Unusual advice for a do-it-yourself home seller

DEAR BOB: We are considering selling our home ourselves instead of hiring a professional real estate agent and paying a sales commission. Our reason is we have not found an agent who seems to really work hard for the seller. How difficult is it to sell your own home? Do you have any advice or suggestions? – Martha C.

DEAR MARTHA: Most home sellers dream of selling their own homes without professional help to save the sales commission. Although I have been a real estate broker for more than 36 years and am very capable of selling my own properties, unless I sell to a tenant I always list my properties with another real estate agent.

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Why? Because I know the listing agent I select can negotiate better terms and net sales price than I can when I am personally selling my own property.

Also, I won’t have the hassles of listing the property on the Internet, dealing with the Multiple Listing Service, showing the property to buyers obtained by other agents, answering their questions and dealing with the 1,001 details of getting the sale closed even after an acceptable buyer is obtained.

Unless you have recent real estate experience and can comply with all the disclosure laws to avoid after-sale lawsuits, selling your own home is not recommended. Before you decide to become a do-it-yourself seller, please interview at least three successful local realty agents who sell homes in your vicinity.

Be honest. Tell each agent when you listen to his/her listing presentations you are thinking of selling your home alone without a professional agent. They won’t mind.

Here’s why: Smart realty agents know that more than 80 percent of do-it-yourself home sellers fail, and, after 30 to 60 days, they list their homes for sale with a professional agent. Chances are you will call one of the agents you interviewed.

Another major reason to interview three successful local agents is each agent should prepare a written CMA (comparative market analysis) for you showing recent comparable sales prices of nearby homes like yours, the asking prices of competitive neighborhood homes (your competition) and asking prices of nearby recent expired home listings. Each agent will then give you their opinion of your home’s market value.

Be sure to ask each agent which disclosure forms are required in your locality, both state and local. You will be shocked by all the mandatory disclosure paperwork to avoid a lawsuit.

Only after you have all this information are you prepared to make an intelligent decision as to whether you are capable of selling alone. A good book to read on this topic is “The For Sale By Owner Kit, Fourth Edition” by real estate broker Robert Irwin, available in stock or by special order at local bookstores, public libraries and www.amazon.com.

ARE INTEREST ONLY MORTGAGES A GOOD OR BAD DEAL?

DEAR BOB: What do you think about the new interest only home mortgages? I have been pre-approved by a mortgage lender (as you often recommend) before buying a home. She explained my various mortgage choices but seemed to be “pushing” an interest-only mortgage for a first-time home buyer like me – Brendan S.

DEAR BRENDAN: Interest only mortgages have many advantages for you and the lender. But there is a major disadvantage for you.

For you, the major advantages are (1) your monthly payment will be the minimum possible (because there is no principal portion of each payment to gradually decrease the mortgage balance) and (2) 100 percent of each payment is tax-deductible interest.

For the lender, the big advantage is all the lender’s money will be busy earning interest and none will be unprofitable return of principal (which the lender then has to lend to another borrower to keep earning interest).

If you plan to stay in your home “forever” and never expect to sell, the interest only mortgage disadvantage is you won’t have any mortgage balance reduction. In this situation you should have an amortized mortgage so you will eventually own your home free and clear in 30 years.

However, if you are like most first-time home buyers, you will probably keep your residence a few years before moving up to a better home. Mortgage principal reduction then isn’t important to you. An interest only mortgage could be ideal for you.

INSURANCE WARNING PAID OFF FOR HOMEOWNER

DEAR BOB: Thank you for your item some time ago about not filing small homeowner insurance claims, even if they are covered. During a storm, our tree blew over on our neighbor’s property, damaging his fence. When I phoned my insurance agent, whom I have known at least 15 years, I explained the situation. He said the damage was covered and my insurance company would pay. But he alerted me that the insurance company might cancel my policy at its next renewal (although I have been insured with the same insurer about 10 years) for filing a claim. I called a tree removal company, which bid $450 to remove the tree. A fence company bid $225 to fix the fence. Since I have a $250 homeowner’s policy deductible, my insurance agent advised me not to file a claim and pay the $700 myself. I appreciate your great advice not to file small insurance claims so I won’t risk losing my homeowner’s insurance – Bernice G.

DEAR BERNICE: You did the right thing in today’s hostile homeowner’s insurance environment. I suggest you raise your very low $250 deductible to $500, $1,000 or higher so you won’t even consider filing a small homeowner’s insurance claim.

SHOULD HOME BUYER CLOSE AT THE END OR BEGINNING OF THE MONTH?

DEAR BOB: We are buying our first home. The closing date is a few weeks away. My Realtor, who is an inexperienced agent, wants to close the first week of the month. But my mortgage loan officer says we should close at the end of this month because it won’t cost us so much interest money up-front. I realize the loan officer’s paycheck probably depends on how many loans he closes this month. Who is right? – Pete P.

DEAR PETE: Your mortgage loan officer gave you great advice. To conserve your cash, close your home purchase on the last business day of the month unless it is a Monday. Then close the sale or mortgage refinance on the previous Friday.

The reason is you want to minimize the cash needed at the closing to pay mortgage interest until the end of the current month before you gain possession of the house.

You don’t want a closing and recording of the deed to occur on a Monday because most lenders will fund the mortgage on the previous Friday and charge you interest over the weekend before the transaction is recorded.

However, a few enlightened mortgage lenders encourage early in the month closings by not charging interest at the closing until the end of the current month. Instead, because mortgage interest is collected in arrears, enlightened lenders make your first mortgage due on the first day of the next month, including interest from date of closing until the end of the month.

IF YOU DON’T WANT A DEED, YOU CAN REJECT IT

DEAR BOB: My mother has terminal cancer. Her doctor says there is nothing that can be done. He says she could live a year, or she could die in a few months. My mother has her home in a living trust, as you often recommend, to avoid probate problems. That’s fine with me, but she insists on going to her attorney now to sign a quit claim deed for her home to me. Because she has owned her home many years and has a very low basis, from reading your articles I have tried to discourage her. However, she seems very determined to deed her house to me, her only child, before she dies. What can I do to prevent this? – Simon O.

DEAR SIMON: Because your mother has owned her home many years, she probably has a very low adjusted cost basis. If she deeds her house to you before she dies, you must take over that low basis. That’s not good for you.

You would be much better off inheriting your mother’s house from her living trust after she passes on. Then you will receive a new “stepped-up basis” of the home’s market value on the date of death. This is much better for you to minimize future capital gains tax.

If you can’t talk your mother out of gifting her house to you before she dies, you can reject her quit claim deed. For details, please consult a local real estate attorney.

The new Robert Bruss report, “Consumer Awareness Guide to Living Trust Pros and Cons for Avoiding Probate Costs and Delays,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.