DEAR BOB: I recently read your explanation on how to choose an outstanding real estate agent. What is your opinion of FSBO (for sale by owner) home sales? I have almost always sold my own properties with good results. Are there any things I should be cautioned about in today’s active real estate market? – Barbara F.
DEAR BARBARA: Before you decide to sell your home alone without a professional real estate agent, please interview at least three successful realty agents who sell homes in your vicinity.
Purchase Bob Bruss reports online.
You will learn (1) their opinions of your home’s market value based on their CMA (comparative market analysis) reports, (2) how their evaluation was determined based on recent comparable home sales prices, and (3) all the disclosure paperwork involved in home sales today to avoid lawsuits by buyers.
Most FSBO sellers give up after 30 to 60 days. Chances are you will then list your home for sale with one of the professional agents you interviewed before attempting to sell your home alone.
If you decide to sell your home without a professional agent, please realize you will be cutting yourself off from the most powerful home marketing method: the MLS (multiple listing service) and having your MLS listing on the Internet at www.realtor.com.
Today, more than 70 percent of home buyers start their quest on the Internet. If your home isn’t listed there, you are greatly limiting your potential market for prospective buyers and receiving top dollar from a well-qualified buyer.
SELLING HOME TO BUY ANNUITIES MIGHT NOT BE VERY SMART
DEAR BOB: My mom passed away in May 2003, and my dad went into an assisted living home in May 2004. Their home is now vacant. It is worth at least $750,000. Their investment broker recommends selling the home and buying annuities. Others have suggested a trust account, while still others suggest waiting until dad passes away. My dad has Alzheimer’s disease but is otherwise in good general health. What do you recommend? – Annie D.
DEAR ANNIE: Today is an excellent time to sell dad’s home to provide money for his future care. However, I very strongly disagree with the suggestion to tie up the sales proceeds and purchase annuities.
Is he still competent enough to understand what he is doing? If so, I suggest you get him to sign a notarized power of attorney so you have authority to sell the house and make other major decisions involving the home sale.
The primary reason I do not recommend buying annuities with the home sales proceeds is that is a major decision, which makes those assets unavailable for your dad’s other possible needs, such as medical care. My suggestion is get the home sold while the market is strong in most communities, but don’t rush to buy annuities.
SHOULD HUSBAND ADD WIFE TO HOME TITLE?
DEAR BOB: When I applied for a home loan, it was more beneficial to apply alone and leave my wife off the mortgage. Should I add her to my title and does it really matter? If anything happens to me, she would get the house – Jacob F.
DEAR JACOB: You might think your situation is unusual, but it really isn’t. Because one spouse has good credit and the other spouse has bad credit, it is often easier to take title and get the mortgage in just one spouse’s name.
The last time I saw that situation, where a couple bought a house from me, the wife’s income and credit as a nurse were great. But her husband’s credit was bad because of a recent business bankruptcy.
So title was taken in the wife’s name alone. The husband didn’t seem to mind. I presume, if the husband behaved, the wife later signed a quit claim deed for a 50 percent interest in the house to her husband.
If your marriage is strong, there’s no reason not to sign and record a quit claim deed to your wife for a 50 percent interest in the house. But there’s no reason to notify the lender. Of course, be sure you either have a living trust and/or individual wills just in case of simultaneous deaths, such as in a plane crash.
CAN REALTY INVESTOR EXCHANGE INTO A HOUSE FOR LATER OCCUPANCY?
DEAR BOB: Can I sell my investment property and avoid capital gain tax with an IRC 1031 tax-deferred exchange by acquiring a rental house that will later become my personal residence? – Kerry S.
DEAR KERRY: Yes. The only way to avoid capital gain tax on the sale of an investment property is to make an Internal Revenue Code 1031 tax-deferred exchange for another investment or business property of equal or greater cost and equity.
Thanks to a Starker delayed exchange such a transaction has become quite routine. Most tax advisers suggest renting the acquired house 6 to 12 months to show rental intent at the time of the transaction.
When you sell your investment property, be sure the sales proceeds are held by a qualified third-party intermediary accommodator, such as a bank trust department. You then have 45 days to designate the replacement property of equal or greater cost and equity, and up to 180 days to complete the purchase with the sales proceeds. Details are in my special report, “How to Exchange Your Way to Tax-Deferred Real Estate Wealth,” 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.
IT’S A SERIOUS MISTAKE TO SUE THE WRONG PERSON
DEAR BOB: Our neighbor is suing us involving a property that belongs to the city where we live. It is not our property. What can I do to reverse that lawsuit? – Neusi G.
DEAR NEUSI: A quick phone call to the attorney or plaintiff who filed that lawsuit should bring a prompt dismissal against you. It is a serous matter, possibly entitling you to monetary damages, to sue the wrong person if you have no involvement.
If, for some reason, the plaintiff’s attorney or the plaintiff refuses to drop the lawsuit against you, be sure to answer the complaint promptly. Failure to answer and deny ownership might prove costly later. For full details, please consult your attorney.
SELLER NEED NOT SELL AT FULL ASKING PRICE
DEAR BOB: My husband and I made a full-price purchase offer on 58 acres advertised for $551,000. Instead of accepting, the seller counteroffered at $696,000. Is this legal? We think they thought their asking price was too low. There are no other offers. Doesn’t the seller have to sell to us? – Cindy J.
DEAR CINDY: No. A for-sale property ‘s asking price is legally an invitation for purchase offers at that price. But the seller need not accept a full-price purchase offer.
If your purchase offer was made shortly after the acreage came on the market for sale, perhaps the seller thought he could get more for the property.
Should you feel your offer was at the market value and you don’t wish to accept the counteroffer or make a counter-counteroffer, I suggest you politely inform the seller you don’t wish to raise your offer price but you will still buy at the price you offered. It would not be unusual for the seller to come back to you in a few weeks and accept your original offer (if you are then still willing to purchase at that price).
UNTIL A PROPERTY IS SOLD, THERE IS NO CAPITAL-GAIN TAX DUE
DEAR BOB: My client (I am a real estate broker) has owned a rental house for 17 years. She took the usual depreciation deductions on Schedule E of her tax returns. Now she has refinanced the property, her son has moved in, and she added his name to the title along with her husband. She removed the property from her Schedule E, as it is no longer a rental. The son pays the mortgage and is claiming the tax deduction benefits. Her question to me, and now mine to you, is what happens to all the depreciation she deducted over the last 17 years since there has not been a sale? – Joyce H.
DEAR JOYCE: Nothing happens, taxwise, until there is a sale of the property. All that happened was a change of use from rental to personal use by one of the co-owners.
However, when the property is sold, then your client’s depreciation deducted since 1997 will be “recaptured” and taxed at the special 25 percent federal tax rate. For full details, your client should consult her tax adviser.
The brand-new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes,” 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.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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