DEAR BENNY: We contracted with a well-known Realtor to sell our home. After the fully executed sales contract was signed, we asked the agent to remove the lawn sign, which we found embarrassing and distasteful. She refused. Additionally, she sent a mass mailing with our home address, which contained interior pictures, describing her great success in selling the home. This mass mailing was sent despite our still living in the home. What can be done to prevent these Realtors who behave as if the property belongs to them? –M.
DEAR M.: When you decided to use this agent to assist you in the sale of your house, you signed a document known as a "listing agreement." Go back and read it carefully. Did it contain any language authorizing the activities of your agent? If it did, then your agent may have the legal right to do what she is doing.
I would immediately contact the manager of the real estate company where the agent works. Discuss your concerns and tell the manager that you are not happy and want these activities to be stopped immediately. If your agent does not have a manager, then I would contact the real estate commission in your state and file a complaint.
On the other hand, if the listing agreement does not give the agent the authority to keep the sign on your lawn or to use your house for her promotional purposes, I would immediately advise the agent that you will have no alternative but to seek a court restraining order against her if she does not immediately cease her conduct.
I suspect that it is tempting to just take down the sign, but I cannot recommend this. The sign belongs to the agent (or her company) and I don’t want you to be accused of doing anything wrong.
DEAR BENNY: We signed a purchase and sales contract with a 90-day contingency on selling our townhouse. Because of this contingency, the closing date was listed as "to be determined" (TBD). We sold our townhouse within 90 days and in trying to set up a closing date on our new home found out that the woman doesn’t want to sell anymore. She is afraid that she "might lose her job this year." She claims to have consulted an attorney and found out that our contract is not valid because it has no closing date. We have not seen proof that she really consulted an attorney. We are livid at our real estate agent for putting us in this position in the first place. We want this house. It’s an architectural dream — a one-of-a-kind for us picky buyers. Thoughts? –Michelle
DEAR MICHELLE: Whether or not your seller consulted an attorney, you should do so immediately.
You advise that there was a contingency in your contract for you to sell your own house within 90 days. And you did sell within that time limit. Did you or your real estate agent formally remove the contingency by advising the seller or her agent in writing before the 90 days elapsed? This will be a critical fact that your attorney will have to analyze.
When you sign a real estate contract, whether you are a buyer or seller, you must fully understand all of the terms and conditions of that legal document. I always recommend that you prepare a timeline, indicating all important dates, such as when the home inspection will take place, when the financing contingency expires, and when settlement (escrow) occurs.
What remedy do you have? The strongest position you can take is to file a lawsuit immediately against your seller asking the court to grant you specific performance. That means that if the judge agrees with your legal position, a court order will be issued requiring the seller to sell her house to you.
Legal fees can be expensive, so you should read your contract to determine if the losing party will have to pay your lawyer’s bill. We follow what is known as the "American Rule" on legal fees. Each side pays his or her lawyer, unless there is a provision in the sales contract authorizing the prevailing party to be reimbursed those fees.
DEAR BENNY: About six months ago we refinanced out home. We have gotten solicitations from the mortgage lender asking us to sign up for their mortgage protection program. The program offers to pay off our loan upon death, or make payments upon disability or unemployment. This sounds too good to be true. What is your experience with these programs? Are they a scam? –Lisa
DEAR LISA: No, they are not a scam, but in my opinion, a complete waste of money. The insurance premiums are based on the initial amount of the loan, and will remain the same even though you are slowing reducing your outstanding debt.
If you feel you want this kind of insurance, talk to a legitimate insurance agent and discuss all of these issues, ranging from disability to death benefits. Keep in mind that should you die before the loan is paid in full, it is highly possible that the surviving spouse will not want to remain in the house, and will sell it as soon as possible.
And even if the house will not be sold, presumably there will be enough life insurance to cover the monthly mortgage payments.
DEAR BENNY: A wife wants to prepare a will leaving her home (now she is the only one on title) to her two children and not to her husband. Her current husband has four children from the first marriage and she wants to avoid them taking over her house if something happens to her. Can she legally prepare a will on which she leaves the house only to her two children, or does the husband have a right to half the house even if she does not put him on the will? –Luisell
DEAR LUISELL: I wish that I could answer every question specifically, but the laws differ from state to state. You really should consult a local attorney for answers to your question.
You definitely should have a will prepared, whereby on your death, your house will go to your two children. If they are not of the age of majority (that also is different in the various states) you may want to put the house in trust, until your youngest child reaches a certain age. That could be 21, 25 or even 30; it’s your decision.
In some states, a husband does have the right to "claim against the will," but your lawyer may be able to assist you so that it will not happen and your children will be able to inherit your entire property.
DEAR BENNY: In 2007 I sold a home and paid a hefty real estate transfer tax. My tax preparer told me that I could not deduct this tax from my gross income. This doesn’t make sense to me, as every other tax I pay (sales tax, property tax, state income tax) is deductible.
Is my tax preparer correct? If not, can you give the citation for the law or IRS rule that allows me to deduct the real estate transfer tax? –Bay
DEAR BAY: Yes, she is correct. In many states, when you buy or sell real estate, the state (and often the county where the property is located) will impose a recordation and transfer tax. This is a convenient way for governments to raise revenues.
As you suggest, these taxes can be quite steep. I always advise consumers — whether they are buyers or sellers — to use these taxes in their negotiations over the purchase and sales price. Just because local custom dictates that one party must pay both taxes (or that the taxes are split between buyer and seller) does not mean that it has to be that way. Everything, including who pays the recordation and transfer taxes, is negotiable in real estate.
Unfortunately, you cannot deduct these taxes when you file your income tax return. However, when you sell your house, the amount you paid for these taxes can be added to your tax basis. Let’s say you bought the house for $100,000 and paid $2,500 for the recondition tax. You sold the house for $150,000. Ignoring for this discussion other deductions (such as closing costs and real estate commissions), your profit is $47,500 ($150,000 – $102,500).
If you have owned and lived in the house for two years out of the five before it is sold, this becomes an academic mathematical exercise, because you can exclude up to $250,000 of the profit you have made (up to $500,000 if you are married and file a joint tax return).
But for investment properties — and for those who have been fortunate to make a profit that exceeds the exclusion — every dollar that you can add to your tax basis will save you 15 cents on your federal tax return. It will also be a savings if you have to pay state taxes.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@sandbox.inman.com.
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