Real Estate Mailbag
Advice for 'Do-It-Yourself' Home Sellers
Q: DEAR BOB: Twelve years ago, we successfully sold our home by ourselves and saved the real estate sales commission. Now we are trying to sell our townhouse without an agent and are encountering nothing but problems. The additional legal paperwork and required disclosures are amazing. More important, we discovered that even paying a local real estate agent $795 to put our townhouse into the local multiple-listing service hasn't brought results. Agents aren't showing our home, even though it is reasonably priced and we offer a two percent broker co-op commission. We had one serious buyer who came back three times, but she wanted us to reduce our sales price by six percent to compensate because we wouldn't have to pay a sales commission. Any suggestions how we can sell our home and save the sales commission? -- Norman V.
A: DEAR NORMAN: I do not recommend attempting to sell your home alone without a professional real estate agent. Although I am a real estate broker, unless I sell a rental house to my tenant, I always list it with a local agent. There are many reasons.
Full-time professional real estate agents know local-market values, whether they are rising or falling. By attempting to sell alone, you could be vastly underpricing your home. Or maybe it is overpriced, so prospective buyers are staying away.
Many prospective home buyers shy away from "for sale by owner" transactions. They fear the seller is "strange" for not listing with an agent. There is a good reason more than 80 percent of home sales are handled by real estate agents.
As a do-it-yourself home seller, although you paid $795 to put your house in the local multiple-listing service, that doesn't mean it will be actively marketed. The MLS is a powerful marketing tool, but your home also needs exposure on the Internet, such as http:/
Offering a mere two percent sales commission to a buyer's agent is an insult because in many markets three percent is the norm. In today's competitive home sales market, you should list with a successful, aggressive real estate agent to get your home sold and to comply with disclosure requirements and thus prevent legal problems.
DEAR BOB: My father died in 1986. He left his house to me, his only child, subject to a life estate for his second wife. My stepmother is 93 and still living in the house, which is in a horrible state of disrepair. About five years ago, after reading your item about terminating a life estate for "waste," on my behalf a local real estate lawyer brought a lawsuit against her because she let the house deteriorate. However, the judge ruled there was not sufficient waste to terminate her life estate. The house, worth about $300,000, is declining but in a decent neighborhood. The life tenant isn't spending a penny to maintain it. Is there anything I can do? -- Ryan R.
DEAR RYAN: You could bring another lawsuit for waste, but there is no guarantee of success this time, either. Another alternative is to offer your stepmother cash to terminate her life estate. Perhaps she would like to move to an assisted-living center where she can receive care and cooked meals in a nice facility. Offering her money might convince her it's time to move out and terminate her life estate. Consult a tax adviser for details.
DEAR BOB: After reading a recent article of yours, I had the impression it is economically better to inherit property than to receive it as a lifetime gift, but both situations are subject to tax. Can you expand on this topic? -- Al R.
DEAR AL: There are many reasons why it is far better to receive real estate as an inheritance than as a pre-death gift. From the heir's viewpoint, inheritance is more beneficial than a lifetime gift because the heir receives a new "stepped-up basis" of market value on the date of the decedent's death. This is a huge tax benefit, especially if the property had been owned many years with a low basis.
When a property is given before death, the recipient takes over the donor's often low adjusted-cost basis. Also, if the net value exceeds $12,000, the donor must file a federal gift tax return. But no federal gift tax will be due if the donor has given away less than $1 million in lifetime non-exempt gifts.
However, if the decedent's net estate exceeds $2 million, then federal estate tax must be paid by the estate before the heir receives inherited title. Also, in a few states, there might be an inheritance tax if the heir is not a close relative. Consult a tax adviser for details.