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Real Estate Question.

Joined
22 March 2000
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Planet Earth
A realtor left a note on my front door stating she had a couple interested in buying my townhouse. It's not on the market but I was planning on putting it for sale in six months after the exterior is painted. This is the first home that I've purchased and I've renovated the entire interior and put in the best of the best when it comes to carpet, fixtures, and cabinrts and countertops (Corian to be exact).

My question is this: If I do sell it how much commission is appropriate for the realtor? I never signed a contract and never listed with anyone. She basically rolled the dice and got lucky the first time. What would you guys say is fair, considering I know how much I want to net and property values have doubled in my development over the past three years.

One more thing. If I do sell, which FI system should I go with? I'll have a pretty big purse to play with for a while.
 
Typical total commission is 6% - that is usually split between the listing agent & the selling agent. In this case the agent should be well-satisified with 3%. Another way to look at it however is that you should look at the net return & decide what your expected final needs to be.
I would be a little suspicious that there really is a specific buyer - this is a typical trick while trolling for listings. May be genuine however, hope so for your sake. If your market is that hot you may wish to consider listing yourself and thus inviting competition - determine if you can gain more than the additional 3% than you can get from this deal. Be sure to get an independent appraisal done & consider what neighbouring properties have been going for, with suitable adjustments for differences (view, upgrades etc). You don't typically get the value of your upgrades back, but it makes your home a lot more attractive versus competing homes.
One thing to remember - regardless if the agent is working for a buyer, as the seller her primary responsibility is to you.

On the second question, GJTC - no doubt there!
 
D'Ecosse is right. They are probably just trolling.... I had the same thing happen to me when I was selling my house. It hadnt gone on the market yet so it wasnt listed in MLS. I had my agent call and "call her bluff", which it was. Commission, in my opinion is negotiable, but you have to know what your doing and not piss of the realitors, some wont look a property (right away) if the commission is low.
 
Thanks for the input Ken.

The broker brought the couple by right before I made the post, so I know it's not a shady deal. I know what's been going on in my development because I've been on the HOA board for three years and I've been doing a lot of the interviews for new buyers. I know who's paid what and I also know the condition of most of the units that have been sold. My unit is one of the nicest (it does have an NSX in the garage!) inside, but the view is not the best but it is very private.

The bottom line is that it's a seller's market where I live and this realtor has no competition with my home, so for that reason I don't want to give her something for nothing. Most of the homes in my development have sold within one week of being placed on the market for sale by owner and that's my present dilema. Should I take a little less and get out now, or hold on for 10k more in six months after the develpoment has a new and updated paint job on the exterior.

Edit: The couple wanted to make a bid right then and there but I declined to hear it. I told the realtor to get back to me in a few days. I think I have the leverage in this situation.
 
I am a licensed California real estate agent, and I've solicited property owners in similar fashions, without the element of trolling that is. It seems like the agent is legitimate. 6% commission is the norm, but I would negotiate with him since he would be a dual agent for both parties and stand to benefit greatly. Or you could get your own seller's agent if you don't feel comfortable enough to have him represent the both of you. Just curious why would you want to sell your property? Have you thought about refinancing with a cash-out and use that money for your "Comptech" supercharger? That way you get to keep your house or maybe use it as a rental and continue to reap the benefits of home ownership.
 
rogerm said:
... Just curious why would you want to sell your property? Have you thought about refinancing with a cash-out and use that money for your "Comptech" supercharger? That way you get to keep your house or maybe use it as a rental and continue to reap the benefits of home ownership.

Thanks for your insight also, it's very helpful. I want to sell because I need a bigger house with a three car garage. I will be geting basically twice the amount that I paid four years ago, and the I'd like to put a significant downpayment on my next home. Second, I don't want to become a landlord and worry about tennants. I have enough worries with my day job. :p

I do agree however that a Comptech supercharger is my best betfor FI.
 
DocL said:
Should I take a little less and get out now, or hold on for 10k more in six months after the develpoment has a new and updated paint job on the exterior.
If you hold on for 6 months to realize another $10K, you'll probably end up paying something like that in interest anyway? Not to mention that your next property is probably also appreciating.
Realistically, unless you can sell one property in an up-market & buy into a down market, then typically it's not going to make a whole lot of difference on the net when you trade up.
See what the offer is like & take it from there.
p.s. be careful how much profit you don't re-invest in the new property - you don't want to pay Uncle Sam! (Technically you should re-invest all your profit but you can take out the cash you originally put down - that includes also all the outlay for your upgrades)
 
D'Ecosse said:
p.s. be careful how much profit you don't re-invest in the new property - you don't want to pay Uncle Sam! (Technically you should re-invest all your profit but you can take out the cash you originally put down - that includes also all the outlay for your upgrades)
The gains tax relief act (name?) of 1997 allows for a one-time exemption for first-time sellers. IIRC the first $250K of gain (single -- $500K for married) is tax-free, regardless of how it is invested... you should be able to deduct all/most costs for improvements (corian, home mods, FI toilet, etc) when calculating your net gain.
 
http://www.taxcut.com/tc/2002/pubs/files/p523.pdf

I don't believe it's a once-only deal - it's once in a 2 year period. That's a single exclusion in 2 years even if the initial exclusion is less than the $250K limit. i.e. if you took an exclusion on a $50K profit, then sold your next property for $150K profit w/in 2 years, then you would not be able to exclude it.
You must have owned & "used" the property for 24 months prior to the sale to qualify for the exemption.

It's still a good idea to minimize your "profit" by ensuring it really is profit. One point of note is that "improvements" which are really repairs (paint, roof leaks, broken window etc) are not considered as part of your cost basis.
A good reason to keep all those receipts.
 
WOW Ken knows everytihng. I been working in real estate for a while now. D'Ecosse has sound advice.

6 percent is normal here in MD too. Ken brings up some very good points.

If you hold on for 6 months to realize another $10K, you'll probably end up paying something like that in interest anyway? Not to mention that your next property is probably also appreciating.

Very true. If your house in a hot market area, Only way to benefit from this would be to move to much cheaper area, even then; appreciation would be present, just not at the same rate.

One point of note is that "improvements" which are really repairs (paint, roof leaks, broken window etc) are not considered as part of your cost basis.

Yes, these upgrades/repairs like painting your home will make your home more marketable, but in general will not contribute to increased sales price. For example if you had 2 identical homes, one freshly painted and one just reg painted, the one that was recently painted on the outside will sell faster, but rarely at a higher price. Alot of upgrades in aggregate may get you a bit more if they change the overall appearance of your home.

My opinion: sell now or 10 months later, will work about about even given the information you provided. Say your new home is currently appreciating at the same rate and your 10k later will work out about even. (considering 10K increase is speculation, and markets are based on actual sales) During that time you have 10 months of interest if you have a mortgage, and money spent on repairs or painting is better spent on your new home. Keep in mind your home is something so personal, its very tough to be objective, make sure your decision is exactly that.. YOUR decision. Good luck.
 
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