Home seller should rethink listing with discount broker

DEAR BOB: My wife and I are thinking about listing our$425,000 home for sale with a real estate agency, which charges a $1,995commission. They will list our home for 30 days. During the 30 days, we cansell the home ourselves or if they sell it, we owe only $1,995. If anotherbroker sells the home during the 30 days, he would write in his salescommission on the offer, subject to our approval. During the 30 days, thelisting agency will put a for-sale sign in our yard with an information boxwith flyers about our home. We would have to show our home to potential buyersif the listing agent isn’t available to show it. Our home will not be in thelocal MLS (multiple listing service) until after 30 days if it doesn’t sell bythen. This agency claims to be a full-service real estate firm. But theircompetitors put their listings into the MLS within 24 hours after listing. Doyou think we should list with this firm? –Don S.

DEAR DON: According to statistics from the NationalAssociation of Realtors, at least half of all home sales involve a listingagent and a buyer’s agent. Most of those sales originate through the local MLS,the most powerful sales tool available to real estate agents.

Purchase Bob Bruss reports online.

Especially in the current buyer’s market for homes, why cutyourself off from half the potential buyers? They won’t even know your home isfor sale if it isn’t shown in the local MLS and on the nationwide www.Realtor.com Web site where many homebuyers start their searches.

Don’t fool yourself. That is not a full-service real estatebroker if you have to show your own home to prospective buyers. How will it beshown while you are at work or perhaps out of town for a few days? If your homeisn’t in the local MLS, and if it doesn’t have a lockbox on the door so MLSmember agents can easily show your home, how do you expect it to sell?

A yard sign and a few flyers are not enough to get a homesold for top dollar in today’s market. You need a successful listing agentaggressively marketing your home. Before you decide to list with that discountbroker, please interview at least three successful realty agents who sell homesin your vicinity. Listen to their listing presentations before selecting thebest for your situation. Compare their success records with the discountbroker.


DEAR BOB: My brother Joe lives with our parents. He has beenpaying his share of the mortgage since they all bought the home about 25 yearsago. Title is held in joint tenancy with right of survivorship. Joe’s name ison the title. They are thinking of selling the home, which was bought foraround $200,000 and is now appraised at $1 million. Is Joe entitled to $250,000capital gains exemption along with the $500,000 exemption for my parents? Iheard they need to change the title to tenants in common. –Jeff G.

DEAR JEFF: No need to change the title. Joint tenancy withright of survivorship is fine as long as all three names are on the title. Thehappy result is when your parents and your brother sell their principalresidence, they will each be entitled to a $250,000 principal residence saletax exemption for a total of up to $750,000 tax-free capital gains.

That presumes each of the three joint tenant co-owners meetthe Internal Revenue Code 121 test requiring ownership and occupancy of theirprimary residence for at least 24 of the 60 months before its sale. For moredetails, they should consult their tax adviser.


DEAR BOB: My mom is thinking of buying a condominium. Butthe insurance is confusing. Is the condo owner or the homeowner associationresponsible for insurance? Should she purchase coverage for the complete condojust to be safe? –John M.

DEAR JOHN: Insurance is the easiest part of buying a condo.The homeowner’s association must maintain adequate negligence liability andhazard insurance on the common areas, including the structure. But that masterpolicy does not insure the contents of individual condos in the event of aloss, perhaps due to a fire.

Your mom doesn’t have to buy any insurance. Her mortgagelender won’t require any insurance because condo lenders are protected by thehomeowner’s association master policy in the event of structural damage.

However, I’m sure your mother is a very smart woman whowants to be adequately protected just in case a loss occurs to the contents ofher condo or if she incurs negligence liability.

For just a few hundred dollars per year, she can buy acondominium owner’s insurance policy from a major insurance company. The policywill include negligence liability coverage, plus insurance for loss by theft,accidental damage to the contents of her condo, and other individual coveragesnot included in the association’s master policy on the condo complex.


DEAR BOB: I own a rental property on which I have beendeducting the depreciation tax deduction. But I recently read in your columnthat when I sell my property I will have to pay a 25 percent depreciationrecapture tax rate. I am currently in the 15 percent federal income taxbracket. If I will have to pay the 25 percent depreciation recapture tax when Isell, do you suggest I don’t even bother to claim the depreciation deductionsince I will have to pay back 10 percent more than I am saving? –Marian M.

DEAR MARIAN: Please don’t jump to incorrect conclusions.Owners of depreciable rental property must take the depreciation deduction ontheir tax returns, even if no tax savings result. Although you are in the low15 percent income tax bracket, the depreciation deduction probably saves youtax dollars.

If no savings result, the deduction from your rentalproperty can be “suspended” for use in a future tax year, or when yousell the property.

More important, you might never have to pay that 25 percentdepreciation recapture tax rate. Perhaps you never sell your depreciablebuilding and you die while still owning it. Then Uncle Sam can’t”recapture” and tax that depreciation deduction you enjoyed.

Or you might make an Internal Revenue Code 1031 tax-deferredexchange for another qualifying rental property of equal or greater cost andequity to pyramid your holdings. Again, there won’t be any depreciationrecapture on such an exchange. In summary, because the tax law requires you toclaim the depreciation deduction, enjoy it and hope you never have to pay therecapture tax.


DEAR BOB: I have a “doozy” of a question for you.My parents took care of my aunt and uncle for many years, paying their expensessuch as the mortgage and property taxes. My uncle died about 13 years ago andmy parents paid off the mortgage about 10 years ago. They took possession ofthe property after he died and continue to rent it today. But I just found outthey don’t have any fire insurance because it terminated when the mortgage waspaid off 10 years ago. What is the best way for them to take title? Squatter’srights? Adverse possession? Probate? I know they probably need an attorney butis there any way to avoid that? –LaVon G.

DEAR LaVON: Your parents need a real estate or probateattorney to sort out this mess. If there was no probate proceeding orliving-trust distribution after the aunt and uncle died, it is necessary todetermine who was entitled to receive the property title. The answer depends ifthere were written wills or, if not, if the title passes according to the statelaw of intestate succession to the closest relative.

After that is determined, your parents can assert theirclaim to title by adverse possession. “Squatter’s rights” is justanother name for adverse possession.

If the occupancy and possession by your parents has beenopen, notorious, hostile and continuous, plus payment of property taxes, forthe number of years required by state law where the property is located, theymight qualify to obtain title by adverse possession.

In the meantime, they need to promptly purchase a fireinsurance policy.


DEAR BOB: Can I deduct from my former tenant’s security depositthe extra cost of scraping and plastering to repair the damage from removingtwo-sided Velcro tape put all over the walls? –Janet H.

DEAR JANET: Yes. However, you should hire someone to do thatwork. If you do it yourself, and if the tenant disputes your deduction in localSmall Claims or Housing Court, many courts value the landlord’s labor at zero.

But if you pay someone to make the repairs, be sure toobtain a receipt marked “paid” and include a photocopy with yoursecurity deposit accounting to your ex-tenant.

The new Robert Bruss special report, “Pros and Cons ofToday’s Five Best Real Estate Profit Opportunities,” is now available for$5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this columnare welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006 Inman News

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