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| August 2010 |
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REO/Foreclosure Call me for all your REO/Foreclosure needs. |
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Your Personal Investing Report Check out the Following Reports about Investing and buying or selling Tips! http://www.link2c.com/infoemails/index.asp?id=16258 |
Articles and Advice |
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| Seven rules for room additions By Paul Bianchina If you're happy with your home and your neighborhood but are craving a little more space, maybe adding on is a better alternative to moving out. Room additions can be a terrific alternative for many homes, adding space for a growing family and adding resale value at the same time. But be forewarned. A good room addition involves a whole lot more than just slapping on some additional square footage. Here are some important rules to keep in mind as your planning gets under way: 1. Know why you're adding on: This is the first rule, and it happens before you lift a hammer. Why do you need to add on? And no fair cheating and saying, "I need more space!" Do you need another bathroom? Bedroom space? A laundry room or mud room? An improved kitchen flow? More space to entertain? Better accessibility due to health issues? More storage? A larger garage or hobby area? The only way the addition will meet your needs is to know what those needs are in the first place. 2. Good additions never look like additions: This is the other top rule of room-addition planning. When you're done, the addition -- no matter what its size or where it's located -- should never look like an addition. The architectural styles of new and existing need to blend. The exterior materials need to blend as well, or at least complement each other. To the extent possible, use the same type of windows, roofing, doors, siding and other materials. If the original home has wood windows, using new vinyl windows in the addition screams "add-on" and lowers the appeal and the value. Don't overlook the need to blend landscaping and hardscaping as well. 3. Out, up, down, or a combination: The how and the where of a room addition is always a fun and exciting challenge for everyone involved. Some homes are situated on larger lots and lend themselves very nicely to adding out. Others seem best suited to adding up by building on a second or even a partial third floor. Some houses are even laid out in such a way that it's possible to excavate under them and add new living space in the form of a daylight basement. Or it could be that a combination of two or even all three of these options makes the most sense for your particular home. Keep your mind open to the possibilities. Work with a good contractor and a good designer and you'll be amazed at what you can come up with. 4. Don't let the interior become an afterthought: I've seen a surprising number of additions that look great from the outside but seem to have no thought put into them on the inside. Flooring doesn't match. Trim doesn't match. Sometimes even the interior floor heights don't match. Remember that how the interior of your addition looks and flows on the inside is just as important as how it looks and flows on the outside. Use the same materials or the same style of materials. Match up ceiling, floor, and wall levels. Here again, no matter how you view the addition, inside or out, it should never look like an addition. 5. Create convenient access: This is another afterthought in a lot of additions. Let's say you have a three-bedroom, one-bathroom house, and you want to add a second bathroom. Typically, that's an addition that's going to have a good payback. But then you build the addition so that the only access to the second bathroom is through the kitchen. You now have a three-bedroom, two-bath house, but since the layout is lousy, you've actually gone backwards in terms of desirability and resale value. Are you going to create a beautiful second-floor master suite that can be accessed only by a tiny spiral staircase from the family room? Is the only way into your great new kitchen via a convoluted hallway that leads through the laundry room? When planning your addition, never lose sight of how you're going to access the new spaces, and make sure that access is both convenient and inviting. 6. Don't overwhelm your lot: Granted, room additions are expensive. So when you're doing one, and all those workers are onsite, there's a temptation to get as much square footage as you can. But don't cram your lot full of house. Remember that open space is important as well, both to you and your family, and, later on, to potential buyers. This is a good time to go back to Rule No. 1 and reconsider the "why" part of your room addition. Don't add space just to add it -- stay focused on your overall goals. 7. Understand the legalities: There are lots of rules and regulations that come into play regarding room additions. These include property line setbacks, zoning restrictions, and restrictions imposed by homeowner associations and architectural review committees. In some historic areas, your addition may have to comply with certain historic guidelines. In other areas, there may even be solar shading restrictions that limit the height or the orientation of your roof line. Be sure you check into all of this before you get too far along with your planning. |
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| Good Faith Estimate contains some 'quirks' By Dian Hymer As of Jan. 1, 2010, the Department of Housing and Urban Development (HUD) required lenders to provide mortgage borrowers with a new three-page Good Faith Estimate (GFE) to protect consumers who are applying for a mortgage. The intent of the GFE is to educate consumers about the key terms and costs of a mortgage, both at origination and ongoing. A loan originator completes the form, giving the borrower a summary of the loan particulars and information necessary to shop rates and to be sure they're comparing like-type mortgages. Although there's grumbling, mostly from mortgage brokers, lenders and closing/escrow agents, the format and information included in the new GFE is a step in the right direction. There are, however, some quirks. For example, the GFE doesn't provide a complete and accurate account of the borrower's costs. Page two provides an itemization of loan origination and settlement costs. The origination charge is itemized as one lump sum; it's not broken down. So, you don't know how much you're paying the appraiser for the appraisal, the loan originator for the origination fee, or other miscellaneous fees. Another shortcoming is in the way transfer taxes are disclosed. The entire amount of any transfer taxes is entered on the GFE, even if the sellers pay part or all of it. This could inflate the buyer's estimated settlement costs. To get around having to generate a GFE for buyers before they have committed to a given loan originator, some mortgage originators have developed worksheet quotes for buyers to use if they want to shop rates. HUD is adamant that these worksheets can't be used instead of a GFE. Furthermore, they provide the borrower no protection. HOUSE HUNTING TIP: The new federally mandated GFE provides protection for borrowers against being charged extra fees at closing that weren't disclosed on the GFE. An informal worksheet provides no such protection. Origination and settlement fees are grouped into three different categories. The first category is fees that can't increase between the time the GFE is issued and closing. Included in this category are the lender or mortgage broker's origination fee, transfer taxes and adjustments to loan origination charges after the borrower locks in an interest rate. Loan originators who miscalculate, causing fees to run higher at closing, have to make up the difference out of pocket. To cover themselves, some loan originators pad the Category one figure. The second category of fees can increase up to 10 percent at closing and includes such things as government recording charges and title insurance -- if the title insurer is identified by the lender, not by the borrower. This is done to encourage lenders to shop for the most cost-effective coverage for the consumer. The third category of fees can change at settlement and includes homeowners insurance and title insurance coverage if the borrower, not the lender, identifies the title insurer. The new GFE also includes a tradeoff table that shows what the interest rate would be if you paid a higher origination fee vs. a lower origination fee: the higher the fee, the lower the rate; the lower the fee, the higher the rate. Finally, there's a loan-shopping chart to use the mortgage information provided by one lender to compare with other lenders. There is no obligation to use a loan originator who completes a GFE for you. A loan originator can't refuse to provide a GFE to a prospective borrower who asks for one. As soon as a prospective borrower provides essential application information, such as Social Security number, property address, etc., the originator is to provide a GFE. THE CLOSING: Lenders are required to provide a GFE within three days of receiving the borrower's application. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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| Sellers face new dilemma in timing the market By Dian Hymer Some sellers have been biding their time for three years and now wonder if they should continue to wait or bite the bullet and sell now. Karl Case, co-creator of the widely followed S&P/Case-Shiller Home Price index, thinks there's a 50-50 chance that we're at the bottom of the market and that we'll see improvements in the months ahead. Unemployment remains a concern. An increase in the number of new households is predicated on an increase in jobs. Even if we have seen the worst of the recession, most analysts believe the housing recovery could be rocky for years. A quick turnaround is probably not on the horizon. The home-sale market is generally better this year than it was last year at this time. Interest rates are lower by about 1 percent. Mortgages are much more readily available. Home prices have dropped significantly, making it possible for buyers to afford to buy a long-term home. An increasing number of fence-sitters have turned into motivated buyers. However, they are focused on value, condition and location; they aren't overpaying, as they did in 2006. It's still a buyer's market and could remain so for some time to come. Sellers who purchased within the last five years might need to sell for less than they paid. One couple bought a home in Crocker Highlands, a coveted Oakland, Calif., neighborhood. They paid just over $1.1 million in 2005 and made improvements to the property. They sold in 2009, after investing more to prepare the property for sale. They received multiple offers, over the list price. The home sold for $905,000. These sellers weren't happy about the loss. But, their goal was to own only one home. They bought a retirement home near Sacramento and were spending most of their time there. Holding onto the Oakland home was a financial drain, particularly since they were there only part time. They couldn't rent the property out for enough to cover the ownership costs. Another homeowner realized before the recent economic downturn that she couldn't afford to continue to make hefty mortgage payments due to a drop in her income. Emotionally attached to her home that she'd improved over time, she decided not to sell then, which would have resulted in a profit. Instead, she rented the property for a few years and moved in with a friend to lower her overhead. Although the rent reduced her monthly debt load, it didn't cover the carrying costs. When she finally sold in January 2010, prices had dropped to a point that the property sold for less than the amounts of the mortgages secured against the property. To get lender approval on a short sale, the seller had to contribute cash at closing. Clearly, she would have been better off financially if she had sold years earlier. HOUSE HUNTING TIP: Deciding whether to sell now and take advantage of an improved home-sale market or wait for a better time is complicated. First, you need to know the approximate selling price of your home in this market. How much work needs to be done to get the property ready to sell? Does the house have any defects or deferred maintenance that will impact the sale price or make the property harder to sell? If so, this would negatively impact the price. This information can be obtained through your real estate agent. THE CLOSING: Low inventories of good homes in some niche market gives sellers an edge. Even so, you'll be successful in today's market only if you are realistic about the current market value of your home. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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| Protect real estate from Medicaid By Benny Kass DEAR BENNY: Seven years ago, when my mother was 80, my husband and I purchased cooperative apartment shares in a senior complex for her to live in. Since at least one of the tenants had to be over 55, we put her name on the shares, as well as my name. The actual paperwork reads: " 'My Mother's Name' or 'My Name' as joint tenants with right of survivorship and not as tenants in common." If my mother needs to move to assisted living or a nursing home, will Medicaid try to get possession of this apartment? I've called the co-op's attorney, senior law offices here in Reno, Nev., and I've called private attorneys. No one can give me an answer. One office suggested I call the Medicaid office. As much as I would like to, I think that might give Medicaid an opportunity to take what isn't hers. We used equity in our home to purchase this apartment. My mom lives on Social Security and could never afford this apartment. One lawyer suggested the co-op "reconvey" the share back to my name, but their bylaws require that whoever is on the deed live there. Any ideas? Are we safe in keeping this, selling it and keeping the monies, or will Medicaid take it? --Penny DEAR PENNY: This is a complicated question and I am surprised that the senior law offices were unable to assist. There are a number of "elder lawyers" throughout the country, and you can locate them on the Web. I searched "elder lawyers" and found a number of Web sites that should be of assistance to you. Generally, however, Medicaid (which is administered by the state, with each state having its own rules) does not "get possession" of property. But if your mother applies for Medicaid, I assume she will need to disclose her interest in the co-op as an asset. It is possible that the state will take into account the fact that she is not an "equitable" owner of the property (as she did not contribute to the purchase price of the property) and simply disregard the asset. But even if she is considered to be an owner for Medicaid purposes, the state may impose only a lien on the property rather than require it be sold. In fact, if the state considers the co-op interest an asset of your mother, it wouldn't require her to sell it, but could deny her benefits until her assets, including her interest in the house, were spent down to whatever the threshold is in Nevada. Many states allow a number of exceptions. For example, if a disabled family member (or a spouse, which I assume there is none) is living in the property, the Medicaid applicant would qualify for benefits and a lien would be imposed on the applicant's share of the property in the amount of any benefits paid -- but the benefits would need to be reimbursed when the property is sold or the disabled person or spouse dies. This is a highly specialized area of law, and not all attorneys understand the rules or the law. DEAR BENNY: I have a question about escrows for taxes and insurance. Let's say I am buying a home and last year's tax bill was $1,200 (or $100 per month). Can the lender set up escrow collecting $150 per month for taxes? --Nate DEAR NATE: My mathematical skills are limited, but the answer to your question is no. According to the federal Real Estate Settlement Procedures Act (commonly known as RESPA), a lender who collects money in escrow for real estate taxes and insurance can have only a two months' cushion on an annual basis. So, if the bank is collecting $150 per month, annually that comes to $1,800. A two-month cushion allows you to collect only $1,400, or $116.66 per month. But depending on when settlement takes place, the lender does have the right to collect sufficient funds (plus two months extra) to make sure that it can pay the taxes and insurance when they become due. Let's take this example: You settle (go to escrow) on May 15. The tax bill in your jurisdiction must be paid by Sept. 30, 2010, but is applied from January 2010 through December 2010. Because mortgage interest is calculated in arrears, your first payment will due in July. (Note: The lender will charge you interest at closing from May 15 to the end of that month.) By the time the real estate tax bill has to be paid, you will have made three payments in escrow (July, August and September). But the lender needs a full 12-month payment. Accordingly, the lender has the right to charge you -- at closing -- nine months' escrow to collect all the money needed, plus two months' cushion; in other words, the lender can charge you at closing for 11 months' escrow. Here's a consumer protection suggestion: Because too many lenders often do not make the tax or insurance payments on a timely basis -- or in some cases do not make the payments at all -- homeowners should send their lender a demand letter, once a year right after the taxes or insurance payments are due, requesting proof that those payments have, in fact, been made. For those jurisdictions where this information can be found online, you should learn how to access this from your local government's Web site. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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| Add power to purchase offer By Dian Hymer Figuring out how much to offer on a home you'd like to make your own is never easy. A complicating factor is that although it appears that the housing market may be stabilizing, there is no guarantee that prices won't slip further. With this in mind, don't buy for the short term. Don't buy betting on future appreciation. Buy a home that will work for you long term, at the best price you can negotiate, using financing you can afford. To avoid paying too much, hook up with a real estate agent who will educate you about how much you'll have to pay for a home that works for you. The Internet is a great resource to help you learn about neighborhoods, current listings, and past sale prices. However, a diligent, knowledgeable real estate agent who has experience helping people buy and sell homes in the area where you want to live can get you up to speed on what's happening in that niche market now. HOUSE HUNTING TIP: Ask your agent to give you a summary of all listings that you might have been interested in that sold during the last three months to six months, including list price, sale price and how long they took to sell. It's also useful to have information about the change in average sale price over the past year. Have prices declined? Are they flat? Or are they rising? Also, ask for a list of properties currently available and pending sale. A pending sale is one where the sellers have accepted an offer, but the sale hasn't yet closed. Significantly more active listings than pending sales in an area suggests a high-inventory market where buyers have an advantage. Few active listings relative to pending sales is characteristic of a low-inventory market. During your house-hunting education, make sure your agent reports back to you about day-to-day changes in the market. If an overpriced listing has a price reduction and is now in your price range, make a point of looking at it as soon as possible. A new price can attract other buyers' interest. When listings you've seen sell, your agent should let you know the sale price. This will help you develop a sense for when a listing is priced too high, or priced at or under market value. How well a listing is priced for the market affects your offer strategy. A well-priced listing in a low-inventory market is likely to sell quickly. There could be more than one buyer making an offer. If so, you may need to make an aggressive offer near, at or over the asking price. However, multiple offers don't always result in a sale price higher than the list price. Becoming savvy about local market pricing enables you to know when to make a strong offer on a new listing, even though the overall market may be lagging. It's a different story in segments of the market where there are plenty of listings that take months to sell. In this case, you have choices, making it possible to offer less than the asking price and negotiate. If this one doesn't work out, you move on to the next. You should be prepared to walk away rather than pay too much. Buyers making offers that are contingent on the sale of another property usually have to pay more than all-cash buyers who can close quickly. If you've already sold your home and are waiting for the sale to close, you'll be in a better position to negotiate on price. THE CLOSING: The best bet is to have your home sold and closed. It removes uncertainty in the sellers' minds and may make them more receptive to a lower price. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
| A simple guide to home seller disclosure By Dian Hymer How would you like to find out after you've closed and moved into your new home that the basement is rat-infested? You call a local pest company and discover that the sellers hired the company to treat the house for rat intrusion. Pest infestation might not be a material fact to all buyers. A material fact is one that would affect whether or not buyers would buy a property or the price they'd be willing to pay. However, most buyers would be annoyed at the least that the sellers hadn't informed them in advance that the property had a condition that required routine maintenance. It could also make the buyers suspicious that the sellers may have withheld other information. Home-seller disclosure laws vary from state to state, although most states require disclosure of material facts. Check with your real estate broker or attorney for information about disclosure requirements before you put your home on the market. Sellers often fear that if they disclose too much, buyers won't buy their home. Generally, the opposite is the case. Buyers appreciate knowing as much about a property as possible before they close the sale. When buyers discover conditions affecting the property that they didn't know before closing -- ones that the sellers had to have known about -- they could use legal channels to remedy the situation. The goal in selling your home should be to sell for the highest price possible in the current market, and to keep as much of the proceeds as you can. Getting involved in a claim, mediation, arbitration or lawsuit over lack of disclosure or concealment can be time-consuming, stressful and very expensive. In today's environment of economic uncertainty, buyers who feel they were duped are more likely to pursue a claim against less-than-forthright sellers than they might have when home prices were appreciating at such a fast clip that it was often easier to fix the problem themselves than get into a legal battle with the sellers. HOUSE HUNTING TIP: Here's a guideline to help you decide what should be disclosed. If you're asking yourself whether something should be disclosed, it's probably material to someone, so disclose it. Keep in mind that it's often not clear whether a fact is material. There's a certain amount of subjectivity involved. For example, a woman was raped in a home in a trendy area of Oakland, Calif. This happened before the current owners bought the house. To err on the safe side, the current sellers disclosed this fact, figuring that it might be significant to someone interested in the property. It was also common knowledge in the neighborhood that the event had occurred. If the sellers hadn't disclosed it, the buyers would surely have found out about it later. A single woman who was interested in the house decided not to buy. The house had a detached garage, which gave her cause for concern even before she learned about the crime that occurred at the property. Another buyer had no concern at all about the past incident. The house sold. There was no discount in price due to the disclosure. It takes time to make complete and accurate disclosures. Some sellers take their disclosure obligations less than seriously. It's foolish to shortchange yourself, literally, by failing to make accurate and forthcoming disclosures about property defects. It could significantly affect your net proceeds. The burden of disclosure doesn't rest entirely on the sellers. Real estate agents are required to disclosure material facts. And buyers have a responsibility to protect themselves by thoroughly inspecting the property before deciding to proceed. THE CLOSING: A well-inspected property, complete with sellers' disclosures, protects all parties involved. Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author. |
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