Home seller wants to cancel listing and sell to buyer

By Bob Bruss

Dear Bob: My house is currently listed for sale with a real estate broker. But my wife and I found a potential buyer without the help of our listing agent. This buyer has not consulted a realty agent to inspect our home. All the contact has been direct with me and my wife. If we terminate our listing contract with our agent, which we can do at any time according to the contract, and sell our home to this buyer, will we still owe our agent a sales commission? Our current arrangement is a 5 percent sales commission with 3 percent going to the agent who brings in an acceptable buyer — Steve K.

Dear Steve: Ethically and morally, you are obligated to pay your listing agent a sales commission. If you signed an exclusive right to sell listing, regardless whether you, the listing agent, or another agent locates an acceptable buyer, legally you owe the full sales commission.

Your situation sounds like a very unusual listing agreement, which lets you cancel the listing at any time without cause. Do you really think that buyer will make an acceptable written purchase offer, arrange the financing and inspections, and you can make the correct legal disclosures to get the sale successfully closed without a professional realty agent? Good luck.

Dear Bob: We bought our new home in 1999. The builder paid part of our closing costs, including a survey. When we bought, it was adjacent to a vacant lot where we expected the builder to construct a new home. That didn’t happen until August 2002. Then the builder informed us part of our front yard belongs to the vacant lot. The original surveyor of our lot then changed his survey given to us at the closing in 1999. We have filed a lawsuit against the lender and filed a lis pendens on the adjacent property. But this did not prevent the sale to a buyer while our boundary dispute with the builder was going on. What recourse do we have against the lender and the survey company? We did not buy an owner’s title insurance policy for defects in our title — Frederick D.

Dear Frederick: Shame on you for not buying an owner’s title insurance policy at the time you bought your new home. That was foolish economy, as you now know. But I am puzzled why you would sue your mortgage lender.

It sounds like you retained a local real estate attorney, as you should. I see several legal grounds to sue the builder, such as for fraud, and the survey company for negligence. But I’m certain your attorney is on top of that.

Recording a lis pendens against the adjacent property won’t prevent its sale. However, unless it was an all-cash sale, I am surprised any title insurer would insure that property for its buyer and lender.

Your situation is a classic example why every real estate buyer needs an owner’s title insurance policy, which insures the property boundaries as determined by a survey or reference to a recorded parcel map.

Dear Bob: My wife and I bought our home 27 years ago. Since then, we used an adjoining vacant lot to plant vegetables every year. We had no idea who owned that lot, thinking maybe the city owned it. But after we planted our crop for this year, we were shocked one day when a local fence company erected a fence around the lot. When I consulted my attorney about my rights, he told me about adverse possession. Do you think we have a good claim? — Roland R.

Dear Roland: No. To acquire title by adverse possession, the use must be open, notorious, and hostile for the required number of years in the state where the property is located. In addition, the adverse user must pay the property taxes. Have you paid the property taxes on the adjoining lot?

If the lot’s owner knew of your use but didn’t object, that is permissive use, which will defeat acquisition of title by adverse possession.

Dear Bob: I recently sold my rental property to an investor who is carrying three mortgages on it. Is this a wise decision? I am holding a $6,250 third mortgage and am rather concerned. But I only found out about this an hour before the closing settlement. What should I do? — Karen D.

Dear Karen: If you sold your property and agreed to carry back a third mortgage, that was your decision. Now it’s a bit late to decide you didn’t want to do that.

There is nothing wrong with being a third mortgage lender if the borrower has sufficient equity. However, you should notify the first and second mortgage lenders you hold the third mortgage and want to be immediately notified if the borrower is a day late paying them.

If that should happen, you can then pay the borrower’s missing payment, add it to the balance owed to you on the third mortgage, and declare your third mortgage in default if the borrower doesn’t promptly reimburse you so you don’t have to foreclose.

I’ve held third mortgages on several properties. If the borrower makes all three mortgage payments on time, there is no problem.

However, if your borrower defaults on the first or second mortgage, you must be prepared to immediately cure that default so you don’t get wiped out if the first or second lender forecloses. For more details, please consult a local real estate attorney.

Dear Bob: I know you have covered my question before but I don’t know what to do. I am a board of trustees member of a 71-unit townhouse condo association. We have recently noticed an increase in the number of rental units. I raised this issue at a recent meeting and we are discussing amending our by-laws to limit rentals because we know this trend will affect our property values if it continues. One problem we face is many owners are in military service and they rent their condos while on assignments elsewhere. But they expect to return to their condos eventually. What should we do about limiting rentals? — Stephen F.

Dear Stephen: You are to be commended for trying to limit the number of renters in your condo complex. Too many rentals make the condos difficult to sell and depress market values because most lenders won’t make mortgage loans if over 25 percent to 30 percent of the units are rentals.

However, getting a rental limit by-law approved by the owners might be difficult because you have so many owners who rent their condos while away from the area. I recommend you consult a local attorney who specializes in condominium law for suggestions. Sorry, I don’t have an easy answer for your unique situation.

Dear Bob: We very much look forward to your weekly articles and always find useful items. Where can we obtain a complete “junk fee” list which we are likely to encounter when refinance our home loan? — Craig and Glennys H.

Dear Craig and Glennys: Sorry, I don’t maintain a junk fee list. The reason is lenders keep dreaming up new legitimate-sounding names for unnecessary 100 percent pure-profit garbage fees. I’m sure there is a top-secret website where they share creative junk fee names.

Because you are refinancing and cannot immediate deduct on your income tax returns any loan fee points, be sure to ask your lender for a no-cost or very low cost refinance mortgage. Shop among at least a half dozen lenders including at least two mortgage brokers, two mortgage bankers, and two direct bank lenders. All lenders are not the same.

When you make a written loan application with the best lender, review the “good faith estimate” very carefully and question any junk fees. Examples include application fee, processing fee, documentation fee, warehouse fee, administration fee, underwriting fee, miscellaneous fee, and other unnecessary pure-profit lender fees.

Dear Bob: What costs should a home seller anticipate, such as real estate sales commissions and transfer fees? How can we estimate how much net equity we will receive on our home sale? — Patrick K.

Dear Patrick: When you interview three or more successful realty agents who sell homes in your vicinity about listing your home for sale, be sure to ask each agent to prepare a seller’s net statement. Thanks to software programs, this is easy for agents to do on their laptop computers.

Even if you are thinking of selling your home without a professional agent, please interview at least three agents. They won’t mind because they know most “for sale by owner” home sellers list their homes for sale with a professional agent within 30 to 60 days. The agents you interview realize they have an excellent chance of obtaining your listing.

Dear Bob: My friend and I are interested in buying a timeshare in Colorado. The seller wants to quit claim the title to us. Is this sufficient for a sales contract? Should we contact the timeshare association? — Tim C.

Dear Tim: Please be extremely careful. If you accept a quit claim deed to that timeshare, you could become obligated for unpaid timeshare assessments and other obligations. Consult the timeshare association before you agree to purchase.

Timeshares are purchases of future vacation. They are not real estate investments. If you decide to buy, please spend money which you will never expect to see again. Also, I hope you can afford the timeshare fees. I would like to be more positive about timeshares, but most resell for only about 10 percent of their original cost so they are usually not good investments.

Dear Bob: I am interested in buying land at one of the tax sales. What is the best way to perform title searches on these properties? Should I pay a title company? — Tom S.

Dear Tom: I presume you are not buying at a property tax certificate sale offered in some states, but want to bid at an actual tax deed sale. When the local tax collector sells a property for its unpaid property taxes, the buyer purchases free of any mortgages, liens, or other encumbrances. By the sale is “as is” with no warranty and no guaranty.

Your big risk is something is seriously wrong with the property. It might be unbuildable. Or it might be a toxic waste dump. Perhaps there are other reasons why the owner failed to pay the property taxes. For more details, please consult a local real estate attorney.