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‘Equal time’ for cut-rate or flat fee broker

May 10, 2011
By BOB JEFFRIES

Question: Bob, several months ago you disparaged so-called or flat fee real estate brokers. I work for a very successful franchise brokerage.

Many of our sellers elect to have their listings submitted to the local Multiple Listing Service so other member agents can show the houses, but most of our sales do not involve cooperating realty agents. Instead, the majority of our buyers come from our advertising program, which includes a weekly booklet of listings which we mail to homes in the vicinity.

When are you going to give "equal time" to the many so-called cut-rate or flat fee real estate brokers?

No-name please.

Answer: No-name, you just received equal time. I like the concept of limited service cut-rate or flat fee brokerage, but the problems I observe are in the implementation.

During a buyer's market, (believe me, we are in a buyer's market, not only in Cape Coral but many places ) when there are more houses for sale than there are qualified buyers, the cut-rate brokerages usually aren't very successful. But in a seller's market, when home sellers don't need much help selling their home, the cut-rate brokerages prosper because sales are easy.

However, most home sellers need full-service real estate brokers who handle all the 1,001 details of a home sale. The majority of sellers are not capable of holding the weekend open houses, negotiating with prospective buyers, showing the house to prospects and performing the tasks full-service brokers offer. I am sure every brokerage has its "pros and cons."

Believe me, I'm not picking on anyone!

Question: Bob, thanks for your informative columns, which I read religiously every week. As a result , I'm sure I know more than 98 percent of the realty agents in Cape Coral, but I would like your advice.

About a year ago, my wife and I bought a fixer-upper house at a super bargain price. It is in a great neighborhood but had become very run down and was empty for about five years. We immediately moved in, thinking we would become "serial home sellers" like you often mention.

Our fix-up work was completed within about four months. The Realtor who sold us the house was amazed. She claims she can get us at least $75,000 more than we paid for (our fix-up costs were only about $4,500).

However, as you know, we have to live here 24 months before qualifying for that $ 250,000 principal residence sales tax break .

Our Realtor (anxious for a listing, of course) suggests we make a tax-deferred exchange instead. She says she can find a tenant-buyer who will rent for a few months so we can make a "Starker" tax-deferred exchange for another fixer-upper. Does this make sense to you?

Ann & Bob T.

Answer: Wow! That's a lot of Realtors that have a wealth of information to share. I will take that as a big compliment. Yes, to qualify for a Starker "delayed" tax-deferred exchange, Internal Revenue Code 1031 (a) ( 3 ) requires both the old and the new properties to be held for investment or use in a trade or business. You can make your home conform by moving out and renting to tenants. However, the replacement property must also be a rental property and cannot be your personal residence until later on.

Another tax-deferred exchange rule is that you must trade equal or up in price and equity. If you find an in-expensive fixer-upper house, for example, which can be bought for less than the fair market value of your current residence, it won't qualify.

My suggestion is to relax, rest up and enjoy a vacation from home fix-up work until you have owned and lived in your residence at least 24 months. Then you and your wife can sell it for up to $500,000 tax-free profits and buy another fixer-upper to do it all over again. Ann and Bob, this will probably not set well with the Realtor, however, you asked for my honest opinion and received it.

P.S., I'm going to Plant City this week-end so no calls from Realtors (Ha! Ha!) complaining.

As always, talk to your accountant. Things change.

Thanks.

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Have a real estate question? Write, call, fax or e-mail:

Bob Jeffries, Realtor,

Century 21 Birchwood Realty, Inc.

4040 Del Prado Blvd., Cape Coral, FL

239-549-5724 Office

239-542-7760 Fax

bobjeffries4@juno.com

 
 
 

 

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