take pride in the condo complex.

Be sure to check with the condo owners association for the most recent financial statement. Inquire about reserves for repairs and if any special or increased assessments are planned. Ask for a copy of the condo CC&Rs; (conditions, covenants and restrictions) as well as the by-laws and any other rules condo residents are expected to follow. Watch for special rules about pets, children and rentals.

Finally, don’t be afraid to bargain hard on your condo purchase. Only a limited number of prospective buyers want to purchase condos, so buyers can usually afford to be tough negotiators.

I suggest you make a minimal down payment and obtain the largest available mortgage, so you don’t tie up much cash just in case the condo turns out to be less than you expect.

Seller Can Name Price If Willing to Give Loan

Q: I have been in real estate for over 20 years, and the. last 15 years I have bought and sold many houses. But I discovered that if I will carry the mortgage for the buyer I can virtually name the price. Why don’t you emphasize the advantage for home sellers of carrying back mortgages?

A: Many, many times I have emphasized the benefits for home sellers of carrying back a first or second mortgage for the buyer. But the big problem is persuading sellers that the benefits of carrying a mortgage far outweigh any slight risk, such as having to foreclose, get the house back and resell it for a second profit.

How Co-Owner Can Force Sale of Property

Q: About six years ago, my best friend and I bought a six-unit apartment building as co-owners. Then his job was transferred out of town, so I got stuck with doing all the management.

Frankly, I’m tired of tenants and want to sell the building, which has a handsome profit. But my co-owner doesn’t want to sell because the property is still going up in value. He absolutely refuses to even consider listing the building for sale. What can I do to get out of this deal?

A: You can bring a partition lawsuit to force the sale of the property. The court can order the property sold with the net sales proceeds divided between the co-owners.

Title Insurance Can Be Bought at Any Time

Q: About eight months ago, we bought our home from my uncle. We paid a $10,000 down payment and he is carrying the mortgage for 20 years. A family attorney handled the simple closing papers.

But nothing was said about title insurance. Now I hear my uncle is in financial trouble and we want to be sure the title to our home is all right. Several times you have mentioned title insurance. Where can we buy this insurance on our home?

A: It is never too late to buy an owner’s title insurance policy. Such a policy will insure you against unexpected title risks, such as forged signatures in the chain of title, claims by ex-spouses and undiscovered heirs and even judgment and income tax liens against your seller.

Except in Iowa, where title insurance is still not widely available (due to strong opposition by lawyers), you can buy title insurance either from a title insurance company or through a local title attorney. Just look in the phone book Yellow Pages.

Put House in Best Condition Before Sale

Q: We plan to sell our home in a few months. It needs paint and new carpets. I think we should give the buyer a credit allowance of $1,000, so they can do their own work, but the real estate agent advises us to do the work now. Who is right?

A: Your real estate agent is correct. Property fix-up before a home sale is usually returned many times its modest cost in the form of a higher sales price and a quicker sale than if you didn’t do the work.

Get your home into near-perfect condition by repairing, cleaning, landscaping, painting and recarpeting if you want top dollar and a quick sale.

Don’t Be Misled by Average Sales Prices

Q: I have heard from several real estate sales agents that the volume of home sales in my town is a little slow. But then I read in the newspaper the median sales price increased last month. Please explain how this can be.

A: Please don’t be misled by the average or median home sales prices you read in the newspaper. The average price is the total sales prices of homes in your community divided by the number of sales. But the median means an equal number of homes sold above and below the median price.

While I admit to reading these figures, I place little faith in them because they can fluctuate so much if a few very expensive homes or very inexpensive homes sell during the month.

Another important factor is the source of the statistics. Although most of these home sales prices come from the local Board of Realtors or other reputable source, many private sales are excluded, as are sales that were not part of the multiple listing service.

Would 40-Year Loan Reduce Payments?

Q: I constantly read in your column and other places about the difficulty many home buyers have qualifying for a home mortgage. It occurred to me the monthly payments can be substantially reduced by increasing the mortgage term to 40 years from 30 years. What do you think?

A: The idea sounds good but in reality it doesn’t work. To illustrate, suppose you want to borrow $100,000 at 10% interest. The monthly payment on a 30-year mortgage would be $877.57. However, the monthly payment on a 40-year $100,000 mortgage will be $849.14, only a $28.43 reduction in the monthly payment.

Why Long Listings Are Dangerous for Sellers

Q: Almost two months ago, I listed my home for sale with a real estate agent who came highly recommended by a friend. I stupidly signed a six-month listing, even though I made it very clear to this agent I need to sell my home quickly.

She put my listing into the multiple listing book and held an open house the first Sunday before the listing was distributed to the other agents. Her company, however, was too cheap to even run a newspaper classified ad, so she depended on a few open house signs at the nearby cross-streets.

I phone this agent several times each week to find out what is happening but she never returns my calls. The last time I called the secretary informed me, to my shock, that my agent just works part time and is a full-time school teacher. No wonder she is doing such a bad job. What can I do to get out of this horrible listing?

A: Your situation is a classic example of why I constantly advise against long listings. Haven’t you been reading this column recently?

Unfortunately, your situation is not that uncommon. You may be amazed to learn you are not the first reader who has written to complain about a lazy agent. To make matters worse, your agent failed to disclose that she is a part-time agent. I hope you know what I think about part-timers.

Please phone the manager of the brokerage where the agent sometimes works. Arrange a meeting to resolve the problem. At a minimum, your listing should be transferred to a full-time agent who will give your listing a 100% sales effort. If you are not satisfied, consider canceling the listing for lack of due diligence by the agent.

Tax Collector Has No Duty to Trace Owner

Q: I own some rural land which I inherited about 10 years ago from my late father. It was undeveloped. I recall paying the property taxes for a few years after inheriting it, but I forgot about it several years ago.

Last month I visited my property, and to my surprise found a house built on it. Upon inquiry, the homeowner said she bought the house from a builder. I checked the title and it seems the land was sold at a tax sale for unpaid property taxes. Shouldn’t I have been notified?

A: No. The local tax collector has a duty to send property tax bills to the last know address of each property owner. But the tax collector has no duty to trace the owners who move and fail to notify the tax collector of their new address.

As a property owner you had a duty to pay your property taxes. Failure to do so resulted in loss of the property when the tax collector sold it for unpaid real estate taxes. Sorry, but you have nobody to blame but yourself.

Child Needs Guardian to Convey a Title

Q: My mother’s will gave my son, now 15, title to some rural land. A developer wants to buy this land and I think my son should sell. The money will more than pay for his college tuition. However, the title insurance company says we must get a court-appointed guardian to represent him and sign the deed. Isn’t there some easier way to convey title for my son?

A: The advice you have received is correct. Sorry, I don’t know of any other way for a minor to convey valid title to real estate owned by the minor. Your situation shows why it is usually not a good idea to convey real estate to a minor.

Letters and comments to Robert J. Bruss, a San Francisco-area lawyer, author and real estate broker, may be sent him at P.O. Box 280038, San Francisco 94128.