It's Difficult, but Agent Can Represent Buyer, Seller


QUESTION: We listed our home for sale in late April with a Realtor who came very highly recommended by a trusted friend who had bought and sold homes with her.

Within a week, the Realtor brought us a purchase offer from her buyer. She explained that since she would be representing both the seller and the buyer, she would reduce her sales commission to 5%. We liked that.

Then she showed us why her buyer's offer, almost $18,000 below our asking price, was justified. We reluctantly accepted.

Now we are having second thoughts because we've checked recent sales prices of similar nearby houses, which are up to $7,500 higher than what we got. Is it legal for a Realtor to represent both the buyer and seller?

ANSWER: Yes. The listing agent can also represent the home buyer. This is called a "dual agency," and it must be fully disclosed to both parties.

However, it is a very difficult situation for the realty agent because she has a fiduciary duty to both parties. She must look out for the best interests of both buyer and seller, even though there is an inherent conflict of interest.

If the realty agent made any misrepresentations to you, that entitles you to either seek damages or rescind the sale. However, proving valuation misrepresentations can be extremely difficult.

Consult a local real estate attorney to determine if you should proceed with the sale.

How Much to Offer? Well, That Depends

Q: Is there a rule of thumb as to how much below the asking price a home buyer should offer? A friend told me to offer at least 10% below the asking price. Is this correct?

A: No. There is no rule of thumb as to how much below the asking price a home buyer should offer. In the currently strong home sales market, I've seen many homes selling at or even above the asking prices.

Before making a purchase offer, ask your agent to prepare a written comparative market analysis.

The analysis includes recent sales prices of comparable nearby homes, asking prices of neighborhood homes currently listed for sale and asking prices of listings that recently expired unsold.

Ask how long the house you want to buy has been listed for sale. If it has been on the market more than 60 days, there's a good chance it is overpriced and that's why it hasn't sold.

After you have all this information, ask your agent to help you arrive at an intelligent offer price. Remember, you can always come up in offer price, but you can't come down after the seller accepts your purchase offer.

Personal Expenses Need to Be Differentiated

Q: We own a rental property in Florida. It used to be our winter home, but we decided to rent it year-round to tenants. Now we visit the area for about four weeks each winter and stay at a hotel. Can we deduct our travel expenses? While we are there, my husband spends several days making repairs and painting the house.

A: Part of your travel expenses qualify as tax-deductible "ordinary and necessary" business expenses for your rental property.

However, these expenses must be allocated between personal and business purposes. Unless the house is in bad shape, I doubt your husband spends every day for four weeks repairing it. Ask your tax advisor to help you make the allocation.

Owner's Title Insurance May Prevent Home Loss

Q: You recently recommended that a questioner buy a mortgage lender's title insurance policy plus an owner's title policy to protect his home equity. You said the biggest cause of property loss is forged signatures on deeds.

Does this mean that if someone challenges my home's title, the title insurer will go with me to court? But what if the judge or jury rules for the title challenger? What good is title insurance if this happens?

A: Without a lender's title insurance policy, lenders won't approve a mortgage. For a slight additional premium, home buyers can also obtain an owner's title insurance policy to protect their equity. Title insurance is a one-time premium for as long as the owner, and heirs, own the property.

Forged signatures in the chain of title cause the biggest title losses because they are virtually impossible to detect until the defrauded title holder claims the property. It is usually an ex-spouse whose signature was forged on the deed. When the person discovers the swindle, he or she either claims the property or demands payment.

A homeowner with an owner's title policy then turns the claim over to the title insurance company. If a monetary settlement is not reached, the case goes to trial. Should the property owner lose to the title claimant, the title insurer then pays the loss to the insured owner.

Shop Around for Management Fees

Q: We plan to rent our house for two or three years while we live in Hong Kong for business. I checked with several Realtors. Most will find tenants for us, but only two will agree to manage the house (collect the rent, rent any vacancy that occurs and arrange necessary repairs).

Both want a fee of 15% of the gross rent, plus a 5% rental fee when a vacancy occurs. What should the fees be for professional property management of a house?

A: Most professional property managers do not want to manage single-family house rentals. Realtors who have rental departments will find you tenants for your vacancy. But collecting the rent and supervising repairs can become very time-consuming if problems develop.

The fees you were quoted are not outrageous. But I've heard of good property managers who will handle house rentals for fees of 10% of the gross rents collected. Perhaps you should shop around further.

Seller Misses Deadline for Sales Tax Exemption

Q: I closed the sale of my principal residence on March 7, 1997. Am I eligible for that new $250,000 / $500,000 home-sale tax exemption?

A: No. Principal residence sellers who closed their sales before May 6, 1997 are not eligible for the new $250,000-per-qualified-seller tax exemption ($500,000 for husband and wife filing jointly). Your home sale, however, qualifies for the now-repealed "over 55 rule": $125,000 tax exemption and / or the "rollover residence replacement rule" tax deferral.


The new Bruss special report "How to Buy Your Home for Nothing Down" is available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010.

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