Q & A With Peter G. Miller
Listing,Buying, Selling. What's the Difference Between all these Brokers?

Q: What's the difference between a listing broker, selling broker and a buyer broker?

A: A listing broker is a licensed real estate broker who obtains a contract to represent a property at a particular price and terms as an agent of the owner.

A buyer broker is a licensed real estate broker who acts as the agent of a purchaser and seeks to find a property in a given community that meets the buyer's needs with the best possible price and terms.

A selling broker is a licensed real estate broker who shows homes to buyers. Depending on your jurisdiction, a selling broker may represent an owner; act as a "facilitator" or non-agent who represents neither buyers nor sellers; or serve as a "disclosed dual agent" representing both buyers and sellers.

Purchasers are best served by using a buyer broker who is obligated to seek the best price and terms for any home they purchase. As with listing agreements, buyer broker contracts are negotiable.

Q: We spoke to several local real estate agents when we recently decided to sell our home. They each made an interesting presentation explaining how they would sell our property, but one went further: He offered to personally rebate a part of the commission without telling his broker after closing. Can he do this?

A: No. In most jurisdictions there are real estate brokers and there are real estate salespeople. Real estate brokers are licensed by a state or province and have the right to contract directly with the public. Real estate salespeople also are licensed, however, they can only work under the authority of a broker. Salespeople are not permitted to contract directly with the public.

In your situation you have a salesperson who effectively wants to create a direct contract with an owner relating to real estate services. List with me, he says, and I'll give you a discount after closing.

You have to ask: Is this offer in writing? If not, how will you enforce it? If the offer is in writing and not approved by the broker, then local real estate regulators would like to see it.

If this salesperson will go outside the rules to get a listing, can you trust him or her to act properly on your behalf?

Real estate fees are negotiable. They should be fully documented at closing. You have the right to seek the best package of services and fees you can find while brokers need not accept an offer to list that is not a good business opportunity. In the usual situation, brokers and sellers work out an arrangement satisfactory to both. However, this is a matter for owners and brokers to determine, not salespeople acting without the knowledge or permission of a supervising broker.

Q: Can I do a 1031 tax-deferred exchange if I only have owned a property for a few months? I'm getting contradictory answers from tax attorneys and CPAs.

A: A successful 1031 exchange confers substantial tax benefits and therefore should be done by the book to assure compliance with all possible rules and regulations. The problem is that "the book" does not specifically address all issues.

Not knowing how the property was acquired (Was it obtained through an earlier 1031 exchange?) and not knowing all the facts and circumstances involved, I suspect that some tax authorities are urging caution because of the "old and cold" rule. This is a general concept under which the IRS typically does not challenge 1031 exchanges when rental income has been reported for at least two years.

When you have conflicting advice from qualified authorities the best approach is to go back and ask why each has a particular opinion. Without a universal green light I would go no further.

Q: I had a rental house that I sold for a $100,000 profit and then bought two houses with the money through a 1031 exchange. I recently became disabled and need to sell one property. The replacement properties were each bought for $150,000 and are currently valued at $250,000. What would be the taxable profit?

A: When you completed your exchange, you also completed IRS form 8824. Since you exchanged multiple properties, the form should show a summary as well as a new basis for each replacement property. Your capital gains tax will be based on the sale price of the property sold less the basis after the exchange and other expenses. As well, you need to ask a CPA or other tax professional about the "recapture" tax on any depreciation that was taken or should have been taken.

© CTW Features

Need real estate advice? Peter G. Miller, author of "The Common Sense Mortgage," would love to hear from you. Send your questions to peter@ctwfeatures.com. Due to the volume received, not all letters may be answered.