Question: We have been contacted by a real estate agent to sell a lot we own out-of-state. A selling price has been accepted verbally, but when the papers were received, we noticed that the brokerage fee was more than twice what we expected. Are there factors that justify this cost?

Answer: Real estate commissions are a negotiable matter between brokers and their clients. There is no standard, normal, required, or mandated commission percentage or amount. The fee for sellers is typically established through a listing agreement created before the property is made available for sale -- thus a seller should know the commission basis in advance of any purchase offer.

A sale price by itself does not reflect all the terms and conditions of a real estate transaction -- that's why realty agreements are so complex. The general standard in real estate is that a verbal offer is worth the paper on which it is written. If you don't like the offer and do not have a listing agreement, then you can reject the offer, not respond (and effectively reject the offer), or make a counter-offer.

Question: Can you direct me to the right source to obtain a credit score schedule? As example: I think 730-850 is rated as A, A+.

Answer: Credit scores exist in their own universe and are not directly related to letter grades -- 750 may be an "A+" with Lender Smith while a minium score of 600 may be an "A+" for Lender Jones.

Not only do credit scores impact credit grades, so do other factors. Examples might include such items as a borrower's debt ratio, late payments, regular overtime income, judgments and -- of course -- bankruptcies and foreclosures.

The best approach is to have a lender review your credit situation to see what mortgage programs may be best for you -- given their particular credit grade standards.

Question: I have found a house and have been told that I need to have a survey conducted on the property. It is to my understanding that it is not required for title insurance. Is this true? The previous or current owner had conducted a survey of the property when he had purchased the home and no major upgrades have been conducted on the property. If a survey is needed, cannot the survey done by the current owner be utilized or be used for the title insurance? Where can I get a copy of the previous survey?

Answer: The survey is a mortgage lender requirement, not something related to title insurance. An old survey will not suffice.

When you purchase a home the lender wants to make sure the seller really owns it. Why? Because the property is security for the loan. For this reason there is a title search and, also, title insurance in case something was missed or not in the public records.

A survey establishes the bounds of the property, its size, and the precise location of all improvements. An old survey may not account for an addition that crosses the property line, a fence in the wrong place, etc.

Question: I am thinking of buying in such California cities as Tracy, Sacramento or Stockton. Tell me which one will appreciate the most in next three years.

Answer: Don't know. Wouldn't guess.

There is risk with real estate. Prices can rise and fall. There are no guarantees -- and no one who knows what the future will bring.

Question: We put a contract on a condo, and gave a good faith promise of $500. We were told it would be held and not cashed. Now we have found out it was cashed and put in escrow. Should the broker have cashed this check even though our loan has not been approved yet?

Answer: When a real estate bid is made it typically includes a written offer, a deposit and, often, a loan "pre-approval" letter from a lender.

The purpose of the deposit is to compensate the seller if the buyer does not go through with the agreement -- for instance, if the buyer does not apply for a loan.

As to a pre-approval letter from a lender, it is generally evidence that a buyer has met with a loan officer and that the loan officer believes that the buyer will qualify for a given amount of financing. However, a pre-approval letter is not an absolute loan commitment because the lender needs to check such items as the property's title, survey, etc.

It may be that the broker said the $500 would not be placed in escrow until the offer was accepted. If your offer was accepted, then the broker would be obligated to make a deposit unless the offer included language to the contrary.

The deposit should be placed in the broker's "escrow" or trust account and not co-mingled with the broker's money.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: August 8, 2003

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