Simple as ABC--Seller Responsible Only for Paying Fee to Listing Agent
QUESTION: I sold my home. Agent A had my listing and agent B produced the buyer. But about two weeks before the close of the sale agent C claimed part of the sales commission. Agent C obtained a purchase offer which I rejected about two months ago. The same buyer then went to agent B who successfully negotiated a sale. Agent C claims she is entitled to part of the sales commission because she first showed my house to the buyer (true) and she negotiated to almost get the price which I accepted (also true). Do you think I owe part of the sales commission to agent C?
ANSWER: No. You owe the full sales commission to your listing agent A. That agent then has a duty to share the commission with selling agent B. Since agent C did not obtain the successful purchase offer, she is not entitled to any part of the sales commission.
However, this is not your problem. The dispute is among the real estate agents. Avoid getting involved. Pay your commission to agent A and forget it. If the agents can’t resolve their dispute, let them fight it out either in arbitration or in court.
Take the Free Meal but Don’t Buy Anything
Q: Recently we received a phone call from a salesman who is selling foreclosed Florida land. He says he represents a bank that foreclosed on the developer and the bank is selling the land at bargain prices which the bank will finance. We are familiar with the general area and agree it is a bargain. He invited us to a free dinner and presentation. Do you think we should go?
A: Yes. Don’t turn down a free meal. But don’t buy whatever it is you are offered. Never, never, never buy any property you haven’t seen and can’t use within six months after purchase.
Thank you for sharing the information that the telephone land salesmen are back. It has been a long time since I have received a letter like yours.
The land may seem like a bargain, but it isn’t. The profits are being made by the salespeople and possibly the seller. Incidentally, don’t be fooled by the sales hype that a bank is selling the land. Banks usually don’t operate boiler-room telephone sales offices.
Fictitious Name Won’t Conceal Ownership
Q: Several weeks ago you ran a letter from a man in a small town who wanted to keep his property ownership private. You suggested several alternatives such as forming a corporation, a trust, or a holding agreement. But you neglected the method I have been using for about 20 years. I simply use a fictitious business name and hold all my property titles in that name. I admit it is a little bit of a problem when I want to refinance or sell because then I have to transfer title into my real name. But this is a minor difficulty compared to having my name on the public records.
A: When you originally recorded your fictitious business name, sometimes called a DBA (doing business as), both the fictitious business name and your real name were recorded on the public records. Any person who wants to check your ownership can review the public records to learn which properties you own, but most people won’t go to that much trouble.
Title Insurance Can Prevent Challenges
Q: About two years ago we bought some rural land from an elderly lady who was also a real estate agent. We paid about $12,000, she gave us the deed, and it was pretty simple. A few months ago we went to visit our land and found a mobile home on it. When we inquired, the rough-looking man and woman said they inherited the land from his mother who died last year. When we said we already owned the land, they said they owned it and they showed us an official looking deed from the court. Did we get swindled?
A: Possibly. I’ll presume you did not obtain title insurance. If you received title insurance, then consult the title insurer to straighten out this mess.
You say “she gave us the deed.” That conveyed title to you, but your next step should have been to record the deed in the county where the property is located to give constructive public notice of your ownership.
If you failed to record your deed and the probate court transferred title when the deceased lady’s estate was probated, the couple you visited may now be the legal owners of the land. The general rule is the first party to record wins unless they had knowledge of a previous sale of the property.
By all means consult a real estate attorney in the county where the land is located. The mystery will be solved at the recorder of deeds office. If you properly recorded your deed then you own the land and should bring a quiet title lawsuit to clear your title and remove the trespassers.
Exclusive Agency Listing Hits Nerve
Q: You and your big mouth. A few months ago you ran an article describing different types of real estate listings such as open listings, exclusive right to sell listings, net listings and exclusive agency listings. In our local board of realtors we don’t use exclusive agency listings because none of the members like them.
But since your article appeared we have had dozens of home sellers who want to list their homes on an exclusive agency basis because they don’t want to have to pay a sales commission if they find a buyer without an agent’s help. In the future, will you please stop writing about exclusive agency listings?
A: No. Home sellers have a right to know about exclusive agency listings. Many realty agents are only too happy to accept this type of listing because they know the chances of the seller finding a buyer without an agent’s help are virtually nil.
Frankly, I am surprised your local board of realtors doesn’t use exclusive agency listings. You are missing an opportunity to serve your clients, especially those who are considering selling their home “for sale by owner” without an agent.
The exclusive agency listing earns the listing agent a sales commission if the agent or another licensee finds an acceptable buyer. Only if the seller finds a buyer without any agent’s help is the sales commission avoided.
Don’t Count on Market Value Appreciation
Q: I want to start investing in real estate, probably single family rental houses. As a percent of the purchase price, how much do you think houses will appreciate in market value during the next year?
A: I have no idea. Never count on market value appreciation of real estate. In some years it might be 5, 10, or even 20%. In other years property values might drop, as they did recently in the Northeast and in Texas.
However, if you want to assure your property will increase in market value, I recommend buying run-down fixer-upper property which you can upgrade to force its market value up. That’s what I do.
Tenant ‘Sells’ House to Unsuspecting Buyers
Q: After reading your excellent columns for several years, we made a stupid mistake last May. We bought a house direct from the seller. But that wasn’t the mistake. Now we realize he was a sweet old con man.
We paid $35,000 cash down payment and he agreed to finance our purchase on very attractive terms. Too attractive, we later learned. He handled all the details of the closing, even bringing the papers to our home. Everything looked legal and, never having bought property before, we didn’t know any better.
About two months after we moved in we started receiving mortgage letters addressed to someone we didn’t know, but at our address. The mailman said this person lived in the house about a year ago. To make a long story short, the con man we thought we bought the house from was merely a tenant. He apparently was making the mortgage payments for the real owner, who is now trying to evict us.
We went to a lawyer who says we got a forged deed, so we have no title. What should we do? We can’t find the con man who sold us the house.
A: I’m sorry, but I don’t know how you can avoid losing your $35,000 and the house. The scam never would have worked if you remembered from this column to always get an owner’s title insurance policy when buying any property.
While we’re on the topic of title insurance, there are many mortgage scams where investors lend money secured by real estate. These investors can avoid losing their money to crooks by insisting on receiving a lender’s title insurance policy for their loans.
To illustrate, in my community we had a local con artist, now in jail, who acted as a loan broker by placing funds for elderly people who loved the high interest rate. What they didn’t know was the loan broker had created a Ponzi scheme with as many as 13 loans on one over-encumbered property he owned. This never could have happened if each greedy lender had insisted on a lender’s title insurance policy.
In summary, always obtain an owner’s title insurance policy.
Letters and comments to Robert J. Bruss, a San Francisco-area lawyer, author and real estate broker, may be sent to P.O. Box 280038, San Francisco, Calif. 94128.
