Ask Realty Times - May 13, 2005
by Peter G. Miller
Question: Our broker has agreed to cancel our 180-day listing contract two months early. However she is now telling us that she won't release us from the contract unless we pay her marketing expenses. Is this fair? There is nothing in our contract that states we are responsible for these fees under any circumstances. Answer: You are asking the broker to break a contract. Because of your request, the broker will have less opportunity to sell the home -- despite such advertising and professional time she has already committed to the project. While it may be true that no termination fees are discussed in the agreement, it's also true that the broker should be able to market the home for two more months. In asking her to modify the agreement, in asking for new terms, it seems fair that the broker should be compensated for costs and services to date. Alternatively, you could allow the broker the time promised under the listing agreement to complete her job. If she performs and the house sells, she gets a fee and you get the sale you want. If she does not perform you pay nothing, her expenses are a business cost and she has a loss on the agreement. Question: I live on a golf course. There are 20 expensive custom-houses built on the greens. I am trying to get an appraisal of our house. None of the 20 golf houses has ever been sold -- all the owners are original purchasers. However, lower-priced houses not on the golf course have changed hands, and will be used to determine local values. I know that all the houses on the golf course are worth much more than what the appraisal is going to be. What is the solution if I want to be the first to sell? Answer: You assume that appraisers will not allow extra value for your superior location. In fact, appraisers will undoubtedly give your home a higher valuation precisely because it materially differs from homes not directly on the greens. The question is how much of a differential can you expect? One general clue might be to look at percentage differences in the original sale prices between your home, and those more distant from the course. Question: I need to sell my house quickly due to ill health. I don't mind selling below market value, as I just want to get out from under the payments. I have an FHA 30-year mortgage at 5.5 percent. I have been in the house for just over two years. What can I do? Answer: You can certainly sell for less than fair market value, but why? If you're in a good market, first try to sell for what the market will bear. Whatever financial burdens you now have will only be helped with a higher selling price. Question: We bought a beautiful new home for $275,000. Now the same builder is constructing $500,000 homes across the street. We are keen to buy there but feel, that the houses are over-priced by $50,000 to $60,000. Our current home is now worth $430,000. Do you think it's a good idea to sell this house and put the equity into a new home, or lease the current house and pay a heavy mortgage on the new home? We want to keep two homes so we have an investment property to fall back on in dire times but we are scared of the way the market may react in future. Our real estate agent thinks the new homes are excellent investment opportunity and he is buying in the same area. Answer: Given that all real estate is local it would be inappropriate to say whether the new homes are "overpriced" or not. What can be said is that your current home has appreciated, and that you now have additional equity. Rather selling your current residence, why not refinance your home to raise capital and then purchase an additional property? This would save the cost of selling house number #1 and you would not have to move (another cost). Rent from house #2 would hopefully cover much or all of your monthly mortgage debt. However, what happens if the investment home is vacant for a few months? Can you carry all the related financing? Be sure to go through the numbers with care before going further, and get opinions from several brokers and lenders. Also, why limit your search for investment properties to homes across the street? Instead, look at a wider range of properties to find the home that's best for you in terms of cost, income potential, location, etc. Question: My husband and I are building a house that is scheduled to be completed within six months. With the Federal Reserve hiking interest rates, mortgage rates are also expected to go up. Does it make sense to pay for an extended rate lock or just buy points at closing to reduce the interest rate? Answer: No one knows where mortgage rates will be in six months -- or if your new home will be finished. Many economists and commentators, as an example, believed six months ago that today's rates would be substantially higher, but despite eight consecutive increases in the federal funds rate, interest levels today are actually lower than at the beginning of the year. In effect, any choice you make has risk. It may be that in six months you can get financing at today's rates without paying dollars up front to buy-down the rate. Or maybe not. Bottom line: There's always risk in the marketplace and potential costs, whether you act or do not act. No one knows what will happen (I dearly wish I had a better answer, but I'm one of those who thought rates at this time would be significantly higher). Question: What is the affect on property values in a high-end development of 20 homes when one property owner decided to construct a fenced in area for four or five pit bulls. We have covenants that should allow us to take action, but we would still like to know the overall affect on property values and issues regarding selling of properties in the development. Answer: Is the owner allowed to build the fence? Are dogs allowed? If "yes" to both then what exactly is the pet owner doing wrong? There is a presumption in the question that pit bulls are inherently dangerous. If we agree that such a presumption is true, then the real question to ask is this: What happens if an animal escapes and hurts someone? Is the owner responsible? The homeowners association? Must you wait for such an event before acting against the neighbor? However, what if the presumption is false? What if the dogs do nothing more than provide comfort and security to the owner? Before going further and assuming that the covenants allow either the dogs or the fence to be removed, you should have a real estate attorney review the specific language in the documents. You should also ask about local health and safety requirements, as well as community leash and noise laws. As to how local property values are impacted, it's not possible to say. I was just in a rural area where it's wise to have several dogs -- they keep away both bears and unwanted strangers. Question: We purchased a house which supposedly has 4,311 heated square feet but when we had the house appraised, it ended up to being 3,789 heated square feet. That's a big difference. We are now being asked to sign a piece of paper indicating we accept the latter heated square feet to avoid any problems later. I don't feel this is fair, as we based our price on the 4,311 HSF. Answer: Do you have to sign? What are the consequences of not signing, if any? Please have an attorney review the agreement and the proposed release of liability before signing anything. That said, how many square feet a property is supposed to have is unclear. The reason: There is no standard form of measurement! Protocol Z765-2003 from the American National Standards Institute (ANSI) establishes "the procedures to be followed in measuring and calculating the square footage of detached and attached single-family dwellings, including townhouses, rowhouses, and other side-by-side houses in the United States." The catch? The "standards" are optional. Question: We moved into our new house about two months ago. I want to start finishing the basement but the walls are damp in a few spots. The house across the street is still being constructed and will have a finished basement. They have already put the insulation over the walls that are still damp. The builder says the walls will dry from the outside so there is no need to wait. Is this true? Do I need to have the wet spots on the wall completely dry before I put the insulation up. What if I put a sealer on over the wet spot? Answer: Before sealing or improving anything, how is water directed away from the house? Are the walls dry or just superficially dry? If not sure, have a licensed engineer look at the foundation before doing anything.
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