Real estate buyers fall victim to 'offer shopping'

Mistake reveals down side of open-ended expiration
By: Robert J. Bruss: Inman News
DEAR BOB: About two weeks ago, we made a written offer to buy a "For Sale by Owner" house. The sellers had all the forms and they filled them out with the price we wanted to offer (about $7,500 below the asking price). They said they would "think about it." When I phoned the sellers a few days ago, they said they accepted a better purchase offer, which was about $5,000 higher than our offer. Shouldn't they have given us a chance to match that second offer? – Lance R.

DEAR LANCE: You were a victim of "offer shopping." That can easily happen when a naive buyer like you makes an open-end purchase offer with no expiration date.

If you had been represented by a buyer's agent, that person would have suggested your offer be valid for not longer than 24 hours. A limited time for purchase offer acceptance puts pressure on the home seller to promptly accept, reject or counteroffer. Instead, your seller obviously showed your offer to other buyers to "shop" for a better offer.

The home seller had no obligation to ask if you wanted to match or surpass the second offer. Your situation provides a valuable lesson on how to avoid offer shopping by always specifying a short offer expiration time, such as 24 hours.

MAYBE NO TAX DUE ON WIDOW'S $488,600 HOME-SALE PROFIT

DEAR BOB: My late husband and I bought our home for $11,400 about 52 years ago when it was brand new. The house is now too big for me alone and I want to sell so I can buy a smaller house. How much will I have left after paying taxes and the sales commission? – Maxine M.

DEAR MAXINE: When your husband passed away, you received a new "stepped-up basis" for your house. Depending on how title was held, you either received a 50 or 100 percent stepped-up basis to market value on the date of his death.

The result is, thanks to your $250,000 principal residence sale tax exemption of Internal Revenue Code 121, you will owe little or no capital gains tax on your sale. I'm presuming you owned and occupied your home at least 24 of the last 60 months before its sale.

Depending on how shrewd a negotiator you are, the real estate sales agent's commission will be 6 percent or less of the home's gross sales price. According to Real Trends, the average nationwide sales commission today is 5.1 percent.

To determine your home's stepped-up basis on the date of your husband's death, you may need to hire an appraiser who specializes in determining past property values. If you have difficulty finding such a local appraiser, contact the Appraisal Institute in Chicago for names of their local members who can assist you. Their website is www.appraisalinstitute.org.

IS LANDLORD LIABLE FOR TENANT'S BARKING DOG?

DEAR BOB: I own a rental house where my tenant's dog occasionally barks at night. The barking annoys a neighbor who knows me and who unfortunately has my phone number. He feels that I, as the landlord, am responsible for the behavior of my tenant's dog and if he is awake, I should be awake too. What should I do? – Sherman N.

DEAR SHERMAN: If the neighbor phones again, very politely inform him you are not responsible for the tenant's dog barking. Suggest he phone the local police. They will probably refer him to the local animal control agency.

If that doesn't work, politely suggest the neighbor sue your tenant to abate a private nuisance. Meanwhile, you should inform your tenant of the disturbances and ask that the dog not be left outdoors at night to bark. Most pet owners are responsible and don't want to cause problems.

The new Robert Bruss special report, "24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.