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Standard Open-House Procedure
Q: Is there a protocol for open houses? Does the seller have a right to know who has been viewing?
A: I'm not sure there's a rule or universally accepted standard, but certainly the broker wants to have a list of everyone who attends an open house because such a list may show who was the "procuring cause" if there's a sale - and who is entitled to a fee.
More importantly, you're the owner. You have a right to know who has been on your property during an open house. Looking at the visitor sheet can tell you how many people visited the home, how many were from down the street and whether your property is drawing interest.
Q: My buddy and I are going to purchase a lake cabin and are going to go half on everything, including all future expenses. Is it right to set up contract with both of our names on title? And how much trouble is it doing this?
A: You're buddies today, but what about tomorrow? What if one of you wants to sell and the other doesn't? What if there's a $3,000 repair bill - and one of you lost his job?
It's important to establish a clear, written ownership agreement to prevent huge headaches in the future. This may seem boring and dull, but having a written agreement is vastly better than having court battles five years from now. Speak with a local real-estate attorney for specifics.
Q: Almost three years ago we rented our house and rented a bigger one for ourselves as we needed more space. Around six months ago our tenant moved out and through no fault on their part the place was left with lot of damage to the carpet and walls, plus the plumbing was falling apart. We fixed up the property for around $14,000. While we were at it we also got the house painted from outside and made it attractive for new prospects. However, because our rent went up it made sense for us to move back to our original house.
Can we still deduct the cost of fixing up the house as a rental expense?
A: "The general rule," says Leonard W. Williams, a CPA based in Sunnyvale, Calif., "is that expenses attributable to the period that the tenant occupied it are deductible against the rental income. However, like many general rules, it's more difficult to apply than to state.
"It appears that your original intention was to re-rent the house. Accordingly, expenses such as repainting the house after the tenants moved out are deducible against the rental income. However, capital expenses, such as replacing the carpet and plumbing would only have been able to be depreciated if you had re-rented the house. Since you changed your goal and converted the house to your personal residence, those items may not be either deduced or depreciated."
For specifics, see IRS Publication 523 and speak with a tax pro.
Q: Is it safe to have real-estate brokers hold money in a escrow account?
A: When a buyer makes an offer to purchase a home there's usually a deposit that accompanies the offer. That deposit is typically held by a real estate broker in an "escrow" or trust account.
State rules regarding escrow accounts often provide the following standards: First, the money must be placed in a federally insured escrow account and not merely held in the broker's personal or business account (what is called co-mingling). By having the money separate and apart from the broker's business or personal account, the buyer is protected in case the broker is sued or money is his accounts is seized or held up. Second, the account must be in a federally insured institution such as a bank or savings-and-loan association.
However, if the deposit is above the level insured by the government, then it makes sense to have the money placed in two or more institutions.
Most states have stiff penalties for brokers who use deposit monies for their own purposes. The real question ought to be: If not in escrow, then where?
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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