Big-Picture Sites Most Helpful for Online Browsing

By Ilyce R. Glink and Samuel J. Tamkin
Saturday, September 6, 2008

With prices falling, I've been thinking about buying a rental house. Like every other home buyer, I've seen the number of "for sale" signs increasing as the number of foreclosures multiplies.

More than 80 percent of home buyers start their search for a house on the Web. They will tap into an average of seven Web sites and search among them to find what they're looking for.

The big real estate Web sites would prefer that you simply choose one and be done with it. From a business perspective, that makes sense. The site that captures the most visitors and provides the most leads to real estate agents will be the site that gets the biggest payoff.

But while researching homes for sale in my neighborhood across the major Web sites, I have discovered that no matter how far real estate Web sites have come, there's still a long way to go when it comes to providing complete information on buying, financing and moving into a house.

I tapped into three of the biggest real estate Web sites to see how they compare in terms of the depth of listings.

Zillow, which started as a place to find out how much your house was worth (what it calls a Zestimate), has blossomed into a bulletin board for real estate for sale. The day I searched, there were 135 homes listed for sale in my neighborhood, most of which had been posted by big real estate brokerage companies, including Coldwell Banker, Baird & Warner and Prudential Real Estate.

The least expensive residential property (a two-bedroom, two-bath condo) was listed for $235,000. The most expensive was an enormous mansion built in the 1930s, listed for $9.9 million.

Next up, I tapped into Trulia, a real estate site that offers statistics and trends, as well as a forum for local "voices" who answer questions. Trulia also allows you to search by keyword, which is helpful in some situations.

After I entered my search requirements, Trulia came back with 167 listings in my Zip code. The least expensive property in the area I'm interested in was a two-bedroom, one-bath property listed for $179,000. The most expensive property was a nine-bedroom, 10 1/2 -bath estate listed for $10.9 million. The second-most-expensive property was the 1930s mansion listed at Zillow for $9.9 million.

As a side note, Trulia also came back with a 1,450-square-foot commercial/investment condo in a multi-use building within the search area. There weren't any photos, nor did the listing agent take Trulia up on its offer to "brand" the listing with the agent's phone or contact information. The listing seemed oddly placed next to the single-family houses, but it was interesting to know it was there.

I also liked seeing the foreclosure listings in my neighborhood, the result of a partnership arrangement with RealtyTrac.

The last site I checked was Realtor.com, the Web site affiliated with the National Association of Realtors, and supposedly the site with the largest number of homes for sale. If you're buying a home, Realtor.com should be one of the sites you visit.

Sure enough, Realtor.com contained the most listings in my Zip code, but the information was confusing. The site said there were 181 properties that matched my Zip code, but that there were 223 properties for sale in that Zip code. I later discovered that some of the properties included rentals and vacant lots for sale.

The least expensive home listed at Realtor.com was the two-bedroom, one-bath condo for $179,000. The site also listed the $10.9 million mansion as the most expensive property for sale in the neighborhood. I had seen both of these, with the identical listing information (as far as I could tell), at Trulia.

I suppose that in a perfect world, if each of these sites had identical information and identical listings, it would be easy for a home buyer to simply pick one or two favorite national sites, plus a local real estate brokerage company's site, to find everything that's available.

But the Web isn't perfect (yet!), and neither is the world of real estate. There are thousands of real estate sites to explore to discover different listings, new information and additional photos.

For real estate agents who list properties on the Web but don't include photos, videos, floor plans, maps and other Web applications that let home buyers explore what's available, you're missing out. The sites I spent the most time on were the ones that gave me a great idea of what the property and immediate area looked like, and how they fit together in the big picture of my community.

Q: I just finished reading your answer to the question about 90-day listing agreements. I don't agree or disagree on writing a 90-day listing agreement. I have written them many times for 90 days, and most people relist anyway.

It's not always the most convenient thing to do, but if my customers don't want to relist with me, then I probably don't want to relist with them.

I do agree with the person who wrote this question, that homes are on the market well over 150 days. In fact, in many of our neighborhoods here, it's actually 190-plus.

What gets to me is that people seem to think we shouldn't make a living. That 5 or 6 percent or whatever the agent is charging is very often split with a buyer's agent. So on a $100,000 home at 6 percent, the listing agent is making $3,000.

Advertising for an average agent costs almost up to $1,000 a month and can be much more. Just two real estate magazines' page ads run over $400, and sellers always want their houses in print. And then there are the costs of signs, lockboxes, Web site fees, any kind of print media and mailers, etc. I work in a rural area, and many of our homes here sell for under $150,000, so these numbers are not a far stretch.

Let's not forget we then split the commission with the broker, let's say 30 percent, and then pay desk fees. And gas, and time. So that leaves us probably with less than $1,500 on a $100,000 sale.

And let's not leave out our knowledge, our expertise. Preparing contracts, keeping our customers organized and within the time limits in their contracts.

Now if we're selling several homes every month, then we would be making an average living -- and I stress average -- but right now, even some of our top agents have a month where the sales are falling apart.

Short sales take months to close, the buyer's financing falls through and such. So selling one house a month would earn me a little over $13,000 per year? Boy, I guess I'm greedy. And what about agents who list at 4 percent, or those whose office fees or splits are greater?

I bet it would be difficult to find someone willing to be on call seven days a week, who actually works a good eight-hour day for at least five of those days, and who only makes that much per year. Fortunately, many people recognize the amount of work we do for them. Unfortunately, the ones who don't see it this way are always the ones who make it to print.

And for those who think we are useless, well, just look at what the housing crisis is proving. Without us selling homes, many other trades and businesses are collapsing. Without a real estate transaction, there are no closings for title agents, no new mortgages, no home inspections, no septic inspections . . . well, you get the idea.

A: Your letter provides an interesting look inside the real estate profession, and I can tell you're frustrated. I appreciate your comments about the length of listing agreements and think that it's wise of you to work with your clients to accommodate the length of time that they want for a listing.

Many agents worry that if they don't sign up their clients for the long haul, they won't renew their listing agreements. So, they push for a long listing agreement that just pens everyone in.

Thanks for also providing an inside look at how the finances of being a real estate agent often differ from what many home buyers and sellers would have expected -- especially in a slow market.

It's true that very few agents are paid on an hourly basis for their work. Most, like you, rely on flat-rate commissions for their income. Your letter provides a glimpse at some of the out-of-pocket expenses agents bear, such as advertising, the entertaining of clients, gas, car maintenance, technology expenses (computers, cellphone and BlackBerry services) and other expenses.

If you lived in a high-cost area such as New York City, where the average home sells for nearly $1 million instead of $150,000, the economics would work better, even if you just sold one house per month.

But in areas where the average sale is $150,000 or less, it's tough to make ends meet when your fixed costs don't fall but your commissions do.

Q: My mother, several years back, began quitclaiming her house to her four children. She did this in several chunks, to avoid any gift-tax problems, I imagine. She didn't tell any of us that she did this until much later.

She retained lifetime residency rights, but circumstances have forced her into assisted living. It's not a nursing home, so the Medicaid look-back period is not a consideration yet.

We wish to sell the house and use the proceeds to keep her in assisted living. Will we have to pay taxes on the appreciated value? Do you think that might be complicated as we received our ownership in several (presumably different-valued) chunks during the process?

A: When your mother transferred ownership to you, you received the property at her cost basis. So, it doesn't matter if she did this all at once or over a bunch of years. If she paid $30,000 for the property, then your cost basis is $30,000.

That is to say, if she gave you 10 percent of the home at one time, your basis would have been $3,000 for that 10 percent share. If, over time, your mother gave all of you the whole home, you could say that your basis for the home would be $30,000. While I have simplified the computation, you can get an idea of what you'll have to pay if you sell.

When computing your mother's basis for the home, you would include the cost of the home itself and whatever capital improvements your mother made to the home over the years: new windows, a new garage, new roof, new bathroom. If the property sells for $200,000, then your profit is the sales price minus the cost basis, minus the cost of any structural improvement to the property, minus any costs of sale.

Because you own the property and not your mother, and neither you nor your siblings lives there as a primary residence, none of you are entitled to keep any portion of the proceeds tax-free. The sale of the asset would be considered long-term, so you would owe long-term capital gains tax of 15 percent, plus any state taxes.

Let's assume the property does sell for $200,000, and the cost basis is $30,000, and with costs of sale and other structural improvements, the profit is about $150,000. That profit is divided by four, or $37,500 for each sibling. Each sibling would pay about 15 percent capital gains tax plus any state taxes owed on that money. You could use the proceeds after that to pay for the care your mother needs.

I know you said that Medicaid is not an issue at the moment, particularly if your mother completed the transfer of the home to you and your siblings more than five years ago. But since the Medicaid look-back period is five years, if your mother transferred the property to you within the last five years, Medicaid could force you to unwind all or a portion of the transfers to all of you to use the money from the home to pay for your mother's expenses.

Please consult with an accountant or estate lawyer to make sure that you have the necessary paperwork in order (a power of attorney would be helpful for financial matters and health matters at this point), and to see whether there are any other ways to assist your mother financially.

Q: We're selling our first home after living in it for six years. Is it true that I can take an exemption from paying capital gains only once in my life?

Our payoff balance on the mortgage is $98,500, and the home is listed with our real estate agent for $169,900. We were thinking that unless we had a profit of $250,000 or more each, my husband and I didn't have to pay capital gains. My mother says, no, we pay it every time we sell, unless we immediately reinvest it into real estate.

A: Your mother means well, but she is wrong. She is quoting you a law, one that has been out of date for more than a decade.

The current tax law allows you and your spouse to keep up to $500,000 in profit tax-free when you sell your primary residence, provided you have lived in the home as a primary residence for the past two out of five years.

There are some exceptions in the case of divorce, death or illness that would allow you to sell the home and keep a fraction of the profit tax-free. You'll want to read IRS Publication 523, "Selling Your Home," for details. It is available at http://www.irs.gov.

Q: We need to reduce our 5.1-acre property to less than five acres to qualify for my husband's employer's relocation program. It has been suggested that we give two-tenths of an acre to one of our neighbors. Are there any other options we should consider? If not, how do we begin the process?

A: It seems the best and easiest solution would be to see if your employer's relocation program manager would waive the "less than five acres" requirement for you. If not, you have other options, some of which can be complicated, expensive and time-consuming.

As you indicated, one of your options is to reduce the size of your property. However, in some cases this might be impossible. Some municipalities have minimum lot-size requirements. If your town or county has a minimum lot size of five acres, you're out of luck.

If you're able to reduce the acreage of your lot, you may have other legal challenges. A big one might be subdivision ordinances and requirements. In an effort to regulate local land use, many municipalities have ordinances that require landowners to obtain accurate surveys of their land, along with water-flow studies, before the municipality permits the subdivision of large lots. In some cases, these local requirements might even include the review of what you propose and the approval of your division.

If you're able to overcome these obstacles, or they don't exist in your area, you could transfer that land to your neighbor. Your lawyer could obtain a legal description from your surveyor to convey to your neighbor the necessary acreage. You, in turn, would need to make sure that the local real estate taxing authority thereafter taxes your neighbor for that acreage.

Q: If a mortgage is owner-financed and the total amount is due in three years, what happens if the deadline is not met? Can they take back the house?

A: When you say the property was owner-financed, you must mean that the buyer purchased a home and the prior owner financed the purchase of the home. If that's the case, the seller should have had the buyer sign a promissory note agreeing to repay the borrowed money at a certain interest rate in a given amount of time. In addition, the borrower should have signed a mortgage giving the seller a lien on the home to secure the debt.

Whether a mortgage is owner-financed or bank-financed, if the buyer fails to pay what is owed, the lender can foreclose on the home, sell the home and use the proceeds from the sale to pay off the debt.

If the home is now worth less than the debt, the lender can continue to pursue the buyer to recover the difference. That difference is called the deficiency.

If the property was sold under what is generally called an installment contract or a contract for deed, the seller would sue the buyer to recover the amount owed or get back the property.

In either case, if the seller had the buyer sign the proper documentation, the seller should be able to sue the buyer. Whether the seller gets money or gets the property back will depend on the circumstances and on what the buyer does.

Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is "100 Questions Every First-Time Home Buyer Should Ask." Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites,http://www.thinkglink.comandhttp://www.expertrealestatetips.net.

© 2008 Ilyce R. Glink and Samuel J. Tamkin

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