Not all real estate brokers favor raising commission

DEAR BOB: I liked your suggestion a few weeks ago to get ahome sold in a slow buyer’s market by increasing the sales commission to 7percent with 4 percent going to the buyer’s agent who produces an acceptablebuyer. However, when I told my listing agent I wanted to increase thecommission to get my property sold, she said, “My broker will not allowit. He says it’s not fair.” Is this legal? Or am I stuck with my listingagent and her broker for another 60 days until my listing contract expires?–Pat C.

DEAR PAT: I am shocked. That is the first time I have everheard a real estate broker refuse to raise the sales commission. As you know,that suggestion to raise the buyer’s agent commission received positiveresponses from several property sellers and agents in this column.

Purchase Bob Bruss reports online.

Variations include offering buyer’s agents incentives suchas the home seller’s car, a Hawaiian vacation, and various other specialincentives to get a property sold, especially in a buyer’s market. Increasingthe sales commission going to the buyer’s agent is just a variation ofincentives that have been used for years to get homes sold in a slow market.

I suggest you phone the broker and discuss (1) why yourlisting hasn’t sold and (2) why the broker opposes raising the sales commissionto 4 percent, which goes to the buyer’s agent. That is a great incentive to getbuyer’s agents, through the local MLS (multiple listing service), to show andsell your property to their prospects.

Maybe the listing broker misunderstood and thought youwanted to cut the commission to 4 percent. Unless his response is satisfactorywhy his firm hasn’t sold your property and why he refuses to raise thecommission to the buyer’s agent, ask him to cancel the listing so you canswitch to a more effective listing agent.


DEAR BOB: You recently answered a question about passing aproperty title to an heir by a revocable living trust. Does the living-trustheir receive the house at the decedent’s presumably low cost basis, therebyincurring a larger gain on sale than if title simply passed by probate to theheir by a will? –Deana K.

DEAR DEANA: The same “stepped-up basis” ruleapplies to the heir, whether title to the inherited property passes by probateof a will or without probate court costs and delays via the deceased’srevocable living trust.

The two primary living-trust advantages over a will are (1)avoidance of probate court costs and delays and (2) if the property ownerbecomes disabled, perhaps with Alzheimer’s disease or a severe stroke, then thesuccessor trustee takes over management of the living trust assets withoutnecessity for a court-appointed conservator.

Whether title passes through probate by a will, or withoutprobate via a living trust, the heir receives the property title with a new”stepped-up basis” to market value on the date of the decedent’s death.More details are in my special report, “24 Key Questions Answered: LivingTrust Secrets Reveal How to Avoid Probate Costs and Delays,” 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


DEAR BOB: My stepmother has a life estate in her house,which goes to my husband after her death. Is it possible for her to get areverse mortgage? If so, what happens after her death regarding the reversemortgage? –Sheila H.

DEAR SHEILA: To obtain a senior-citizen reverse mortgage,the homeowner must be 62 or older and hold fee simple absolute title. A lifeestate does not qualify.

When a homeowner with a reverse mortgage dies, the mortgage”matures” and the principal plus interest become due. To pay off areverse mortgage after the homeowner’s death, the heir can either sell theproperty or, if he desires to keep the property, refinance to pay off thereverse mortgage balance.


DEAR BOB: I co-own a property with someone who is not myspouse. She now wants to take out a home equity line of credit (HELOC) to paydown her credit card debts. But we currently have an $80,000 HELOC. Can she getanother line of credit secured by the property? – Ernie F.

DEAR ERNIE: I am not aware of any HELOC lender who will makea loan to one co-owner but not require the signature of the other co-owner. Ifyou both already have an $80,000 HELOC secured by the property, no lender islikely to make a second HELOC secured by the same property.


DEAR BOB: Is there any way to add my fiance to my currentmortgage without having to refinance? I was recently laid off my job and myfiance is making the mortgage payments. She has a much larger tax bite takenfrom her salary. I would like to add her to my mortgage. Would she then beeligible to take the mortgage interest and property tax deductions? –Mike T.

DEAR MIKE: To claim the itemized tax deductions, your fiancemust hold title to the property and be legally obligated to make the mortgageand property tax payments she pays

If you are 100 percent certain you will get married and youwill both live happily ever after together, then add her name to your title bya quitclaim deed.

After her name is on the title, when she makes the mortgageand property tax payments, although her name does not need to be on themortgage obligation, she can deduct the interest and taxes she actually pays.She can then have her employer adjust her withholding exemptions. For moredetails, she should consult her tax adviser.


DEAR BOB: Is this a good time to build a custom home? Orshould we wait for the cost of materials to decrease? We understand there arehouses on the market that are reasonably priced –Johnny B.

DEAR JOHNNY: Don’t expect the cost of building materials todecrease anytime soon. Building a custom home and buying a lot is usually farmore expensive than buying one already constructed. In most areas, homebuilders are now offering fantastic bargains and buyer incentives due to excessinventory.


DEAR BOB: I recently moved into a house I rented to tenantsfor 10 years. During that time, my tenant would not allow me to repaint becauseof the inconvenience to him. After the tenant moved out, I had the housepainted and repaired by professionals. My accountant says I cannot deduct theseexpenses although I would have gladly painted the property during the tenant’soccupancy. Can I deduct these costs? –Shirley P.

DEAR SHIRLEY: Unfortunately, your tax adviser is correct.Painting and repairing a rental property is a tax-deductible expense onSchedule E of your tax returns where you also report the rental income.

However, because the purpose of the painting and repairingwas to make the house suitable for your personal occupancy, then the cost is anon-deductible personal expense.


DEAR BOB: If I sell my rental property at a loss, can Iavoid that 25 percent depreciation recapture tax or do I have to pay itregardless of the loss? –Bill K.

DEAR BILL: Selling a rental property at a loss on which youhave deducted depreciation is extremely rare. That means you would be sellingbelow your depreciated book value.

For example, suppose you bought a rental house for $100,000and deducted $25,000 total depreciation during the years you owned it. Thatmeans its depreciated book value is now $75,000.

To sell at a loss, you would be selling below the $75,000book value in this example. In such a situation, you have no capital gain andno depreciation recapture tax.

However, let’s say you sell this property for $90,000.Although selling below your $100,000 purchase price, you have a $15,000 capitalgain ($90,000 minus $75,000), which is taxed as depreciation recapture. Fordetails, please consult your tax adviser.

The new Robert Bruss special report, “How to Sell YourHome for Top Dollar in a Buyer’s Market,” is now available for $5 fromRobert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet delivery at 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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