DEAR BOB: Looking back, my wife and I realize we sold our home much too cheaply. We’re not blaming our listing agent (the price we set was $30,000 higher than his recommended price). But we suspect he already had a prospect for our desirable home. The buyer agreed immediately to our asking price and included a $5,000 deposit check to seal the deal, which recently closed. But now we wonder. Suppose we had decided not to sell, sent the buyer’s check back, and took our house off the market. Would we still have owed our listing agent a 6 percent sales commission, even without a sale, because he brought us a qualified buyer? – Walker P.
DEAR WALKER: If your listing agent brought you a full-price, all-cash, no-contingency purchase offer, which exactly met the listing terms that you refused to accept, your agent did his job of obtaining a “ready, willing and able buyer.”
Purchase Bob Bruss reports online.
He would have been entitled to his full listing commission even if you rejected that purchase offer and no sale took place.
It sounds like you and your wife contracted a serious case of seller’s remorse disease. It often strikes home sellers who receive a full-price purchase offer shortly after listing their home for sale.
To prevent seller’s remorse disease from striking, before listing with an agent, you should have interviewed at least three successful realty agents who sell homes in the vicinity of your home.
Each agent would be glad to give you his/her listing presentation, including a recommended asking price based on a CMA (competitive market analysis). Each CMA includes recent sales prices of similar homes like yours, asking prices of neighborhood homes listed for sale (your competition), and asking prices of recently expired comparable listings (which are often overpriced).
Only after talking with at least three local agents, and reviewing their CMAs, would you feel confident you set the correct asking price.
IS CASH REQUIRED AT A FORECLOSURE SALE?
DEAR BOB: I recently saw a legal newspaper ad for a foreclosure sale. The mortgage company minimum bid seems reasonable. But I don’t have that much cash without getting a mortgage. Is cash required to bid at a foreclosure sale? – Cheryl L.
DEAR CHERYL: In most states, bidders at foreclosure sales must have cash (bring casher’s checks because they are much safer). A few states allow the successful bidder to produce the cash within 24 hours to 30 days, depending on state law. A phone call to the foreclosing lender will produce an exact answer.
However, bidding at foreclosure sales can be tricky. For example, that legal notice you read might be a foreclosure sale on a second or even a third mortgage. If you are the successful high bidder, you purchase title “subject to” any senior mortgages and unpaid property taxes.
More details are in my new special report, “Pros and Cons of Earning Big Profits from Foreclosures and Bargain Distress Properties,” 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.
TITLE ABSTRACT WITHOUT TITLE INSURANCE IS DANGEROUS
DEAR BOB: I am buying a house in a state that uses title abstracts. Title insurance is offered but it is quite expensive. Should I feel safe with a title abstract? – Bertha B.
DEAR BERTHA: A title abstract is a summary or history of the title status for the property you are buying. Title abstracts can be fascinating reading, especially if you are buying a historical property. But there is no guaranty of accuracy.
Without an owner’s title insurance policy, if the abstractor made a mistake, you might face a substantial title loss. Your best assurance of receiving marketable title is to obtain an owner’s title insurance policy, which protects you and even your heirs.
90-YEAR-OLD WIDOWER UNDERSTANDS STEPPED-UP BASIS
DEAR BOB: I greatly enjoy your articles, especially the recent one about stepped-up basis for inherited property. But at the age of 90, I’m a little slow. Will I have to sell my home in the year of my wife’s death? We paid $75,000 for it. Current value is $400,000. I know my exemption is $250,000. But what is my new stepped-up basis? – Emil S.
DEAR EMIL: There’s no reason for you to rush to sell your home in 2004 if that is the year of your co-owner wife’s death.
However, if you sell in the year of her death, you will be entitled to a tax exemption up to $500,000 under Internal Revenue Code 121. That’s presuming both of you occupied the principal residence at least two of the last five years before its sale.
Presuming you inherited your wife’s half of the house, your new stepped-up basis on that half will be $200,000. Add your $37,500 half of the original basis so your new total stepped-up basis is $237,500. If the house sells for around $400,000 net, your $250,000 exemption means you will owe no capital gain tax.
If a home is in a community property state of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, the surviving spouse’s new basis is usually stepped up to 100 percent of market value on the date of the deceased spouse’s death. For full details, please consult your tax adviser.
MORTGAGE LENDER’S “GOOD-FAITH ESTIMATE” IS A SCAM
DEAR BOB: My wife and I are having a new home built, which will be ready to move in around Sept. 1. We have received a lot of good-faith estimates of closing costs from different mortgage companies over the Internet. Which ones can we trust? – Clint B.
DEAR CLINT: Don’t trust any of them. A mortgage lender’s “good-faith estimate” isn’t worth the paper (or cyberspace) it’s written on.
There is no enforcement penalty for even blatant lies. Dishonest mortgage lenders know this so they often lie to get your business.
For example, a few weeks ago I was interviewed on KGO-ABC radio in San Francisco. A caller from Sacramento received a mortgage broker’s good-faith estimate of about $4,000 closing costs. But at the actual closing, he was confronted with more than $10,000 of mortgage fees and closing expenses. The borrower then had no viable choice but to take the mortgage with its inflated costs or lose the property.
Personal recommendations of friends and business associates are best for finding honest mortgage lenders. Please be extremely wary of Internet lenders, especially if they are not located in your state.
NO RIGHT TO A PROTECTED VIEW
DEAR BOB: One of the older homes in my neighborhood is located on three lots. A developer recently purchased that property. He plans to tear down the house and build three new homes, which will substantially block my view. What can I do? – Linda J.
DEAR LINDA: Unless you have purchased a view easement (often called a light and air easement) over that property, your view is not protected. The developer can build the new houses as tall as allowed by local zoning even if they block your view. For details, please consult a local real estate attorney.
NO PRESCRIPTIVE EASEMENT OVER RAILROAD LAND
DEAR BOB: I am a member of a sportsman’s club. For more than 50 years, we have been using about 80 feet of an old abandoned streetcar line to get to our property. The property is now owned by a major railroad. Can we claim this access to our property by a prescriptive easement, which you often discuss? – Bobby B.
DEAR BOBBY: No. Obtaining a prescriptive easement or title by adverse possession is generally not available against government agencies, public utilities and railroads.
However, your letter says this is an abandoned streetcar right of way, now owned by a railroad. There are special federal and state laws affecting abandoned railroad rights of way which, in some situations, revert to the adjoining land owners. Or your club might be entitled to an easement by necessity if its property is landlocked.
I suggest your club contact the railroad to see if the parcel can be purchased at a fair price. A good friend of mine has acquired substantial abandoned railroad trackage at nominal cost. Your group might be able to do the same.
WHO GETS FORECLOSURE SALE PROFITS?
DEAR BOB: When a person loses his/her home at a foreclosure sale by the lender, what happens to the profit if a property sells for several times more than is owed? Does the excess money go to the lender or the borrower? In my situation, the mortgage company received approximately $240,000 net when it put the house on the market for sale – Cathy L.
DEAR CATHY: At the lender’s foreclosure sale, any bid amount exceeding the balance due on the mortgage or deed of trust being foreclosed goes first to junior lienholders (such as a second mortgage lender) and then to the property owner who lost the property.
However, if no bidders showed up at the foreclosure sale, the foreclosing lender acquired the title. Most mortgage lenders usually then sell the property for close to fair market value and are entitled to keep the entire net proceeds. For more details, please consult a local real estate attorney.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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