Send to Printer

#2 Salesperson at Century 21 Westworld!

Warren Nass REALTOR® Century 21 Westworld 15058 Rosecrans Avenue La Mirada,  CA  90638 714.606.0329 714.690.9388  warrennass@aol.com http://warren4realestate.com

Listings

Just SOLD! 1281 Brass Lantern, La Habra; 14247 Starbuck, Whittier; 516 Amboy, Anaheim; 3372 Redport, Corona http://warren4realestate.com/career.htm

Just SOLD! 15708 La Fortuna, La Mirada;19801 Meadow Ridge, Lake Forest; 2611 Shady Valley, La Habra http://warren4realestate.com/career.htm

Just Sold La Mirada Home! 3 bed, 2 baths, 1196 sqft located in near Kling center 15111 Tacuba Drive, La Mirada $365,000 http://warren4realestate.com/homesearch.htm?scope=OFFICE&id=35753486&action=detail

California Home Search Click to search for homes in all of California! http://od448348.mlsallianceidx.com/Listings/IDXSCAllianceLanding.aspx

Articles and Advice
Eight ways to conserve water this summer By Michelle D. Alderson In February of this year, the Governor of California declared a state emergency due to drought. “ …California faces its third consecutive year of drought and we must prepare for the worst,” Governor Arnold Schwarzenegger said. As of this writing, the state has not issued a mandatory water rationing order, but asks that the residents of California participate in a voluntary reduction. With the summer months ahead, the drought is even more cause for concern. Lawns and gardens will be watered more often, more cars will be washed; essentially the hose will replace the rain. By adjusting their lifestyle a bit, homeowners can reduce water waste -- and save a buck on the monthly water bill. Here’s how: 1. “Plant” Synthetic Grass If you are thinking about planting a new lawn this year, know that AstroTurf is back. This is not the same kind of artificial turf you think of when you reminisce about the Brady Bunch’s backyard. Synthetic grass actually looks like grass, and it does not need a drop of water to maintain its lush green color. An additional bonus is that you’ll never have to mow the lawn again. 2. Water Efficiently Residential properties are regularly overwatered by 30 to 40 percent (http://www.stopwaste.org). Learn how to water your lawn efficiently and at the correct time of day. For example, watering your lawn either in the late evening or early morning reduces evaporation. 3. Go to a Car Wash Using a running hose to wash a car uses up to 150 gallons of water. Most car washes use about five to 10 gallons of water per car (http://www.epa.gov/). In addition, the water used to wash a car in a driveway goes from the street gutter straight to bay or rivers without being treated. Car washes must treat their water before it enters the water system. Many car washes also recycle graywater, keeping the environment clean and conserving at the same time. 4. Use a Broom Running a garden hose can waste up to 10 gallons per minute (http://conserve.sfwater.org) and is unnecessary when cleaning a driveway or sidewalk. The water from a garden hose also contributes to the pollutant waters already abundant in sewer systems. 5. Check for Leaking Sprinklers and Hoses A leaky faucet can waste 100 gallons a day (http://www.sscwd.org/), which includes outdoor systems. Check for and replace leaking hoses or sprinklers. Place automatic water shut-off nozzles on any hoses. 6. Keep a Rain Collection Barrel During a 1-inch rain, 625 gallons of water can be collected from 1,000 square feet of roof (http://www.stopwaste.org). Rainwater can be channeled through gutters and downspouts to a storage unit, which can then be used to water lawns and gardens. 7. Plant Mulch Planting a layer of mulch around trees and plants, such as chunks of bark, peat moss or gravel slows down evaporation. By doing so, 750 to 1,500 gallons of water can be saved a month (http://www.mwdh2o.com/). 8. Grow Native Plants As defined by the Environmental Protection Agency (EPA), native plants, also called indigenous plants, are plants that have evolved over thousands of years in a particular region. Native plants are drought-resistant, require fewer pesticides than lawns (another plus for the environment), and require less water to maintain their natural beauty. If you want to find more ways to conserve water both inside and outside, check out this non-profit Web site: http://www.h2ouse.org/tour/index.cfm. It’s geared for homeowners to research room by room in their home for better ways to conserve water. To read about the drought in California, visit the state government’s website http://www.saveourh2o.org/ for more information.
Don't wait until selling to make repairs By Dian Hymer Home maintenance ranks low on many homeowners' priority lists. When the washing machine breaks, you might fix it to keep from having to go to the Laundromat. But, if there's no pressing need, home maintenance chores are often put off. In the current soft real estate market, homeowners may be less inclined to pay money to make repairs around the house. However, the key to preserving the value of your home is keeping it in good condition. Home maintenance is a necessary part of home ownership. The cost varies depending on the age of the home, its overall condition when you buy it and the climate. For example, in coastal California the alternation between fog and blistering sun takes its toll on exterior paint. Houses with a western exposure may need painting more often than those that face east. Homeowners can have a hard time coming to terms with the fact that they can't recoup the cost of home maintenance when they sell. Home maintenance is a cost of ownership, as are property taxes, homeowners insurance and mortgage expenses. Even though you can't tally your home maintenance expenses and expect a buyer to reimburse you, you do benefit when you sell by keeping your home well maintained. Buyers tend to pay more for homes that are in top condition, particularly in a buyer's market. Also, if you don't take care of deferred maintenance, buyers are likely to adjust the price they'll pay for your home accordingly. The burden of making the repairs will be on them, so they will factor this into the cost of the house. You can cut down on home maintenance by buying a condominium or townhouse in a planned-unit development where the homeowners association dues cover some of these costs. If you rent, your landlord is usually responsible for making repairs. HOUSE HUNTING TIP: As a homeowner, you can keep your home maintenance costs down by staying on top of correcting minor problems before they become major. For instance, if a threshold is cracked and showing signs of wear, it's best to have it replaced before it causes water damage to the framing underneath. With the escalating cost of lumber, it would be a lot cheaper to replace the threshold now than to repair major water damage later. Summer is an ideal time to take a serious look at your home in terms of getting it ready for the winter months. Track down leaks in windows, doors, roofs, foundations, drainage systems and basements. Have these and any related damage repaired. Water is a homeowner's biggest headache. Too much in the wrong place can lead to dry rot, fungus and mold problems that can be very expensive to repair. Ideally, your home should be dry inside underneath the house during the rainy season. Some homeowners can make repairs themselves. Others have little or no experience, and can't even spot a problem when they see one. If you fall into the latter category, plan to hire a home inspector, contractor or handyman to inspect your home annually for defects that need to be repaired. Many small repairs like installing weather-stripping, sealing French doors or windows, or caulking sinks and tubs can be done by a handyman. Ask your inspector to prioritize the needed repair items. If you're short of funds, at least take care of the most important items. Set a schedule for taking care of home maintenance items like having the furnace and fireplace checked, trimming trees and clearing drains. THE CLOSING: Keep copies of invoices for work performed on your home. It will serve as a good reference for you and for the next owner of your home.
What to do if your home won't sell By Dian Hymer Homes take longer to sell today than they did in 2005. This is due to a slow home-sale market that has resulted in a build-up of the inventory of unsold listings. Although there are exceptions, this situation is expected to continue until late 2008 or 2009 -- at least. What options do sellers have whose homes aren't selling quickly enough? Many of the homes that aren't selling are priced too high for the current market. The median sale price of homes sold nationally in February 2008 was down 8.2 percent from a year ago, according to the NATIONAL ASSOCIATION OF REALTORS® (NAR). This percentage was even higher in cities like Miami and Las Vegas that were speculative hotbeds in 2004 and 2005, and now have high foreclosure rates. Some areas are doing better than others. For example, the median sale price of homes sold in the San Francisco Bay Area in February 2007 dropped only 5 percent compared with a year ago. There are few areas in the country where prices have actually increased during the past year. Even so, sellers often have a difficult time coming to grips with the fact that the value of their property has declined. It has often been said that sellers are the last to know when it comes to the value of their homes. Buyers, on the other hand, are often ahead of the game. They know the market better than most sellers. They are aware of the risks involved in today's market, and they gauge the price they'll pay accordingly. HOUSE HUNTING TIP: Sellers whose homes aren't selling should analyze the price they are asking with the help of their real estate agent. It's useful to look at similar homes in your area that have sold recently. Why did these homes sell when yours didn't? If price is the key determinant, adjust your price accordingly, if you can. Sellers who are unable to accept a reasonable price for their home should take it off the market and wait for a better time to sell. Letting your home sit on the market overpriced won't accomplish your goals. And, it could hinder your sales effort at a later date when you get serious about selling. You don't want to be known as an unrealistic seller. Some listings need more than a price adjustment to sell in this market. If modifications can be made to the property to make it more salable, consider removing the listing from the market temporarily until changes can be made. Then, adjust the price some to give the listing an entirely new look when it is re-marketed. Finding a tenant rather than a buyer might seem like a good option for some sellers. Before taking this approach, talk with a tax advisor. The tax laws affecting single-family residences differ from those relating to income-producing properties. One tax benefit of owning your home is that you are entitled to $250,000 of tax-free gain ($500,000 for a married couple filing jointly) when you sell. But, restrictions apply. For instance, you need to have owned and occupied your home for two of the last five years. If you were to move out of the area, with no plans of returning, this could pose problems when you decide to sell. It can be difficult to sell a tenant-occupied property, particularly if the tenants are content to stay where they are. Also, your home might not show well with a tenant living in it. Ideally, plan on selling after the tenant has vacated. THE CLOSING: This way you can have the property repaired, painted, cleaned and staged for sale before it goes on the market.
Sellers, pay attention to lowball offers By Dian_Hymer Selling a home can be an emotional experience because most sellers have a lot more than money invested in their homes. So, it's understandable that sellers might be reluctant to respond to an offer that is for less than the asking price. Most sellers have a difficult time being objective about their homes. But, detachment is something sellers should strive for, particularly when the market favors buyers. To be a successful seller in a buyer's market, you need to be able to put yourself in the buyer's shoes. Ask yourself if you were a buyer if you would pay the price you would like to ask for your home. In a soft market, like we are currently experiencing in many parts of the country, buyers are prone to make a low offer on any listing that doesn't receive offers from more than one buyer. The exception is when a listing is priced so competitively that a buyer recognizes a good deal and buys the property before others have a chance. Some sellers might be inclined to inflate their asking price so that they will have room to bargain with a buyer. This is a risky strategy for serious sellers. In a buyers' market where there are a lot of homes for sale, the best listings at the best prices sell. The listings that don't sell usually need price reductions to get them to a marketable range. If the market is trending downwards, this could mean selling for a lower price than might have been possible if the listing had been priced competitively to begin with. HOUSE HUNTING TIP: Sellers whose homes are not competitively priced are prime targets for low offers. Even if your home is not badly priced, you could receive a lower-than-asking-price offer if market conditions are uncertain. Rather than being insulted by a low offer, sellers should view it as the beginning of a dialogue that could result in a sale. Pay close attention to the buyer's financial capability. Gone are the days where buyers could buy a home with little or no cash down, and without verifiable income. Today's buyers are subjected to far more financial scrutiny by lenders than they were a year ago. Ideally, buyers should be preapproved for the financing they need before they make an offer. If they are not, make sure there is a clause in the purchase contract that requires the buyers to apply for financing within a several days of acceptance. Find out what kind of financing the buyers are applying for and which lender they intend to use. Some mortgage lenders recently failed to fund buyers' loans at the last minute. Make sure your buyers receive underwriting approval from a bona fide lender. The number of days for lender approval should also be included in the contract. Sellers who receive an offer that is unacceptable regarding any of its terms and conditions -- not just the price -- should have their agent draft a counteroffer. Buyers and sellers often don't know in advance what price they'll accept until they're in the midst of a negotiation. For example, a seller who bought another home before selling might accept a lower price if his house has been on the market awhile and the buyer's offer is not contingent on the sale of another property, and if the transaction will close quickly. Likewise, a buyer could agree to pay more than he thought he would if interest rates were to drop. THE CLOSING: The counteroffer process can happen quickly or it can be long and tedious. Be prepared to explore all options before letting a negotiation fail.
How buyers, sellers are closing deals in today's market By Dian Hymer Negotiation is back in style, and is likely to remain a necessary part of buying or selling a home in today's beleaguered residential housing market. Other key elements to a satisfactory closing are flexibility, perseverance, creativity and diligence. Needless to say, you need to work with the best real estate professionals you can find in your area. In most cases, it takes a team effort to put a home-sale transaction together and see it through to fruition. HOUSE HUNTING TIP: Successful negotiations usually require give and take by both parties. It has been said that the sign of a successful negotiation is one where both parties walk away feeling they have won. It has also been said that the key to a mutually acceptable agreement is that both sides feel a little wounded. A must in this market is a commitment to exhaust all possible ways to put and keep a deal together before calling it quits. Recently, it looked like a purchase contract was about to fall apart. The buyers had originally offered a price that seemed insultingly low to the seller. The seller set his personal feelings about the price aside and countered the buyers' offer at a price he felt was reasonable. The buyers accepted. As it turned out, the price was one that was halfway between the seller's list price and the price the buyers offered. Splitting the difference is often a winning strategy. The house in question had been well inspected before the buyers entered into contract to buy it. However, when it came time for the buyers to remove their inspection contingency, they requested a large monetary credit from the seller. Not only did the buyers discover a few health and safety issues that weren't covered in the previous reports, they also developed a serious case of cold feet. These buyers were able to find jumbo financing at a good interest rate. However, to obtain this financing, they had to make a larger cash down payment than anticipated. This left them feeling cash-strapped. The seller refused to credit the buyers the amount of money they requested. However, he was willing to credit some money. Or, he would carry a second mortgage for the buyers so that they didn't have to put so much cash down. Flexibility gives the parties to a negotiation a way to explore options for making a deal or for keeping one moving forward. In order for the buyers in this case to feel comfortable closing the sale, they needed a concession from the seller in order to ease their financial strain. By offering to carry a second mortgage against the property, the seller found a way to free up more cash for the buyer. As it turned out, the buyers elected not to take the seller-financing offer and accepted a monetary credit at closing. Credits at closing require approval by the buyers' lender. Most lenders have limits on how much money a seller can credit a buyer at closing. It is often equal to 3 percent of the purchase price, but cannot exceed the actual amount of the buyers' nonrecurring closing costs. These are costs paid for the buyers on a one-time-only basis at closing, such as title insurance or a transfer tax. A seller carry-back would also need lender approval. The lender in first position would want to ensure that the terms of the second mortgage were reasonable and would not be likely to put the buyers in financial jeopardy. THE CLOSING: Sellers should carefully consider whether it makes good financial sense to carry financing for a buyer who is making a relatively small cash down payment.
'Creative financing' tactics to lure home buyers Retired seller moving abroad not looking to make big profit By Benny L. Kass DEAR BENNY: I recently retired and am planning to move out of the country. I own a single-family house in a desirable area. I owe only about $70,000 on my current mortgage. The value of the house before the recent market crash was about $470,000. Despite the current market, numerous people have looked at the house, but only one has made an offer (a very lowball offer). I am not desperate to sell, but I want to move on with my retirement plans. The house is older, but has recently had about $30,000 in improvements in order to appeal to buyers. Since I will not need the money from the sale of the house, how could I offer a very appealing owner-financed mortgage, perhaps with an introductory "teaser rate"? I called the bank that holds my mortgage, but it does not have anything in place to assist individuals with owner-financing. I could offer the house with a fair rate, but I do not want to have to fly back from another country to collect late payments, foreclose, make repairs or redo legal paperwork. Therefore, I am apprehensive about renting or offering a mortgage to anyone with less-than-perfect credit. Any suggestions you could offer would be appreciated. --Bob DEAR BOB: There are a number of ways that you can market your house with what I call "creative financing." First -- a land sales contract. Here, you enter into an agreement with your buyer that he or she will start making monthly payments. Your attorney will hold the deed to the property in escrow. When the buyer is able to obtain sufficient funds to pay the entire contract price, the deed will be recorded in the buyer's name. If the buyer does not make the payments, the agreement states that he or she will immediately move out, and you still own the house and keep the moneys that have been paid thus far. Second -- a wraparound mortgage. You sell the house and take back a mortgage (deed of trust). Since you already have a mortgage that has not been paid in full, this would be a second trust. Example: You sell the property for $470,000; the buyer pays you $20,000; and this second trust is for $450,000. Let's assume your current mortgage carries an interest rate of 5.5 percent, and the new mortgage is at 6.5 percent. You receive payments based on the higher mortgage rate, but pay off your lender at the existing rate. In my example, you will make 1 percent on the money you owe your bank, and 6.5 percent on the difference. Third -- a seller take-back. If you -- or your buyer -- can come up with the money to pay off your outstanding mortgage, then you can take back a first deed of trust at an interest rate to be negotiated. You can start off with a low rate for a couple of years, and have it increase periodically. You do not have to worry about flying back to handle these issues. You can appoint a bank or an attorney to handle all of these issues, including collecting the monthly mortgage payments or assessing any late fees, and you can enjoy your retirement wherever you are. DEAR BENNY: I am on the board of directors of a 112-townhome development. A new development is being built right next to ours, and the developer has requested permission to tap into our water line. I assume that since he asked we must have some rights. We have an attorney researching this. Our development is approximately 22 years old. What are the pros and cons for allowing this and should we charge a fee? Thanks for your advice. --J.D. DEAR J.D.: It appears obvious to me that your association has certain rights; otherwise, the developer would not be asking for your permission. The very first thing I would have your attorney do is contact the water authority in your county, which must be involved in any discussion and decision that is made. It concerns me that your water line will be used by another development. Is this only a temporary request (which under certain conditions would not bother me as much) or is this a permanent situation (which in my opinion is not acceptable)? Yes, if the association and the developer enter into a written agreement, the developer should pay for the use of your water. But I am not sure how this can be determined. I suspect that a submeter will have to be installed, which must be at the expense of the developer and subject to the approval of the local water authority. Bottom line: It's not a good idea. DEAR BENNY: My daughter and her boyfriend are thinking about buying a house, and she is putting a larger down payment. Is this a good idea? --Doug DEAR DOUG: There are ways to protect your daughter should they end up separating before marriage. As you no doubt recognize, that is always a possibility. There are two ways they can take title -- either as tenants in common or joint tenants with right of survivorship. Under the latter arrangement, should one of the owners die, the other owner will automatically -- by what is known as "operation of law" -- become the owner of the entire property. Unfortunately, very few states (to my knowledge) allow a disproportionate interest with such a tenancy. Basically, both parties own the entire property equally. So there is no guarantee that your daughter's investment in the property will be protected. In a tenants-in-common arrangement, ownership can be based on the amount of money that each party invests in the property. So, for example, if your daughter is putting up 75 percent of the down payment, title can be held as tenants in common, 75-25. With that arrangement, should one of the parties die, his or her interest will be distributed in accordance with that person's last will and testament, and probate is required. So if your daughter has a larger interest, her share will go by way of her will. Accordingly, at least until the couple gets married, I would recommend a tenant-in-common arrangement. Once they get married, if they so desire, they can change the title into tenants by the entirety, which is reserved for husband and wife. I also suggest that they enter into a "partnership arrangement," which would spell out such matters as what happens if one party wants out of the deal, dies or cannot afford to assist with the house payments. DEAR BENNY: My husband and his mother bought a commercial property as joint tenants seven years ago. His mother has developed a mental illness and has announced that she wants to file bankruptcy. What are his legal options? His mother's business is located in the building, which she is going to include in bankruptcy. She has quit making mortgage payments but will not agree to sell. --Leigh DEAR LEIGH: This is obviously a difficult problem for you and your husband, especially since his mother is involved. I am not a bankruptcy attorney and suggest that you immediately consult an attorney with that expertise. Did your mother-in-law ever give anyone her power of attorney? That should be investigated. If there is such a document, the holder of that power may be able to take appropriate action and resolve the situation. If there is no such power, you may want to consider going to your local court to have a conservator and guardian appointed to act on her behalf. Your mother-in-law will have to be in court, if she is able to do so, and the judge will have to find that she is incapacitated -- meaning that she does not have the capacity to make financial or personal decision on her own. Again, your attorney should be able to assist you. Depending on what conditions the judge puts in the court order, a conservator will have full authority to investigate the matter and take all appropriate action. However, the conservator must act in the best interests of your mother -- and not your husband.
Green building's surprising energy savings New-home design that can also help environment, improve health By Katherine Salant "Use common sense to make sense." It sounds like Ben Franklin, but the speaker in this case is David Johnston, a green-building consultant in Boulder, Colo. His Ben Franklin-sounding aphorism, he said in a recent interview, has proved to be a useful, shorthand way of explaining sustainable green-building principles and practices. Although these have been embraced by more and more home builders, there is still much confusion among the general public as to what exactly makes a house green. One way to keep things straight, Johnston said, is simply to remember to "use common sense to make sense." For example, Johnston is regularly asked if a green house is one that is petroleum-product-free. His common sense answer: "If you eliminate everything that contains petroleum, you can't enjoy the accoutrements of a 21st century lifestyle." All the heating and cooling equipment and standard appliances contain plastic, he pointed out, adding that "even something as basic as a toilet has plastic parts." The make-sense part of green building, Johnston went on to say, has to make sense both environmentally and economically. For example, building materials that have recycled content are generally considered to be a plus because recycling can significantly reduce both the volume of the waste stream and pressure on overflowing landfills. But, speaking like the hard-headed home builder that he once was, Johnston said you shouldn't select a product solely on this basis. A product with recycled content may be much more costly than the conventional product it is intended to replace, and it may not perform any better. Materials have to make sense from a health perspective as well, Johnston said. Many building materials are made with unstable, volatile organic compounds, called VOCs. They can off gas into the air for weeks and sometimes years after they are installed in your house. Of the hundreds of VOCs that have been identified, the one that concerns most people is formaldehyde, a potent eye and nose irritant that can cause respiratory problems. It has been classified by the World Health Organization as a confirmed human carcinogen. You can easily avoid it by using one of the many building products now available with low or no VOC content, Johnston said. Though the non-VOC products often cost more, this is one instance where a higher cost is worth it, he added. Segueing from materials to other aspects of green-home builders Johnston talked about household energy use. His common sense rule: Use as little as possible. His common sense reason: to save money and the planet. If you use less energy, you'll save money on your utility bills. You'll save even more as the price of natural gas, fuel oil and electricity inevitably goes up. If you use less energy you'll help save the planet because you will be reducing the greenhouse gas emissions associated with your house. Unbeknownst to most homeowners, buildings are the largest source of the greenhouse gas emissions that are causing global warming. In the United States, half of building-related emissions are from houses. Johnston feels that energy issues are so important, he urges homeowners to put them front and center in the design of any new house -- "from the first sketch of a floor plan to the final dotting your I's and crossing your T's." But, Johnston hastened to say, energy savings should not come at the cost of having a great-looking house with lots of windows and great views. The trick is to get all this and save energy. Johnston's common sense strategy for supplying household energy needs: Use what's free before using what you have to pay for. That is, tap as much free solar energy as you can for your heating and lighting needs before turning to conventional solutions. To do this, you really do have to think about energy from the start because the feasibility of passive solar solutions depends on how you place your house on your building site, the first step in any building project. To capture the sun's rays for heating your house during the winter, your living areas must be oriented to the south. You can keep the same spaces cool in the summer by adding overhangs. With some additional refinements to the overhangs, the sun can also supply your lighting needs during the day. To maximize the benefit of passive solar heating and cooling, you need to carefully tailor your building envelope to reduce heat loss or heat gain through the walls and roof. This generally requires adding insulation to the walls, attic and basement in amounts far above code requirements and upgrading windows to get ones with a low-emission coating that helps to keep the heat inside during winter and outside in summer. Unless you live in Hawaii or Santa Barbara, Calif., where passive solar strategies can supply all your heating and cooling needs, you'll still need a furnace for those cold days when the sun's heat is not enough to keep you comfortable. But with your upgraded building envelope, you can use a smaller furnace and air conditioning condenser, and that is a cost savings, Johnston said. You'll also need electric lights for nighttime use and cloudy days. Surprisingly, lighting accounts for about 12 percent of household energy use in the average household. Solar daylighting shaves part of this, but you can shave it further with compact fluorescent bulbs, commonly called CFLs, Johnston said. They use about 75 percent less energy to produce the same amount of light as an incandescent bulb, and they last six to eight times as long. CFLs can be screwed into almost any conventional light socket and their color correction has vastly improved in recent years. The other part of the home energy puzzle that green building can affect is the sizeable energy draw for hot water. The luxury of having 40 to 50 gallons available 24/7 consumes another 12 percent of household energy use. But, Johnston said, it's another instance where you can tap free solar energy by installing a solar collector on your roof. For those cloudy days, though, you'll need a backup hot-water heater. The other 35 percent of the energy that the average household consumes is out of a builder's hands, because it is the "plug loads" that homeowners bring into the house when they move in -- appliances, computers, home-entertainment equipment, and all the other doodads that most households accumulate. The most effective way to reduce this load is to purchase Energy Star products, now available in more than 40 categories. How does Johnston's "common sense to make sense" work in real time on a real house? To find out I contacted McStain Neighborhoods, a small production-home-building firm in Boulder that has built sustainable, green houses for more than 40 years. The firm builds about 350 houses a year in the Denver and Boulder markets. Like all home builders, McStain evaluates everything from a cost-benefit perspective. But, unlike almost all the others in the United States, McStain has a research and development department that carries out in-depth reviews of about 50 new products and building techniques a year. Periodically, the firm builds a test house that incorporates the most promising of these innovations. The test houses are eventually sold, but the firm continues to monitor them for several years afterwards, said McStain marketing head Barr Hall. Jeff Medanich, who heads up McStain's research efforts, said that much of his work is a balancing act, spending more here but saving more there so that in sum, the cost of an innovation is relatively small. Medanich offered as an example McStain's current exterior wall construction. Instead of the dimensional wood studs that are used by most home builders (a single piece of wood sawn from a tree log), McStain uses finger jointed studs, which are made up of several smaller pieces of recycled scrap lumber that are glued together. These cost more but their superior quality means that fewer are tossed as unusable -- only about 4 percent compared with 20 percent of the dimensional studs. The cost difference is a wash, but the finger-jointed studs have the added benefit of lowering costs down the line. Because they are straighter, the walls are plumb, and this makes the work of subsequent trades go more smoothly and faster.
Real estate inheritance a mess when stepchildren involved Probating both mom's and dad's estate required By Robert J. Bruss DEAR BOB: My mother died in 1988, and dad passed away in 2006. The house was, and still is, in my late mother's name alone. All dad did after mom's passing was continue to pay the property taxes on the house. A couple of other children belong to dad from a prior marriage. What needs to be legally done to clear the title to the house? --Mr. A.M. DEAR MR. A.M.: What a mess! If your mother's estate was never probated or distributed to her heirs, her will needs to be probated in the local probate court where she was a resident at the time of her death. That proceeding will determine if your late father received title to the house, or if her will left it to somebody else. If mom didn't leave a written will distributing her assets, then her estate will pass according to the state law of intestate succession where she was a resident. Presuming your late father received the house from your late mother, then another probate needs to be opened to distribute his assets according to his will or by the state law of intestate succession. For details, please consult a probate attorney in the county where your mom was a resident. HOW SELLING PROPERTY "SUBJECT TO" THE MORTGAGE WORKS DEAR BOB: I own a piece of commercial property, which has a small mortgage. Can I sell this property without the buyer coming up with a big down payment to pay off the existing mortgage? --Jerre V. DEAR JERRE: Yes. You can sell any property "subject to" its existing mortgage. Of course, the buyer must make the monthly payments or lose the property by foreclosure. But the lender might enforce the due-on-sale clause, if there is one. However, only very dumb lenders enforce due-on-sale clauses if the monthly payments are made on time. If that should happen, your buyer can refinance the mortgage with another lender to pay off the existing mortgage. You should be aware that because the mortgage was acquired in your name, you will remain liable on its obligation. If your buyer fails to keep up the monthly payments, that will reflect adversely on your credit report, but not on the buyer's credit report. HOW TO RETURN PEACE AND TRANQUILITY TO THE NEIGHBORHOOD DEAR BOB: My neighbors have anywhere from seven to 13 cars parked in front of their house. They run a gardening business with day laborers, a daycare business, and a rooming house from the home. The neighborhood has single-family houses of four to six bedrooms in the $750,000-value range. The constant traffic and noise, as well as strangers on our block, drives us crazy. Can anything be done to return peace and tranquility to the neighborhood? --Edwin T. DEAR EDWIN: Presumably you already had a polite conversation with the neighbor but it didn't produce satisfactory results. Next, I suggest you contact the city code enforcement officer to have the situation investigated to determine what zoning and other laws are being violated. If that doesn't produce satisfactory results, then you and your neighbors should consider bringing a lawsuit against the neighbor to abate this private nuisance that is disturbing the neighborhood. NO EASY WAY TO AVOID TAX ON SALE OF A TWO-UNIT PROPERTY DEAR BOB: My wife and I own a property that contains two rental houses on one lot. To sell the property and avoid capital gains tax, can we occupy one of the houses and still rent out the other one? Or must we occupy and/or not rent both for two years? --Jon H. DEAR JON: You and your wife could occupy one of the rental units as your principal residence at least 24 of the last 60 months before selling the property. Then you will avoid capital gains tax apportioned to that unit, up to $500,000 for a married couple filing a joint tax return. If you were single, Internal Revenue Code 121 provides a principal-residence-sale tax exemption up to $250,000. However, your capital gains tax apportioned to the other rental house will remain taxable. Keeping the other unit vacant won't reduce your capital gains tax on its sale. For more details, please consult your tax adviser. ALWAYS GET OWNER'S TITLE INSURANCE WHEN BUYING OUT CO-OWNER DEAR BOB: I will soon be buying out my investor co-owner in an apartment building for about $260,000. We are not relatives. We obtained title insurance when we bought the property about six years ago. Do I need title insurance again? --Herb W. DEAR HERB: Yes. Always get an owner's title insurance policy when acquiring any property or, especially, when buying out a co-owner. That's the only way you can be certain you are obtaining marketable title. Although remote, there is a possibility your co-owner has unpaid judgment liens, income tax liens, child support liens, or other liens which may have attached to the property. Go back to the title company which originally insured your title and ask if they have a discounted or "bring down" rate for your situation. SHOULD HOME SELLER REFUND DEPOSIT IF BUYER DIDN'T TRY HARD TO GET A MORTGAGE? DEAR BOB: The buyer of our home made a quick Internet mortgage application and was declined. I offered to carry back the mortgage for the buyer on exactly the terms stated in the sales contract financing contingency clause. But the buyer refuses and wants to cancel the sale. Am I obligated to refund the buyer's good faith deposit? --Mary Ann P. DEAR MARY ANN: The buyer is obligated to use good faith to remove the contingency clauses in the purchase contract. Applying with just one mortgage lender is clearly insufficient and does not show good faith. Your offer to carry back the mortgage for the buyer shows financing is available. However, if the buyer wants to get out of the sale, you might not want to do business with that person. Buyers like that are disgusting. If I were in your situation, I would have my attorney write a letter to the buyer giving him the opportunity to clear his breach of contract by either accepting your finance offer or obtaining a mortgage elsewhere. If he refuses to complete the purchase as agreed in the sales contract, I would keep his deposit (presuming it is several thousand dollars). Let him sue you for it if he thinks the judge might rule in his favor. The buyer will look silly suing for a deposit refund when the buyer is in breach of the contract. For details, please consult a local real estate attorney. ARE NO-PET CONDOMINIUM RULES ENFORCEABLE? DEAR BOB: I enjoy your educational and entertaining articles. Last weekend I was looking at condominiums for possible purchase. Several of the sales agents informed me when the condo complex has no-pet rules. Are such rules legal? It seems to me a condo owner should be allowed to keep an indoor cat if it doesn't go outdoors and never bothers anyone --Victoria G. DEAR VICTORIA: Many upscale condominium complex CC&Rs (covenants, conditions, and restrictions) prohibit pets. Such restrictions have repeatedly been upheld by the courts so don't even think about having a pet in a no-pet complex. But perhaps you might get away with having a goldfish. U.S. MORTGAGE LENDERS WON'T LOAN IN FOREIGN COUNTRIES DEAR BOB: My wife is from Trinidad and Tobago, West Indies. We intend to buy a home in Tobago. I am hoping we can get a mortgage in the United States. Is that possible for foreign real estate? --Mark L. DEAR MARK: Sorry, you cannot get a home mortgage in the United States for use in a foreign country. Perhaps your banker can refer you to an affiliate or correspondent bank in Tobago for assistance with financing there. NO WAY TO BE CERTAIN HOUSE IS LEFT TO SPOUSE IN A WILL DEAR BOB: My husband and I have been married 27 years. He is rather "old school" and set in his ways. When we purchased our house about six months after getting married, he insisted title be taken in his name alone. I went along with that. We have had a good marriage, raising three wonderful sons, but my husband's health is declining. I am concerned what will happen if he dies first. He refuses to show me his will. When I bring up the subject of what happens to the house when he dies, he says, "Don't worry. It will go to you." How can I be sure I am named in his will to receive the house? --Ida C. DEAR IDA: There is no way to be certain you are named in your husband's will to receive the house. He might leave you, for example, only a life estate with the remainder to go to the three sons after you die. Of course, because of the long period of your marriage, under the laws of most states you have probably established marital rights in the house. Other than that, you can't be 100 percent certain of receiving title to the house when your husband passes on.
Multiple offers making a comeback By Dian Hymer In the current home sale market, it might seem ludicrous to make an offer on a listing if it means competing with another buyer. However, multiple offers are on the rise in some markets. But, it doesn't always mean that you need to pay a lot more than the asking price. Sellers are ever hopeful of receiving multiple offers. These days, this is usually an unrealistic expectation. That is, unless the listing is a prime property in a high-demand neighborhood where few homes are being offered for sale. Price is a critical part of the equation. Some sellers price their homes low because they need a quick sale. If the price is below market, multiple buyers could step forward with offers. Sometimes an overpriced listing is reduced to market price or below and results in offers from more than one buyer. Most multiple offers today are on low-end foreclosure properties. Investors make up a large part of the buyers in this segment of the market. In some areas of California and Florida, prices have fallen 40 percent since the market peaked in 2006. HOUSE HUNTING TIP: Don't shy away from making an offer just because there is more than one offer. In some cases, a dozen or more buyers make offers on foreclosure properties that are listed at bargain prices. But, the highest bidder is not always the winner. Even in non-distressed-sale situations, multiple offers in today's market don't always result in an overinflated sale price. For instance, a charming older home on a sought-after street in the Crocker Highlands neighborhood of Oakland, Calif., sold after only two weeks on the market with multiple offers. The property was listed for $1.3 million, and sold for $5,000 above that price. There are far fewer financially qualified buyers in the home-buying market today than there were two years ago due to credit tightening, more rigorous financial qualification requirements and recent stock market losses. In some areas, as many as one-third of home sale transactions fail to close, often due to the inability of buyers to obtain the financing they need. Sellers who receive more than one offer should carefully consider all aspects of the offers, not merely the offer price. An offer from an all-cash buyer who doesn't need a mortgage to finance the purchase, and who can close quickly, should be taken seriously even if the price is lower than the other offer(s). However, some all-cash buyers -- who are fully aware of their strong position in this market -- feel they are entitled to a major price discount. Whether or not you'll have success countering for a higher price will depend a lot on the profile of the buyer. Buyers who intend to occupy the property for the long term are more likely to pay more than will investors who base their purchase decisions on the numbers, not their emotions. THE CLOSING: Sellers should try to keep greed out of their decision when faced with multiple offers. Today's buyers are willing to walk away from a negotiation rather than pay over market value, or it they think the sellers are unreasonable. Dian Hymer is a nationally syndicated real estate columnist and author.
Price it right when selling in today's market By Dian Hymer We're in the midst of a challenging home-sale market in many areas. However, soft markets can provide opportunities for some home sellers. The trick is to price your home right for today's market. The most difficult reality for most sellers to face is that prices in their neighborhood may have dropped during the last year or two. Some sellers will find that it may not make sense to sell if the probable sale price is too low. If you have the luxury of waiting for a better market, stay put for now. Be sure to check with a knowledgeable real estate agent before you make a decision to move forward -- one who knows the local market well. HOUSE HUNTING TIP: It is an advantageous time for move-up buyers, who may have to sell for less than they would have a few years ago. But, they may also pay a lot less for the home they buy. A seller usually has an advantage selling when there isn't much competition from other listings. Even though the listing inventory was low in some areas at the end of 2007 and the beginning of 2008, anticipate that there will be more listings coming on the market in April and May -- the traditional home-selling season. Today's home buyers are extremely price-conscious. If there is a lot to choose from, price will certainly be a big factor. A price that's too high for the market won't bring the desired result. Homes don't necessarily lose value at the same rate in a soft market. In the current environment, buyers are more cautious about what they buy because they know that the property they buy might drop in value before it starts appreciating. They buy for the long term and are less prone to make compromises. The homes that have what most buyers want tend to hold their value better in a down market than do homes that have an incurable defect. Here a few examples of defects that can't be cured: an awkward floor plan that can't be fixed, a location next to a noisy freeway or a house that is either up or down a lot of stairs. Homes with defects that can't be corrected are easier to sell if there's low inventory, and it's a seller's market. We are now in a buyer's market. This doesn't mean you can't sell your home if it has an incurable defect. However, you will need to account for the deficiency in the price. Keep this in mind when you compare your home with one that sold recently that had level-in access, a livable floor plan, and wasn't on a busy street or next to a freeway. The condition of your property will also be scrutinized more carefully in the current market than it would have been a few years ago. You can sell a property that has deferred maintenance. But, you will sell it more quickly and for a better price if you can repair defects and have the property looking great when it hits the market. If this is not possible, take this into consideration in your list price. It's difficult to hit the market price for a property if there haven't been many recent sales in the neighborhood. If you miss the target and find that you're home is priced too high, lower it as soon as possible. A price reduction is no longer a stigma in this market. THE CLOSING: Letting a listing sit on the market too long at a high price sends the wrong message to buyers and could result in a lower sale price if market prices in your area continue to decline.
Pro's guide to painting home's exterior Three-coat approach recommended By Bill & Kevin Burnett Q: In an article on restoring a Victorian, you mentioned exterior painting using three coats: a coat of primer, a second coat of one-half primer and one-half coat of finish paint, and a final coat of finish paint. Is this your suggestion for all exterior painting? A: Yes, especially on older wood homes. We also recommend the three-coat approach when painting trouble spots -- such as windowsills -- that are subject to the ravages of sun, wind and rain. Wood siding on Victorian houses in the San Francisco Bay Area is usually clear heart redwood. A century ago, when the siding was applied, building paper and insulation were unknown. As a result, the wood dried from both sides. Even if the house was painted regularly, today the siding is as dry as a bone. A paint job on this type of house has to be done right to get the longest possible life from the new paint. It's time consuming if you do it yourself or very expensive if done by a professional. From time to time we've described the painting process in varying levels of detail. Now it's time to go through it step by step. The painting process can be broken down into three basic steps: preparation, priming (including caulking and filling voids) and finish painting. A paint job is only as good as the preparation. Prep is a boring process, but if you invest the time and effort, a good prep job will pay lasting dividends. Usually, the first step is to clean the surface to be painted by pressure washing. However, sometimes an older home's buildup of multiple layers of paint requires stripping the paint to the bare wood. If this is the case, use a propane torch or electric heat gun to strip the old paint before pressure washing. If you use a propane torch, also use extreme caution. Dry wood and open flame do not get along well. Kevin spent a month or so burning the paint off one side of his Alameda Victorian. Good thing he did, too; the paint lasted at least 10 years before the new owners needed to repaint. Let the building dry out a full week after pressure washing to ensure that any excess water evaporates. The next step is to use a disc or belt sander to feather the edges of the remaining paint. This way the transition from paint to bare wood is less noticeable. Be certain to dust away any residue after sanding. Now it's time to paint. To spray or not to spray? An airless sprayer gets the material on quickly but is susceptible to leaving thin spots and to overspray. There's nothing quite as tacky as overspray on a roof. But brushes and rollers are slow. We've always compromised. We use the sprayer to get the material on the siding, then back brush or roll to ensure an even coat. This method works for all three coats of paint. Whatever application method you choose, the next step is to apply the primer coat. Use a high-quality primer. We've always used an oil-based primer for exterior work. We recommend that you purchase the paint at a paint store rather than at one of the big box stores. Salespeople at paint stores cater to the trade and generally are very knowledgeable and ready with helpful tips. Ask about adding extra linseed oil to the primer to replace some of the moisture lost in the wood over the years. Also ask them to tint the primer toward the finish color for a finish that fully hides the undercoats. Allow the primer to dry thoroughly. Then caulk and fill all voids in the building. This is critical. The better the caulking, the less chance of moisture penetration and of the paint failing. Joints should be caulked using an acrylic latex caulk. Nail holes and small divots in the siding should be filled with a good-quality exterior Spackle. For more extensive repairs, Bondo works well. The split coat is next. Back in the day, when all paint was oil-based, painters mixed equal parts primer and finish material to get the "split" coat. Today, if the primer and the finish are compatible (oil and oil or water and water), this is the way to go. If not, apply a second coat of primer and have the paint store tint it a shade lighter than the finish coat. The primary purposes of the split coat are to add an extra coat of protection and to eliminate "holidays" visible in the final coat. Depending on the color, even a full finish coat can show impressions through a white primer. After the split coat dries, inspect the job for any defects. Now is the time to fix them. Perhaps a little more caulk is required or a nail hole needs to be touched up. Finally, apply a full finish coat. Follow these steps and you should have a handsome and long-lasting paint job.
Is it worthwhile to fix a property up before selling? By Dian Hymer Buyers tend to want listings that are in move-in condition. For that reason, sellers often put a lot of time and money into prepping their homes for market to realize the largest profit possible from the sale. But, is it worthwhile to fix a property up before selling if it is in a dismal state? It's usually worthwhile to fix up a needy property in a good location that has great potential and that can be improved considerably with cosmetic improvements. The reason why it makes sense to go through the effort is that most people don't have good imaginations and can't envision what a house might look like with work done to it. They simply relate to what they see. For example, last year a grand old home sold in Oakland, Calif. Neighbors went directly to the sellers and asked if they could take a look at the house before it was fixed up for marketing. The sellers agreed and showed them the house. The buyers didn't like what they saw. The house was subsequently improved by removing wall-to-wall carpet and refinishing the original hardwood floors that were underneath the carpet. The entire interior of the house was painted in beautiful decorator colors. Light fixtures were updated; the yard was spruced up; and the house was staged for sale. The transformation was stunning. The property sold with multiple offers for considerably over the asking price. The buyers who had turned the property down before the house was fixed up were one of the four bidders; they weren't the ultimate buyers. HOME SELLER TIP: There's a tip to be gleaned from this experience that's relevant to all sellers. Don't let a prospective buyer look at your home until it has been prepared for sale. Buyers remember what they see, not what you tell them the house will look like when you're done with the prep work. You could lose a good prospect by showing your home before it is ready. Circumstances may not permit you to do much to a fixer property before you put it on the market. You might be short of funds or have a pressing deadline. In this case, the best approach can be to take advantage of the fact that the property you're selling is a fixer-upper. In other words, market it as a fixer. Some sellers bridle at the notion of calling their home a fixer-upper. But, it can make good marketing sense. A certain segment of the market is looking for fixer properties that can be improved to increase value. In fact, these buyers sometimes overpay for the perceived potential. Even though you might get lucky and sell a loser house for more money that you thought was possible, don't lose sight of the fact that you're marketing to a limited pool of buyers. Most buyers won't even look at a fixer because they don't have the time, expertise or resources to turn a property around. Listing a fixer at an enticing price is an important part of selling it for a good price. The list price should reflect concessions made for work that needs to be done. To attract a fixer buyer, make sure you get broad marketing exposure. It's also a good idea to have pre-sale inspections done. Make the reports available to buyers to review before they make offers. This will help to minimize the chance of a deal falling apart when the buyer finds out the extent of the necessary work. THE CLOSING: Even if you don't do fix-up work, the yard and house should be clean and free of debris so that the fixer buyers with vision will be able to see what the property has to offer.
Rethinking your home search If it's taking longer than six months, it's time for compromise By Dian Hymer Most home buyers claim they're picky. And why shouldn't they be? The real estate they buy will be home. It needs to provide more than just a roof over their head. It needs to satisfy emotional needs that aren't easily quantifiable. The home is a reflection of the self, which makes the quest for the right place to buy complicated. Since the home-buying experience is intermeshed with the psyche of the person in pursuit, there's a psychological component to consider. For example, let's say you have been searching for the right home for years. You haven't seen too many properties that fit the bill, and have only made an offer or two during that timeframe. The property you really loved turned out to be entirely too expensive. You lost out in a multiple-offer competition on a property that was listed too low. You've come close to making an offer several times, but have backed away after reconsidering. Each property had defects in terms of your ideal wish list. You weren't willing to compromise. HOUSE HUNTING TIP: Buyers who find they've been looking for the right house for more than six months should pause to consider whether their expectations are in line with reality. For instance, if you want a bay view and a level lot, you may find that you'll wait forever. Bay views tend to be available only in homes that are built on hills. Home buying involves making compromises if you're serious about buying. In order to decide how you will compromise, you need to research the local housing stock to discover what is realistically possible. In other words, you need to do your homework. The perfect house won't just magically appear. To save time, use the Internet to whittle down the list of homes for sale until you find the ones that suit your needs. Then make a point of visiting these in person, either with a real estate agent or at an open house. Buyers with pressing needs usually have less of a problem finding the right home to buy. For example, if you live in an area with a school district you don't like and you have children who are about to enter school, you need to move if you can't afford private-school tuition. You have an urgent reason to move that preempts the desire for a perfect house. You'll settle for the right number of bedrooms and baths, a yard and a good school district. You may be willing to give up on the Old World charm or character that you were hoping to find. You may be getting out and seeing the listings that might work for you and still aren't having success. In this case, you could be suffering from approach-avoidance. This syndrome can keep you from making a decision, even when you see the right house to buy. You come close to making an offer but never carry through. Buying a home can be frightening, particularly if you are doing it on your own. It's a big commitment, perhaps to a lifestyle that you're not used to. It's helpful to consult with advisors when you find that you're getting nowhere. Talk to a trusted financial advisor to see if you're looking in the right price range. If you're over your head financially, scale back to a level that feels comfortable. THE CLOSING: It can be useful to reconsider your wish list in terms of what you've learned about your local market and what to expect. By realigning your expectations and readjusting to a comfortable price range, you may feel more comfortable moving ahead.
Ask a Legal Expert: Fulfilling Deceased Mother’s Wishes By June Barlow Q: My father died a few years ago and now my mother recently died. I’m in the process of selling our family home to a nice couple. The next door neighbor, one of my mother’s closest friends of 50 years, just told me that my mother always wanted to have both her and my father’s cremated ashes scattered in the backyard. Can I fulfill my mother’s wishes if I’ve already entered into a contract to sell the home? A: Probably not. Like many sellers, you are likely to have entered into a contract called the “California Residential Purchase Agreement and Joint Escrow Instructions” published by the CALIFORNIA ASSOCIATION OF REALTORS®. Under that standard form agreement, you have promised as the seller to maintain the property, including the landscaping and grounds, in substantially the same condition as when you entered into the agreement. The legal issue your question presents is whether the scattering of cremated ashes substantially changes the condition of the property. On one hand, ashes sitting on top of the grass and soil seem insignificant, especially if they will eventually blow away with the wind or be absorbed into the ground when watered. On the other hand, some people may become very upset knowing that someone scattered cremated human remains in their backyard. If necessary, that legal issue will ultimately be decided through a court or arbitration proceeding. Therefore, I would not recommend scattering ashes and then concealing it from the buyers. I recommend simply asking your buyers for permission to scatter the ashes. If they don’t agree, your mother would probably have understood, given that you sold the property before discovering what her wishes were and that you want to avoid a legal dispute. If the buyers agree, get it in writing. Finally, before moving ahead, check with your local authorities to make sure they do not prohibit or otherwise regulate the scattering of cremated human remains. June Barlow is vice president and general counsel for the CALIFORNIA ASSOCIATION OF REALTORS®. This information is believed to be accurate under the laws of California as of the date written. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. You should seek the advice of an attorney, tax advisor, or other professionals for your particular circumstances.
Tips for paying off mortgage early By Benny Kass DEAR BENNY: I was reading in one of your columns about paying off your mortgage faster by making an extra payment each year. You said to make sure your coupon clearly indicates you are making an extra payment. I did this at the end of 2008, but didn't know whether it should go under an extra payment or payment on the principal. I paid it on the principal because otherwise it wouldn't show up until January as a payment. I called the mortgage company and could not get a straight answer from them. I was told I could do it either way, which was not helpful. Did I do the right thing by paying the extra payment on the principal? I was setting up our payments to come out of our checking bimonthly so the extra payment would be included each year. We also have money going into our escrow account to pay our taxes and homeowners insurance. I am confused. –Lynette DEAR LYNETTE: I am also a little confused about your question, but let me try to answer it this way. I always recommend that if you can make at least one extra monthly payment each year, you can lower the amount of interest you will ultimately pay as well as shorten the term of the loan. For example, one additional monthly payment per year should reduce a 30-year loan down to approximately 22 years. You can make this extra payment in several ways. In December of each year, you can make that extra payment. Or, better yet, divide the monthly payment by 12 and add that amount to your payment each and every month. I recommend that you call it "extra payment" and include it in your coupon as an "extra payment." To be on the safe side, I also would include the amount as a note on the bottom on your check, and again call it "extra payment." If you are using an automatic payment account, instruct the organization paying the loan to make sure they label the extra payment as such. And in January of each year, do your own calculations to make sure that these extra payments have, in fact, been included in your new mortgage loan balance. DEAR BENNY: My wife and I (via our LLC) own a two-story brick building built in 1890. We are eight years into a 15-year fixed-rate mortgage with payments of $816 monthly, and a $42,000 balance. We have a successful business, which my wife operates, on the first floor. For the last several years there has been a successful historic renovation of our downtown. Many of the second-story lofts have been or are being renovated into urban living spaces. Our second-story loft has 1,800 square feet and 11-foot ceilings with 8-foot windows, but has been bricked up since the 1950s. We are considering moving forward with a renovation, but we must borrow to complete this work. Our economy has experienced a downturn recently and our county currently has a 10 percent unemployment rate. I am uncertain if we should continue under these circumstances and if we do, is it wise to refinance the total building or extend our HELOC? We are debt-free (except for our home and business mortgage), own four small businesses, have no children, own other free-and-clear rentals, and we have a six-month reserve on hand in the bank. I have proposed a budget of about $100,000 to complete this work, and other downtown rentals are running at about $1,100. What advice can you offer given the current economic situation and our borrowing needs? I do feel confident that given a 90 percent occupancy rate we can accomplish a slightly positive cash flow over our PITI. –Michael DEAR MICHAEL: I always appreciate hearing positive things from my readers. You have asked the $100,000 question, but I can provide only general information. Only you can make the final decision. Since you wrote this question to me, (a few months ago) the economy has not gotten better, and indeed it has declined further. Perhaps the new Obama administration will create hope and optimism similar to Camelot when John Kennedy became president back in 1960. You indicate that the unemployment rate in your county is quite high, but you will need a 90 percent occupancy rate to make a profit. What guarantee do you have that you will reach that goal? Keep in mind that being a landlord means you will have vacancies. Have you lined up any potential tenants, and checked out their financial and credit ratings? That's the first thing I would do before launching in the project. Only you can make the final decision. However, if it were up to me, I would hold off at least until we see some signs of an economic recovery. You can always do this later, but if you fail now, you could lose the building. DEAR BENNY: In June 2007, I purchased a house with a fixed-rate mortgage. A year later, the mortgage company requested an extra payment of $715. Six months later, they sent me another bill, claiming an extra payment was required. I am being told that a mistake was made on the original amount needed for insurance and taxes, and they cannot be sure if or when additional extra payments will be required. And nobody seems sure whether I will be allowed to take over payment of my own insurance and taxes, which I've always done in the past. Since I'm not a first-time homebuyer and have excellent credit and have managed house insurance and taxes in the past, this all seems highly weird. –Willi DEAR WILLI: I personally dislike the concept of having to pay money monthly into an escrow fund managed by a lender to pay real estate taxes and insurance. However, it is legal and most lenders (especially FHA and VA) require this. My objections are twofold. First, most lenders use this money as collateral and do not pay any interest on it. Second, lenders sell/assign loans all over the country, and often a lender in one state does not know where or how to pay the real estate tax in your particular county. But whether you are a first-time homebuyer or have good credit, if you want the loan you have to comply with the lender's requirements. You should obtain and carefully review the lender's financial records regarding your loan. Find out the costs of your tax and insurance, and compare those costs to what the lender has been charging -- and paying. By law, lenders have the right to a two-month cushion, just in case you miss a mortgage payment. Finally, I recommend that every borrower who escrows for taxes and insurance send a demand letter once a year (or twice a year if real estate taxes are paid every six months) requesting proof that your lender did, in fact, make the required payments. This is especially true in today's market economy, when many mortgage lenders are no longer in business. DEAR BENNY: My mother recently applied for a reverse mortgage. I have been trying to find a benchmark for reasonable costs associated with this loan to no avail. Could you please guide me in the right direction? –Peter DEAR PETER: Congress recently enacted a law putting a maximum limit of $6,000 on closing costs for federally insured reverse mortgages. But different lenders will have different costs. I recommend that you do a search for "Reverse Mortgage" at your favorite Internet search engine. Specifically, AARP has a lot of helpful information, which can be found at www.aarp.org. DEAR BENNY: I have an investment property I would like to use in a 1031 tax-deferred exchange. I have great credit scores (770), but my debt ratio will not allow me to qualify for a loan on the new property. I currently own the current investment property in my own name. I now have a significant other in my life. Can he go on the new loan and title work, allowing me to take advantage of the 1031 tax exchange rules and qualify? We plan on the new property being our retirement home eventually. –Kathy DEAR KATHY: It all depends on the price of the properties. Your current property is the relinquished property and the new one is called the replacement property. Since you own the relinquished property by yourself, the replacement property must also be in your name only. However, let's take this example. The relinquished property will be sold for $500,000, and the replacement property will cost $750,000. If you and your significant other take title to the replacement property as tenants in common, with your interest equaling two-thirds (i.e. $500,000), I believe this would fly through the Internal Revenue Service. But confirm this with your own tax and legal advisors. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.
When double-pane glass needs replacing By Paul Bianchina Q: I am sort of handy around the house and was wondering how difficult it is to remove and replace the windows in my house. There seems to be moisture between the double-pane windows now. Any tips? --Frank C. A: If you are seeing moisture between the panes of glass in a double-pane window, that indicates that the air-tight seal has failed, which is not unusual. What you want to do is replace the insulated glass unit, not the entire window -- the same as what would happen if you broke the window glass. Insulated glass units need to be special ordered to fit the window. Contact any licensed and bonded glass company in your area, and have them come out and measure and order the units for you. They can also discuss any options you have for installing glass that is more energy efficient. Installation involves snapping out the trim pieces that hold the glass in place, removing the old insulated glass unit, setting the new unit into the window frame with special tape to hold it in place and help with the air-tight seal, and then reinstalling the trim pieces. All in all, it's something best left to the glass company. Q: I recently had my wood shingles removed and replaced with an Elk 40-year composition shingle. My wood shingle roof did not have any vents, and the new roof was installed with continuous "Z" ridge on top for ventilation. The house is single-story, 3,000 square feet, and I have calculated that I need 10 square feet of vent area. There is vent all around the house at the eaves. How do you figure the ventilation of the ridge vent? Do you think I need more vents? --Don H. A: The Z-Ridge that you mention is actually Elk's ridge shingle, not the vent itself, so the first thing you would need to know is exactly what type of ridge vent was installed, because they can differ between brands in the amount of net free area (NFA) that they provide. If you have the Elk brand of continuous ridge vent, they list it at 10.65 square inches of NFA for every one linear foot of vent length. That assumes that the roofer cut back the roof sheathing at the ridge by the recommended 1/2 inch on each side, creating a total of 1 inch of air space at the ridge. Because you want your vents to be divided roughly equally between high and low, you would want about five square feet in high ventilation, which is 720 square inches. Divide that by 10.65, and you would need almost 68 linear feet of ridge vent. The final step would be to measure (or ask) how much ridge vent was installed, and see how close it is to that 68-foot figure. If it's substantially less, I would suggest adding additional ventilation in the form of individual gable or ridge vents. Q: During our remodel, our existing wood floors got soaked during an unexpected rainstorm in the spring. They were refinished in September. I've noticed some gaps between the lengths of the boards, maybe 1/16 inch wide. Is there a way to fill the gaps without refinishing the whole floor? Should I fill these gaps or leave them alone? The wood floors are 3/4-inch red oak and nearly 40 years old, and they have been refinished two times. --Cindy K. A: There are ways to fill the gaps and repair the finish, but they are difficult to do correctly for a nonprofessional. They should also not be left alone, because gaps in the finish will more readily allow for the intrusion of dirt and, more importantly, moisture, which can damage the floor in the future. It sounds as though the floor may have been refinished before it had dried down to a low-enough moisture content for finishing. As a result, when the boards completed drying, the gaps opened up. Since the floor was just refinished last September, in my opinion the flooring contractor needs to come back out and make the necessary repairs for you.
Buyers, get into negotiating position By Dian Hymer Bridging the price gap between home buyers and sellers can be a challenge in today's market. Sellers, many of whom have a hard time accepting that their home has lost value, often expect to sell for more than buyers are willing to pay. Buyers, on the other hand, are concerned that home prices could drop further. So, they're making sure that they don't overpay. There are exceptions to the rule. Very desirable homes in the best locations sometimes sell for over the asking price, particularly if there isn't much inventory of similar homes on the market. Some foreclosure properties at bargain prices are attracting multiple offers. Prices are rising in select areas. Overall, however, it's a still a buyer's market in most parts of the country. There's not much you can do to convince an unrealistic seller that he should accept your market-price offer. Many of the listings on the market belong to sellers who will sell only if they get a certain price. They may not be able to sell for less because of the size of the mortgage(s) secured against the property. In some cases, sellers bought at the peak and then improved the property. They can't bear to take the loss they would incur if they sold at market price. In other words, these sellers would like to sell, but they won't sell unless they get their price. Before you make an offer on a listing that's priced over market, try to find out as much as possible about the sellers' motivation, and if there's any flexibility in their price. A lot of time and emotional energy goes into making an offer. Save your efforts for listings where the sellers are motivated. That is, they don't just want to sell -- they need to sell. Some sellers want to test the waters at a price that's higher than the market will support. They usually feel that someone will appreciate the added value their home offers and pay more for it. However, these sellers will often negotiate with a legitimate buyer who offers a price that is less than the list price. HOUSE HUNTING TIP: To put yourself in the best negotiating position, make sure that your financing is in order and that you are able to show the seller that you are capable of closing the deal. The fallout ratio is high in the current market. Many of these transactions fail to close because the buyers couldn't get financing. It's always a good idea to be preapproved for the financing you'll need to buy a home before you make an offer. Preapproval involves making a formal loan application, having your credit checked, as well as verifying your funds for down payment and closing costs, and validating your income and employment. Lenders often want to know that you have enough surplus cash to make house payments (mortgage, property taxes and insurance) for two to three months. Buyers who make an initial low offer and who aren't in competition should make as clean an offer as possible. This means omitting anything that's not necessary. However, you should include contingencies for loan and appraisal approval and an inspection contingency. It's a good idea to include a copy of your preapproval letter with your offer. If you are approved for a higher price than you are offering, ask your lender or mortgage broker to issue a preapproval letter for the price you're offering. THE CLOSING: Then be prepared to negotiate. It may take several rounds of counteroffering back and forth to reach a mutually acceptable price.
Mortgage approval is no easy task By Dian Hymer It wasn't too long ago that home buyers made offers without financing contingencies and closed the deal in as short as 14 days following acceptance. Quick closes are virtually impossible today if you're buying a home with the aid of a mortgage. And, it's highly recommended to include loan and appraisal contingencies in your offer. Following the credit crisis of August 2007, many mortgage lenders closed down. Those that are left have cut their staff due to low demand for mortgages. Also, it's now necessary to actually qualify financially for a home mortgage. This adds time to the loan approval and funding process. For most mortgages, home buyers are now required to have good credit. They need to provide verification of employment (W-2s or tax returns), verification of the funds needed to close (down payment and closing costs) and verification of reserve funds. If the funds haven't been sitting in your bank account for a few months, some lenders require proof of where the money came from. Be prepared to provide brokerage statements, and any other supporting documentation that will validate you as a bona fide borrower. Buyers who own other real estate will need to provide even more documentation. HOUSE HUNTING TIP: It's a good idea to start pulling together all of your financial documents as soon as you're serious about buying a home. Ideally, the paperwork required by the lender should be forwarded to your loan agent or mortgage broker within a couple of days of contract acceptance. You can't wait until the last minute to provide the lenders what they need and expect to close on time. Before you write an offer, check with your mortgage person to find out how long it will take to process and fund the mortgage. Some lenders are taking 35 to 40 days from acceptance. So, you wouldn't want to commit to a 30-day closing, if this is the case. Make sure that you allow sufficient time in your contract for the appraisal and formal lender underwriting approval. This could take two to three weeks, depending on the lender and on how diligent you are about supplying the documentation. Your lender or mortgage broker will order the appraisal of the home you're buying. It should be ordered as soon as possible. If you end up not buying the house, you might owe an appraisal fee. However, waiting to order the appraisal could cost you time. Many lenders require a review appraisal, which is a second appraisal to confirm that the first one is accurate in terms of market value. Ideally, this should be done before you remove your appraisal contingency. If it can't be done within that time frame, ask the seller for an extension. Before August 2007, it was common practice for lenders to prepare the mortgage documents for the buyers to sign even though all underwriting conditions had not been met. For instance, the lender might have needed proof that you paid a charge-card account down to a zero balance. Today, many lenders won't issue the mortgage documents until all of the pre-funding conditions have been met. So, you need to be prepared to provide additional documentation that the lender might request, even if it's at the last minute. Work with a good loan agent or mortgage broker who will help keep you on track throughout the process. And, as outrageous as the lender's requests might seem, don't let it get to you. Lenders have a lot of due diligence work to do to restore their credibility with investors. The housing market is dependent on investors buying mortgages so that buyers can buy homes. THE CLOSING: Properly qualifying buyers for mortgages is long overdue.
Not everyone's keen on fluorescent lights Some say CFLs consume extra energy when turned on By Paul Bianchina Q: I have a question about fluorescent bulbs and power usage. I have been told that fluorescents draw the most power when they are turned on and almost no power to keep on. Therefore, they should be turned on and left on, and should not be turned on and off during the day because it would end up using more power in the process. Is that true? --Richard C., via e-mail. A: A fluorescent light does consume some additional energy when first starting up. This is known as "inrush current," and is equal to about five times what the operating current is. However, with today's rapid-start bulbs, that initial surge only lasts for half of one cycle. Electrical current is 60 cycles per second, so the initial startup surge lasts only for approximately 1/120 of a second. In other words, you would have to turn the lamp off only for a couple of seconds to save the equivalent amount of energy that it takes to turn it on again. With any type of light bulb in your home -- incandescent or the new compact fluorescent lights (CFLs) -- it's best to live with the old rule of thumb of turning off the light whenever you're going to be out of the room for more than just a couple of minutes. Q: We have some stucco houses on our street. A couple of them had dry rot, and they had to remove the siding and some of the wood. We were wondering if there is a way to check to see if our stucco house has dry rot. --Art W., via e-mail. A: There can sometimes be some telltale signs. Since water runs downhill, if moisture has been getting behind the stucco it will often migrate down to the bottom of the wall. On some older stucco houses you may be able to see or feel soft spots at the very bottom of the exterior walls, where they meet or overlap the foundations. Also, examine the stucco carefully for signs of discoloration and cracking, and press on those areas to see if there is any movement in the stucco or if the wall underneath feels soft. You can examine the wood around window and door casings, both inside and outside, for signs of rot or water intrusion, and examine baseboards and flooring around the inside of the exterior walls to look for softness or water stains. Finally, you can check under the house at the exterior walls, looking for the same indicators. You mentioned that a couple of the houses on your street had dry rot problems. I would also suggest that you stop by and chat with neighbors who have had work done and see what occurred with their homes. They can tell you exactly where and how extensive the rot was, and if the homes were all built around the same time and by the same builder, that should also get you a few additional tips on where to search. If you do suspect dry rot or other moisture problems, you can contact a contractor who specializes in insurance-related home repairs. These specialized contractors typically have moisture meters that are capable of detecting moisture inside walls. You can also see if any contractors in your area have thermal imaging cameras, which can "see" inside walls for differences in heat patterns that can indicate moisture problems. Q: I have a microhood that has to be replaced. I'm not a big do-it-yourselfer person, but I'm OK with most straightforward projects. On a scale of 1 to 10, how difficult is it? Can you give me some basic instructions? --Michael T., via e-mail. A: If you are replacing the microhood with one that is the same size and type, with the same venting arrangement, then the replacement should be pretty easy. There could certainly be some variables with your installation, but in general the steps should be as follows: 1. Unplug the old microhood, and remove the tape that seals the vent duct to the transition on top of the hood. 2. Remove any bolts that hold the microhood to the bracket, and slide it out of the bracket (you may need two people for this). 3. Remove the old mounting bracket, unless it's identical to the new bracket. 4. Install the new mounting bracket, slide the new microhood into the bracket, reconnect the vent, and plug the unit in. Complete installation instructions are included with the new hood, and because it just plugs in there is no electrical wiring required. As long as there are no alterations to the vent -- which there shouldn't be if you're using the same make and model -- then on a 1-to-10, simple-to-difficult scale, I would rate the job about a 3. You can always give it a try on your own, then hire someone to complete the project if you end up not feeling comfortable with it.
Home mortgage provides array of tax breaks Rules on deducting loan interest, points By Tom Kelly If you feel better knowing you can deduct the mortgage-interest portion of your huge annual housing expenses, make sure you know exactly how much you can deduct. One of the more popular topics I've had with accountants this year is regarding mortgage interest. You can deduct only interest on the original amount of the loan at the time you refinance, plus $100,000. For example, let's say you purchased your home 10 years ago for $100,000 and took out a loan for $80,000. Since then, you have paid the loan down to $20,000. The house is now worth $275,000 and your oldest child needs college tuition. The house definitely has equity to tap, but your mortgage interest deduction would be limited to the first $120,000 ($20,000 old loan at the time of "refi," plus $100,000). It is important to remember that home-loan-interest deductions simply reduce your taxable income. They are not dollar-for-dollar tax credits that are subtracted from your tax bill. If you have a $1,000-a-month mortgage payment and are in the 15 percent tax bracket, only about $150 a month escapes being taxed in the early months of the loan. You can deduct the loan fees ("points") paid to buy or improve your main home in the year of purchase. You cannot deduct these fees in the year you refinanced if you refinanced only to obtain a lower interest rate on your loan. The term "points," once used to describe only prepaid interest on government loans, now is used to describe charges paid by a borrower to secure any mortgage. These points can be loan-origination fees or prepaid interest to "buy down" an interest rate. To be deductible, these charges -- or points -- must represent interest paid for the use of money and must be paid "before the time for which it represents a charge for the use of the money." According to the Internal Revenue Service, most points paid when you are refinancing an existing mortgage must be written off over the life of the new loan. However, if you sold a home in 2006, you can still deduct several items, including title insurance costs and excise tax. For guidance on closing costs, the best source may be the settlement sheet from the original loan. Points on refinance are not fully deductible in the year in which they are paid because they were not paid in connection with the improvement or purchase of a home, even though the original loan met the requirements for deductibility. What many home sellers forget to factor at tax time are the fees remaining from a previous refinance. All of those fees can be deducted in the tax year you refinanced a second time. For example, let's say you jumped at a 30-year, fixed-rate loan at 4.5 percent in May 2005. In order to get that lower rate (conventional rates were hovering higher), you had to pay at least 5 discount points. If the loan amount were $80,000, one discount point would amount to $800, and five points would be $4,000. Points paid to buy, build or improve your principal residence can be deducted in the year they are paid, as long as they were not rolled into the loan amount. However, because you refinanced to simply obtain a lower interest rate, nearly all of the $4,000 must be written off over the life of the loan. That's because the IRS sees refinancing points as repayment of existing debt. Let's say that last month an unexpected need to send Dad into an assisted-living home necessitated another refinance to pull some cash out of the home. You decide on an adjustable-rate mortgage with a very low starting rate and pay no fees. Now that the existing loan is paid off, the remaining balance of the fees from the previous loan is deductible in tax-year 2007. The tax rules and deductions for second-home owners who rent out their properties on a short-term basis depend on many factors, including how often you personally use your second home, how many nights or a percentage of the nights you rent out your home, and your personal adjusted gross income (AGI). The details can be found in IRS Publication 527, Residential Rental Property (including Rental of Vacation Homes). Now, I need to do a better job of recording all of my deductible expenses that often slip through the cracks. It seems I might have to counter the loss of some mortgage interest for 2007.
Open house don'ts How to improve your chances of selling By Ilyce R. Glink I spent some time over the weekend visiting some open houses. While I'm not seriously thinking about moving, I like to see what's going on in my neighborhood. The thing I've learned recently is how sophisticated sellers in my neighborhood have become. For the most part, each home is a shining example of how to make lemonade with the lemons that exist in your own house. Mostly, the houses looked as if they've been staged into a showpiece that's really appealing. But one house I visited over the weekend had a classic case of what I call "Open House Don'ts." These are things you don't want to do if you've listed your house for sale: DON'T leave dirty clothes all over the bedroom floor, your bed, in the bathtub or even in the laundry room. No one wants to see your dirty underwear, or even your son's sweater draped over a chair. Dirty clothes belong in a hamper. And, don't forget to make your bed. DON'T leave dirty dishes in the sink, on the counter or anywhere except in a dishwasher. And even then, you should run the dishwasher so that you have time to empty it before you get out of the way for the showing. No one wants to imagine what you made for dinner last night. Be sure to sweep the house for coffee cups, milk or sippy cups, or other remnants of late-night snacking. DON'T leave a filthy house, hoping the buyers will see past the dustballs near the couch -- they won't, and as they run their fingers over your dusty window frame, they'll just wonder what other maintenance projects you've let slip. DON'T allow odors from pets, babies or other unappetizing smells (think bathrooms, garbage and smelly cheese in the refrigerator) to permeate your home. If you think your home might smell bad, ask a neighbor to give it a "whiff test." If your house does smell bad, don't try to mask it with a spray. Buy a roll of refrigerated cookie dough and slice and bake some on a piece of tinfoil just before the showing. It'll make your house smell good enough to eat. DON'T assume Mother Nature is your friend. Prepare for whatever weather is seasonally appropriate. If it's winter, then be sure your walk is shoveled and salted. If it's wet, be sure to leave out a tray for wet boots. And while we're on the subject … DON'T assume that prospective buyers will treat your house as if it were already theirs. If you don't want muddy shoes or boots on your white carpets, create a nice laminated sign that nicely asks everyone to remove their shoes. Then, provide a basket of booties or socks for buyers and agents to slip on as they walk through your home. DON'T leave vacant rooms filled with junk, toys or spillover messes from other rooms. If you're lucky enough to have too much space in your house, make sure your empty rooms are pristine. DON'T leave personal information such as mail or bills out in the open where anyone can see it. Be sure to lock down your computer and lock up your laptop and any other expensive, easy-to-pocket electronics, like iPods, before your showing. DON'T leave money, jewelry or other valuables out in the open or even in typical hiding places, like the top dresser drawer. Invest in a safe or put your valuables in a brown paper bag and hide them somewhere unusual, perhaps in a box at the top of the closet, or in the basement. DON'T use boxes and extra furniture to hide problems in your basement or attic. Don't use paint to cover up perennial problems. In other words, fix the leak, don't just paint over it. DON'T leave your house in the dark. People want to buy light, bright homes. As you walk through the house for the final check before you clear out for the showing, be sure to turn on all the lights, including closet lights. While you may pay a few bucks more on your electric bill, a dark house simply won't sell.
Choosing exterior paint colors By Paul Bianchina So the time has come to repaint the outside of your house, but you're tired of the old color scheme. If you'd like to try something fresh and new that suits your style, some simple homework will help you get off on the right foot. First of all, you might be interested to know what the rest of America is doing. According to a poll conducted by the Rohm & Hass Paint Quality Institute, the most popular exterior color is white or off-white, which was selected by 34 percent of the poll's respondents. Way too boring? If you were thinking of red or pink, you're at the other end of the poll, and can place yourself among only 4 percent of the people. In between, in descending order of popularity, comes beige, tan or brown (28 percent), gray (15 percent), blue (7 percent), and green or yellow (6 percent each). Whether you're going with or against the crowd, there are lots of tips worth considering when selecting the perfect color scheme for your home. Here are some questions you'll want to ask yourself: What color is it now? You want to ask yourself what you like and dislike about the current colors, and why. Are they too dark or too light? Too bright or too dull? Between the body color and the trim, are there too many colors on the house, or perhaps not enough? A good rule of thumb in your initial thinking about color is to decide what you like, and work from that palette of colors. Are their restrictions to worry about? Some neighborhoods have restricted color choices, and you may need to check with your homeowner's association or architectural review committee for approval before deciding on a color. Certain historical neighborhoods also have restricted color palettes from which to choose. Keep the style of your home in mind: Certain color schemes are better suited for certain architectural styles than others. Southwestern stucco might do best with monochrome whites or pastels, while your ornate Victorian may look best with a coordinated set of three, four, or even more colors. Most paint dealers can provide you with color sample books that show coordinated groups of colors for various styles of homes. Look at your home's prominent features: For some types of homes, color may be dictated by such highly visible and unchangeable components as brick or stone veneers, or by the color of the roof. Large or small? Remember the basic rule of color – dark colors can make a large house look smaller, while light colors can make a small house appear larger. Dark colors: If you favor dark colors, you need to keep in mind that in harsh sunlight environments they are more prone to fading, and also absorb and hold in more heat. Very bright colors are also much more prone to fading. Light over dark: If your existing house is a dark color and you want to paint a light color over it, you'll probably need to use a primer first in order to get that lighter color to cover. While this alone is not a reason to stay away from a lighter color that you like, it's important to know that you'll probably be facing some additional labor and material expense. Break out the crayons: When you have some color schemes in mind, a great way to test things out is to sketch or photograph your house, then make several black and white photocopies of the picture or drawing. Using colored pencils, paints, crayons or other art supplies, color in the photocopies and see what you like. Try a computer program: Many paint stores have sophisticated computer programs for you to try out your color scheme. You'll be presented with a variety of house styles, and you begin by selecting one that looks as close to the style of your home as possible. Then, use the computer to color in the body of the house, the trim, the doors, and other features. You can instantly change colors on one or more parts of the house, and you can use the computer's suggestions for coordinated colors or simply choose your own. Buy a tester: When you think you're got it nailed down, buy a quart of each color and test them out on the house. Paint them on in different areas, and avoid direct sunlight that can somewhat distort your view of the color. Testers are cheap insurance to see if you like the actual colors in their intended locations!
When is the best time to buy or sell a home? Time to sell? By Warren Nass Many people ask me, “Is now a good time to buy?” There are so many things to consider when purchasing a new home—interest rates, price, area, location, lenders, fees, disclosures, the commute, crime rate, financial responsibility, affordability, schools, money, Megan’s law and the list goes on. This is why it is important to work with a qualified ‘full time’ professional Realtor to assist you with all of your real estate needs. The real estate market changes constantly, but it seems to do it in cycles. Another way to look at the market it is like a roller coaster that goes up and comes down, but mostly goes up. Since the mid 1950’s, we have seen this cycle change approximately every 5 to 10 years. We are now at the top of the hill of the roller coaster and just at the crest of coming down. So does that mean, “We should not see the prices of homes as high as they were at their peak until 2011,” as stated from real estate expert, Jim Droz, from the Century 21 Top Agent Retreat, 2006. But how far will prices come down, or will sales just continue to slow down? They may or may not come down anymore. The low interest rates seem to be helping the housing market, but rates are on the rise. The foreclosure and bank repossessed homes are also on the rise. All the better reason to get a good loan. Lenders are making it a lot harder to qualify and many lenders are no longer doing 100% financing. The home inventory in La Mirada, and the surrounding areas is the highest we have seen in years. This means there are more homes from which to choose and the competition is fierce. There are many homes now on the market that are considered Short Sales. Short sales are when the homeowner owes more than the home is worth. The bank or lender now gets involved to lower the amount of money owned to enable the sale of the property prior to foreclosure. This process takes more time than normal. There are tax consequences involved with both short sales and foreclosures for sellers, see your tax professional. Some sellers and home builders are offering higher commissions to selling agents as well as buyer incentives. Six (6%), seven (7%) and eight (8%) percent listings are appearing again on the Multiple Listing Service. Because of the inflated housing market, “The number of Realtors nationwide has risen to 1.2 million and should decrease to approximately 800,000 Realtors in 2011,” says Jim Droz. When selling your home in today’s market, you need to price your home correctly from the start. With so many homes to choose from, buyers want to feel they are getting a good deal. If they feel they are not getting a good deal, they will wait until they find one. Sellers and buyers can get a rough idea of a homes value at http://Zillow.com. It will give you a low, average and high range. You need to have a Realtor give you an opinion of value also, because Zillow is not always accurate and does not know about your upgrades and condition of your home. “Buyers today have a much greater selection of properties from which to choose, while some sellers are still clinging to price expectations that are no longer valid in today’s market,” said Vince Malta—President of the California Association of Realtors. I feel the best time to buy or sell a home is when it is best for you and your family. If we only had a crystal ball, we would all be rich. If you stay in your home for over 7 to 10 years, there is a great chance you will come out ahead. Contributed by Warren Nass at Century 21 Westworld Realty located in La Mirada at 15058 Rosecrans Avenue 714-606-0329. Selling Real Estate full-time in La Mirada and the surrounding areas since 1992. Please call Warren with any questions about this article or Real Estate in general. Search for your new home at warren4realestate.com.
Extra insurance coverage urged for condos Master policy may not offer enough protection By Benny L. Kass Sometimes, we need a painful experience to prod us into doing what we should have done in the first place. On Oct. 1, 2007, a serious fire ravished a condominium building in the Adams Morgan section of Washington, D.C. Fortunately, it does not appear that there were any serious injuries, but many condominium owners and renters will now have to relocate until the building -- and the damaged units -- are restored. There was property loss, both in the common areas of the building and within those units where the fire occurred. And clearly there will be a lot of smoke and water damage to the personal property of many of the residents. Let's talk insurance: In every condominium and cooperative apartment building, there is what is known as the "master insurance policy." The legal documents governing these associations require that a certain level of insurance coverage be obtained. When you went to buy your unit, your lender insisted on receiving proof that there was a master policy and that the coverage was consistent with the association's legal requirements. But contrary to what many owners believe, the master policy may not cover you for all of your personal loss. According to the Insurance Information Institute, the master policy "covers the common areas that owners share with others in the building like the roof, basement, elevator, boiler and walkways for both liability and physical damage." If, for example, someone trips on the stairs, the master policy will provide coverage, and should that person file suit, the master will also cover the legal costs incurred by the association. If a unit is destroyed, the master policy will pay for the restoration of the walls and the ceilings. In some cases (depending on the insurance policy) if your appliances are damaged, the policy will reimburse you for the cost of replacement. Keep in mind that every insurance policy contains a deductible, and you should inquire of your association manager what that number is. But any improvements that you -- and even previous owners -- made to the unit will not be covered. The insurance term is "betterments"; if you added wallpaper or remodeled your kitchen or bathroom, these upgrades will not be covered by the master. Many owners do not understand this, and find out only when it is too late. An unfortunate -- but typical -- situation is where an owner inadvertently lets his or her bathtub overflow, causing water to cascade down into all of the units below. The master policy will cover the cost to repair the ceilings and the floors, but your valuable Oriental rug and expensive plasma television set that were damaged will not be covered. You need to obtain your own individual insurance policy. In the trade, it is referred to as an "HO-6" policy. This will give you coverage -- subject to your own deductible -- for the betterments in your unit, and for your personal furniture and clothing. Depending on your own financial situation, the HO-6 policy can also include such things as reimbursing you for monthly assessments and alternative lodging while you are unable to reside in your unit; water and sewer back-ups (which are all too common especially in older buildings); and even expensive jewelry, stamp or coin collections, or fur coats. Some associations require that every owner obtain the HO-6 policy, and I have always strongly recommended that every association make this a requirement. You should be able to obtain this kind of policy through any insurance agent. But in my opinion, the best approach is to obtain that policy from the same carrier that issued the master policy. Take this very common situation: a common-element pipe burst, causing major flooding damage throughout the building, including in your unit. The condominium association files its claim against the master policy, and you file your claim with your insurance company. However, each company points it finger at the other one, stating that it is the obligation of the other carrier to cover the claim. Often, when faced with this situation, I merely tell both agents: "Guys, both the master and the HO-6 policy were issued by the same company, so why not just work it out on your own, and make sure that both the association and the owner are properly compensated for their losses?" If you own a condominium unit, you must learn the difference between a unit and the common elements. Your unit consists of the area between the four walls, from the floor to the ceiling. Common elements include, for example, the elevators (unless they go to specific units in which case they are called limited common elements); the roof; and the mechanical equipment that services all of the units in the building. But it's not that simple. For example, pipes that serve only your unit will most likely be considered part of your unit -- even though those pipes go down the walls outside of your unit. It is important that you understand these concepts. Your association declaration will provide you with this information, but if you get confused with the legal (and architectural) terms, consult the association's property manager, its attorney or even the insurance agent for your building. It is absolutely critical for every owner to carefully read -- and reread periodically -- these legal documents. If you are renting your unit, you probably will not need protection for your tenant's personal property. However, you still need coverage in case someone gets hurt in your unit, and accordingly should still obtain the HO-6 policy. And you should make it a requirement in your lease that your tenants purchase "renters insurance" -- called an HO-4 policy -- so that they too will have protection in case problems arise. Damage to condominium units can come from many sources. The hot water hoses in your washer can burn out. Your fireplace chimney can get stuffed up, unable to provide the necessary updraft. Or the rubber seal under your toilet gets worn down. One never knows when these problems occur. More importantly, disasters are often out of your control; they are caused by your upstairs neighbor. I am currently involved in a situation where the upstairs owner accidentally drilled a hole in a sewer-line pipe, causing extensive damage to the unit below. The cost of this insurance is nominal, considering the risk and the exposure involved. The October fire should be a strong incentive to pick up this protection today.
Parents shouldn't place kids' names on real estate Unless occupancy rules are met, capital gains tax may be huge By Benny L. Kass DEAR BENNY: Twenty years ago my mother placed my name on the deed to avoid issues when she passed on. Will the IRS treat this as inherited property or consider it investment property? Did I inherit her half of the property? --Theo DEAR THEO: Why, oh why, do parents do this? For example, let's say your mother and father bought their house years ago for $20,000 (sounds great but that was a lot of money then). For tax purposes, your parent's tax basis was $10,000 each. Your father died 20 years ago, when the house was worth $40,000. Under a legal concept called the "stepped-up basis," the market value on the date your father died was added to your mother's basis. Thus, her basis would be $30,000 (her original $10,000 plus half of the $40,000). Did your mother add you to title or are you the sole owner? I did not understand your question. A very strict tax rule is that the basis of the person giving the gift (the donor) becomes the basis of the receiver (the donee). So, if my calculations are correct, if you are on title with your mother, your tax basis for half of the property is $15,000. On the other hand, if you are now the sole owner, your basis is $30,000. Why is this a problem? Because unless you have lived in the property for two out of the previous five years before it is sold -- in which case you can exclude up to $250,000 of any gain or if you are married and file a joint tax return you can exclude up to $500,000 of gain -- you will have to pay a lot of capital gains tax. If you are now the sole owner, the IRS looks at the difference between the tax basis and the sales price. Any profit that you make is taxable. If the property has been rented out, then you may want to consider doing a 1031 (Starker) exchange. You will have to discuss all tax issues with your own accountant. If your mother is still on title, upon her death you will receive the stepped-up basis for her half. But your half is still, unfortunately, the basis described above. DEAR BENNY: I hold a $120,000 promissory note backed by a first deed of trust in Virginia. The borrower paid back $60,000 in principal in 2001, and I subsequently loaned him back $60,000 in 2004. My thinking was this second advance was covered by the recorded deed of trust and if any dispute ever arose, I could produce the cancelled check and refuse to sign the certificate of satisfaction. Opposing counsel says the 2004 advance is not secured by the deed of trust and is a personal, unsecured loan. Is that correct? --Bob DEAR BOB: There is an old saying that where there are two attorneys there are three opinions. I do not practice law in Virginia, so you should really get a specific opinion from your own attorney -- or at least ask the other lawyer for his or her legal opinion. Is there any language in your promissory note and deed of trust that would cover the situation? The problem is simple: Creditors of the person who borrowed the money from you are put on notice of your security interest because it is recorded among the land records in the county where the property is located. However, these creditors want to be paid also, and if they can find a "legal loophole" they will exploit it. And while they are on notice of the original loan, they have no way of knowing that you advanced additional moneys -- even though the amount is the same as reflected in the original note and deed of trust. The issue of future advances -- sometimes referred to as "dragnet clauses" -- is a very complex area of law. State law -- and the specific terms and conditions of your legal documents -- will determine whether the additional moneys are secured. The courts will also look to the intentions of the parties. Did your borrower intend that the new loan would, in fact, be covered under the original deed of trust? I must caution you, however, that in a number of jurisdictions, if any one gets a judgment against your borrower (or a contractor files a mechanic's lien) the second advance that you gave would be junior in priority to those new creditors.
Where are today's best real estate bargains? By Dian Hymer The housing market is soft. Hard times for some can mean opportunity time for others. Could now be a good time to step into the housing market and pick up a bargain? Generally, it is a better time to be a buyer than a seller, but this is not so in every market. In San Francisco, for example, there are still more buyers than sellers for prime upper-end properties. You're not likely to pick up a bargain there. Many more markets are suffering from too much inventory and too few buyers. These markets would seem to offer the best opportunities. However, this is not necessarily so. Even though the price you pay is relatively low, it could take some time before the value of your investment increases. Anecdotal evidence suggests that the best housing investments are properties that are always in demand. These are well-planned and well-constructed homes in prime locations that appeal to a wide cross section of home buyers. In a strong seller's market, virtually all listings sell if the inventory is low enough. For example, a small two-bedroom, one-bath home on a substandard lot in Rockridge, a trendy Oakland, Calif., neighborhood, might be snapped up quickly in a seller's market, and buyers feel an urgency to buy before prices rise further. In August, there was such a listing on the market in Rockridge. By mid-September, it had received no offers, even after a price reduction that would have triggered multiple offers in a stronger market. HOUSE HUNTING TIP: Property that's not selling isn't necessarily a bargain if no one wants to buy it. A foreclosure that's selling for less than the defaulting owner paid for it isn't a bargain unless there is clearly upside potential. A property in a good location that suffers from deferred maintenance could be a prime property in the future. That is, as long as it doesn't have incurable defects, like the two-bedroom, one-bath home on a small lot with no expansion potential mentioned above. These starter homes sell well in a hot market. The demand dries up quickly when the market slows because these homes don't satisfy most buyers' long-term needs. Good candidates are properties that are located in areas close to urban centers with good transportation and where the population is growing faster than new homes in the area are being built. These locations could be the next hot spots when the market turns around. Buyers have the luxury of being selective when there is a lot of inventory on the market. Before you waste time negotiating on a deal that can never come together on terms that you can accept, find out about the seller's situation. Sellers who bought within the last few years may not be able to offer their property at a price that makes it a good deal for you. Many who bought in competition paid significantly more than the buyer who made the second to the best offer. In other words, they paid too much. Also, many buyers who bought in a multiple-offer competition bought the property "as is" regarding deferred maintenance. To make matters worse, some of these buyers waived their right to inspect the property. To avoid making this mistake, have any property you're seriously considering well inspected. And, keep in mind that a seller who paid a premium price for a property that he didn't inspect might not be willing or able to sell it to you at a price that's reasonable given current market conditions. THE CLOSING: There are good buying opportunities in the current market for well-qualified buyers. Just make sure that you pick your bargains carefully.
Home prices will see modest declines in 2008 Sales of existing homes stabilize According to the most recent forecast from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.), home prices across many areas in California will continue to show modest declines in 2008, but sales of existing homes should begin to stabilize following the slow-down in 2007. Home buyers may find it difficult to obtain mortgage funding as a result of tighter lending practices, however, loans are available. However, tougher lending practices, coupled with softening home prices will, no doubt, dictate that only serious sellers put their homes up for sale. And, for both buyers and sellers, there is no better time to enlist the services of an experienced REALTOR®. “Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year,” said C.A.R. President Colleen Badagliacco. “Now is not the time for homeowners to ‘test the waters’ – only serious sellers should put their homes on the market in what will continue to be a challenging sales environment.” The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are expected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007, according to C.A.R.’s 2008 California Housing Market Forecast. The areas expected to feel the brunt of the sales downturn are those with significant numbers of new-home developments where sales have fallen well-below builders’ expectations. Nonetheless, these areas may also afford buyers excellent opportunities, as builders continue to lower prices to help move unsold homes off their books. “Geographically, more affordable regions such as the Central Valley and Inland Empire will experience greater softness in the resale market because of the large numbers of new homes coming onto the market in recent years,” Appleton-Young said. “Higher priced regions of the state, such as the San Francisco Bay Area and parts of San Diego, Los Angeles and Orange counties will react more to affordability constraints.” The state’s luxury market is expected to remain somewhat insulated from the current downturn, due largely to broader availability of mortgage funding options. “By price-range, the highest-priced markets – those with medians over $1 million -- will show less stress,” Appleton-Young said. “The lower-priced markets will continue to face fallout from the subprime crisis, tighter underwriting standards, and competition from new home developments where price-cutting has been even more severe.”
Attic ventilation makes a healthy home Does your house have enough vents in the right places? By Paul Bianchina If you're like most folks, you've probably never given any consideration to how well ventilated your attic is. But proper attic ventilation is very important to your home's good health, both in summer and winter. In the summer, a good flow of ventilation will remove unwanted heat that is trapped in the attic. That heat can damage the roofing, and it also makes it that much more difficult to keep your home cool. In the winter, removing attic heat allows the underside of your roof to stay closer to the ambient temperature of the outside air, which helps prevent ice damming. And throughout the year, good attic ventilation removes excess moisture before it can accumulate and create the potential for mold growth or damage to wooden structural members. Properly installed, attic ventilation works on the natural passive movement of air. For the typical attic, this means a combination of low vents along the eaves of the roof, and high vents along roof's ridge. Since the air in the attic is warmer at the ridge than it is at the eaves, lower temperature air is drawn in through the low vents, pushing the higher temperature air out through the high vents. While the movement of air is more dramatic in the summer when attic temperature differentials are higher, this movement actually occurs at all times and in all temperatures. VENTILATION REQUIREMENTS How much ventilation your attic needs depends on the size of your house and, to some degree, its shape. To determine ventilation requirements, most building codes rely on a simple mathematical formula of 1 square foot of ventilation area for every 300 square feet of attic area. For example, if your home has 1,500 square feet of living space, you would need 5 square feet of vent area to provide an adequate amount of air flow (1,500 square feet divided by 300 = 5). Since it is the passive movement of the air through the attic that creates the ventilation, the placement of the vents is a very important consideration in how effective they will be. They need to be installed so that roughly half are in high locations along the ridge or in the gable ends, and half are placed low along the eaves. Attached garages can add to the ventilation load of the home as well. If your home has an attached garage and the attic of the garage is continuous with the attic of the house, then the square footage of the garage needs to be included as well. For example, if your 1,500 square foot home has a 500 square foot attached garage and the attics are continuous with one another, then the required vent area goes from 5 square feet to 6.67 square feet (1,500 square feet + 500 square feet = 2,000, divided by 300 = 6.67). If the garage is attached to the house but the attics are not continuous, you have a slightly different situation. Because the attic of the garage is still going to get warm (even if the garage does not have a ceiling), that heat is still going to have an impact on both the garage roofing and the heat being transferred to the house, not to mention on the garage itself and all its contents. Therefore, the garage attic needs to be ventilated as well. You can use the same 1:300 formula, but the square-foot requirements and the layout of the vent locations for the garage should be considered independently of the house attic. NET-FREE AREA If you were to purchase a vent that is 12 inches by 12 inches (one square foot) in overall size, you would not actually be getting one square foot of ventilation area. The framework of the vent and especially the insect screening in it reduces the overall amount of area that the air can actually pass through -- sometimes by as much as half. For that reason, vents are rated in net-free area (NFA), which is the actual amount of open ventilation area that the vent contains after deducting out all of the space taken up by the frame and the screening. The exact NFA will be printed directly on the vent by the manufacturer, and it's important to utilize this number as opposed to the overall size of the vent in making your calculations for how many vents you will need. With whatever type of vents you use, remember to keep them free of insulation and other debris that reduce their effectiveness, and to be certain that all bathroom, kitchen and other exhaust fans in the house are vented all the way to the outside, not into the attic.
The Ballad of Redport An Escrow that took so long a song was written about it! By Sheila Watson The Ballad of Redport by Sheila Watson Can it be the house is sold? The deal is closed so we’ve been told. After so much time has passed. Have our dreams come true at last? But we have been misled before Shaken to our very core Our psyches taking such a beating Or are they cheating? Is it true? We have no clue Months of promises and delay Should we go or should we stay? Thought this was an easy sale Pete almost caused the deal to fail With appraisals always less Mission Hills picked up the mess Heard it was time for them to pay Oops they needed another day There is the thing about the tax Jeremy’s been somewhat lax Tax records can’t be found Lynda’s an information hound IRS has sealed our fate Lynda tells them she will wait The information appears Jeremy is in arrears But he can make a plan We get assurances from Dan But appraisals still not in Steve’s the villain in this sin Refusing to send the papers Is there no end to all their capers? Weeks turn into months on end Riki and Gayle are forced to spend Losing patience with these clowns Roller coaster ups and downs Appraisals, taxes, FHA Gayle and Riki had to pay All things good and bad must end Mission Hills prepared to lend Cheers to those who paved the way Who persevered and saved the day Relax and give yourselves a treat Bad karma goes to Steve and Pete Why did this take so long? Can anything else go wrong? Oh no! Now the Notary’s at fault Everything comes to a halt. And so, my dears, who fight despair We’re finally ending this nightmare We’ll believe it when we see the money In a thousand years it will seem funny. Thanks, Warren for being a calm, reassuring voice in a transaction that took three months and met with the most unbelievable obstacles every step of the way. Thanks for keeping us informed by staying in contact with all parties. Also thanks for listening to us whine. I don't know if this is a saga, epic, ballad or maybe a rap. See attachment and what I did to distract myself and not go crazy....
Testimonials See What Warren's Clients Think.... By the Happiest of Warren's Friends and Clients Dear Warren, Words cannot express how grateful I am that I called Sam to get your info. I know that aside from God's divine intervention, you played a HUGE role in us getting our first home. We would love to have you and your wife over once we get settled in. We also have a little something that we think you'll get a kick out of :). Looking forward to getting together. Again - thank you so much for your dilligence, your work ethic and most of all your professionalism. You are awesome! Just wanted to say thanks so much. You Rock. Sincerely - Mr. Chad & Michelle Gomez "It is with pleasure and great confidence that we put to words our thoughts of the work of Warren Nass. As first time homebuyers, Warren far surpassed our expections with his knowledge and honesty. Warren provided us with a wide array of choices, was patient and virtually eliminated the stress and headaches of such a large purchase. There were certain houses that we would have considered, however, with Warren's attention to detail and his integrity, he would point out potential problems, small or large, and let us make a decision. Due to Warren's exemplary work ethic, we have truly found our dream house. Warren is a very talented individual and we highly recommend him to anyone without reservation." - Riki and Gayle Rachtman ______________________________________________________________ "I would like to take this opportunity to state how much we appreciated one of your Real Estate agents - Warren Nass. We Just recently sold our condo and bought a home through your office in La Mirada. It was always amazing to me that throughout the rigorous process of buying and selling a home, how Warren always paid close attention to every detail of our wants and needs. I know that he had other clients that he was also working with but he continuously made my wife and I feel that we were his first priority. He always kept us well informed during the ordeal and when other agents or personnel involved in our business dealings dropped the ball, Warren was always there to pick it up and keep the process moving forward. We sold our condo in 4 days and for more than we expected - yet Warren felt we could get our asking price. The home we purchased had 15 other bids besides our own and again, Warren was there with the sellers and their agent and through his people selling and personality skills, he succeeded in putting us in the home of our dreams. In closing, although this was a business transaction, we feel Warren went above and beyond the call of duty in ALL instances and made my family and myself feel like he was our very own personal agent. He truly is an asset to your organization and we can and WILL recommend Warren Nass and Century 21 Real Estate wholeheartedly to anyone who is interested in buying or selling a home." - Robert and Debra Syphax _______________________________________________________________________________ June 8, 2006 Subject: Mr. Warren Nass To Whom It May Concern: The purchase of a home was the largest investment we were going to undertake so we knew that we needed to align ourselves with the right real estate agent to ensure a successful transaction. This transaction would be slightly more complicated due to the fact that we were selling our home and looking for a new home concurrently. We interviewed several candidates prior to meeting with Warren Nass. Upon our interview with Warren, we immediately signed a contract with him. We were impressed with his credentials but what sold us was his character. He was honest, straightforward, thorough, articulate and meticulous about every minute detail. We knew that he was going to worry about the particulars so we wouldn’t have to. He was the perfect real estate agent for us! Warren conducted a thorough market analysis. He explained to us what the prices in our area were and where the analysts believed the market was going. Though no one can predict with certainty which way the housing prices will go in a year, it was reassuring to have a real estate agent who was familiar with the financial analysis of the market. In addition, as the neighborhood specialist, Warren made it his business to study the local conditions and advise us on how much to list our home. Prior to putting our home on the market, Warren staged our home to stand out. Having Warren was like hiring a professional stager and interior designer. He evaluated each room and made adjustments to ensure that we were using the best use of space and natural light. He created a setting that inspired visitors to visualize themselves residing in our home. In addition, Warren exercised his excellent marketing abilities to advertise our home. He utilized the internet, newspaper, mailings and open houses strategically to sell our home quickly. During a time when the average number of days on the market was on the rise to approximately 64 days, Warren was able to sell our home within 30 days. Warren navigated us through the complicated escrow process for both homes. With his guidance, the process was seamless and very smooth. We were able to close escrow on both homes within 2 days of each other. As expected, Warren produced top results. We know that it was because of Warren’s expertise that we were able to receive top dollar. We received 99% of the asking price of our home. This was the highest sales price of our Plan at the time of sale. We were able to purchase our new home for under the asking price due to Warren’s excellent negotiation skills. With our best interests at heart, Warren was very patient during the home searching process. He took the time to get to know us and understand our priorities. With this knowledge, he was able to channel the search more productively. The process of selling a home and purchasing a new home will always be arduous and stressful because it is the largest expenditure most American households will ever make. However, as a buyer and/or seller you won’t feel lost in the hands of Warren as your real estate agent. We are now lifetime customers and friends of Warren and we recommend him to anyone and everyone. Thank you. - Scott & Heidi Hunter La Mirada ________________________________________________________________ Our name is Dale and Pauline Wilshire. We lived at 14441 San Cristobal Drive. Warren came to us from a friend who had used Warren as his agent when selling his home. Warren presented himself as a very professional person whom we instantly liked. He showed us that he was interested in us and wanted to do the best for us. Throughout the selling of our home he was always available and we felt competent in his judgment. He handled all situations in a very professional manner. Our house just closed escrow and we are so excited to know that everthing was done correctly and in a timely manner. We have already recommended a neighbor to Warren and would do so in the future. Thank you again Warren for all your hard work and dedication. Dale & Pauline Wilshire _______________________________________________________________________________________________ "Warren was recommended by some friends of ours, and he was truly a joy to deal with. He cheerfully answered hundreds of our questions, and then worked really hard to close our escrow. I'll never forget that he actually came to my job on my lunch hour to make it easier for us to sign some paperwork. Now that's dedication! We truly love our new home and are eternally grateful to Warren for making it so easy for us. Now we recommend him to all of our friends." - David, Lisa & Christopher Nowell Thanks again Warren for all your help and encouragement and swift paperwork to get Christine and I into the house we wanted today. We really appreciate it and if and I do mean IF I could ever afford to buy a home in SoCal I will sure get in touch with you. Take care and have a great Christmas and New Year. Michael Shafer "We wanted to thank you for being our real estate agent. As you know, this was the sale of our first house and we feel that everything went smoothly. Also thank you for going beyond your duties as a real estate agent to help us with the house. It's those special touches that people will remember." - Jessie and Wilson Wong 15938 Ridgeview Lane, La Mirada The Heights of Hillsborough "Dana and I didn't think we could afford to buy a house, already having spoken with one real estate agent, who led us to believe we were so far out of our league. We gave it one more chance and talked to Warren Nass. Right from the start he made us feel like there was a chance for us to buy a house. At least it was worth a try. He talked us through everything. He didn't just want us to get into a house. He wanted us to get into a house that was right for us. Warren wouldn't let us settle for less of a house just to get in. I think he would rather not sell it at all if that was the case. Being first time buyers we didn't have a clue about the process of buying a house. Warren walked us through every step of the way. He told us about every cost, every detail. Also, when we were looking, I'd be looking at the cosmetic look of the house while Warren would be looking for flaws I wouldn't even think to look for but were very important. Warren Nass did the best job any real estate agent can do. I just can't say enough good things about him. Warren bent over backwards for us. Showing us the same house over and over again and not even making us feel like we were taking any of his time. To us, Warren played the part of the agent and inspector. I know that if it wasn't for Warren's attitude, spirit and enthusiasm we would not be in a house today." "Warren did the best job any real estate agent can do. I just can't say enough good things about him." - Patty and Dana Lux _________________________________________________________________ "We didn't realize how stressful purchasing a home can be. You really came through for us by responding so quickly and representing us in a very professional way. I've heard many horror stories from friends and relatives on how dishonest and unresponsive some real estate agents can be. It was a great pleasure to work with someone we could trust. I will be recommending you to everyone." - Julie Chestnut _____________________________________________________________________________ "D-Day! Hey Warren, Thank you so much for all you've done to assist us in a smooth sale (both houses) and being the great friend you are. Both Hal and I appreciate your even temperment, kindness and especially the caring way you helped us through a very traumatic situation. We're both very excited for you, you've worked hard!" - Sandy and Hal ____________________________________________________________________________________ "We've know Warren for 8 1/2 years and during that time he always accepted our phone calls with market and real estate questions with patience. He was the expert. Not us. We knew that some day we would sell our home and move to a new one. It felt like we had not only our total savings tied up in our place but our whole lives as well. Last year with his encouragement and friendliness on the phone and in person we knew it was the right time for us to sell. He made us feel so good about ourselves. The really incredible part of this story is that when we put our place up for sale it sold on the first day!!! This has to be a record. We were in total shock. If we could just reach out to people with our story who wish to sell their homes and let them know the experience is worth it. Last but never the least, we want to be sure and share with you all the gratitude we feel for the support and strength that we have received from knowing Warren. It is because of Warren's courage and example in leadership that we followed his advise on our personal matters." - Albert, Penny and Sally Villanueva ____________________________________________________________ "We want to thank you so much for all that you have done and all the time and effort you have put in to get us our house! We appreciate all that you do and all you've done to make this happen for us." - Mark and Suzy Nass "Thanks from the bottom of our hearts for making the sale of our home in La Mirada, as "Painless" as possible. We want you know how much we appreciated doing business with you." - The Heckmans "I am sorry this note is late coming. We are finally unpacked and things are getting back to normal. Greg and I wanted to thank you so much for everything you did on selling our La Mirada home. We enjoyed getting to know you and wish you all the best. Give us a call and come visit us." - Greg and Jef Lawson "Thank you for helping to make our "New" home possible. We couldn't have done it without you. We're still unpacking boxes, but having a good time doing it! Come visit us anytime, you are always welcome. Thanks again." - The Holm's Jeanine, Michelle and Steve "Dan and I would like to take this time and thank you! you did a wonderful job. Everything went great! We love our new home very much! Thanks again for all you did:)." "Warren was there every time we needed something. Really went out of his way for us. Even cancelled a date." - Dan and Stacie Harper "He found my dream house!" - A. Gonzales "What an absolute delight to have worked with you selling my home. You went far beyond the call of duty - I couldn't have done it all without you, really... I'd guess you already figured that out!" "Wow! Mr. Nass went beyond the call of duty again and again, even meeting repair personnel when I couldn't. His constant contact and service set a benchmark for the profession." - Shelly B "Besides telling us about painting over paneling and tips to make the house sell better, he also helped physically, planting flowers and helping to clean up the landscape." - The Stines' Warren and Cathy, You. Are. Awesome. And by awesome, I mean totally awesome. Thank you for the referral money, you didn't have to do that. We love being able to know that people are in your trusted hands! We deposited the $$ into Sammy's college fund! Look forward to seeing you soon. Love, Sam & Katie "Thank you for all of your help. We never thought that moving would be so easy." "The previous owner left the house a mess. Warren went out of his way to come over and help clean the house so we could move in. He was always helpful and there when we needed him." - Patrick and Nilda Rockenbach "Provided visibility by advertising our property as what had been agreed to. Provided continuous updates as required." - Linnga & Maria "Mom and I are delighted with the job you did in selling our home. I know it wasn't easy." - Mom and Dad "Gentleman: Recently, Warren Nass of your Westworld Realty office in La Mirada, California, handled the listing and sale of our home at 13324 Bluefield Avenue, La Mirada, California. We would like to express our appreciation for the professional manner in which the entire transaction was handled. His assistance in helping us select the right price, his creative promotion (including an Elvis open house)and advertising led to several offers being received in a matter of weeks after the initial listing. His help and patience in negotiating with a difficult buyer resulted in a very satisfactory price and terms. The closing, thanks to his attention to detail, was within a few days of our original target date. Yes, Warren is our son and we are proud of it. However, even if he wasn't, we could not have been more pleased with how he completed the sale of our home. In fact, it made it more difficult for him to handle the sale of the home that he had spent most of his life in. We thank him, his manager and your organization for a job well done." - Paul & Susie Nass "Warren was very active and aggressive in selling. He also helped do some repair on my condo on his own time." - H. Martinez "Just a little something to thank you for all your help and hard work. We appreciate the time you took to help us sell & buy a new home. Your patience and understanding of our need & wants in a new home made us very lucky to have you on our team. Thanks again." - Andrew, Lisa, Amy, Matthew & Dusty Craig "Keep up the great work, Warren! We will send any referrals we know to Warren Nass! - Robert & Melissa "Warren spent so much time with us helping us find a house. He seemed like he was always available for us throughout the whole process!" - Jim & Jill Ries "Just wanted to let you know how much all you've done for us is appreciated. We would really like to take you out to dinner as soon as you and I can get together. Give me a call at my parents house so we can plan what night would be good. Hope all is going well and I hope to hear from you soon. Take care." - Julie and Michael Sullins "I would like to take this opportunity to thank you for your advice. Never owning a home, I am clueless about many things. So, I really appreciate your tips." - Candace Burgess " Thanks for all your help and support with Nicki on my new home! - Karrie Hatfield "A belated thank you for all your efforts re my home. Even though I am not yet putting it on the market, you may be sure your expertise and professional manner will keep you on the top of my list. I appreciated your generous sharing of time and thoroughly enjoyed our visits. Thanks for the info on your beautiful Bed and Breakfast facility. Your Mom and Dad must love the adventure. Again, thanks and keep following your dreams, as will I!!! Keep in touch! - Maggie Kite "A very sincere "Thanks" from your friends and colleagues for all your help with our laptops, printers and every other question we can possibly think up! Your willingness to always help us out is one reason this is such a great place to work! Your help is appreciated and as our way of saying "Thank You" enjoy a night out on us!! Have fun and again "Thank You." - Sincerely, Kim, Mark, Diane, Nicki, Hilda, Vicki, Michele, Judy, Paul, Pam, Lynda, Nellie, Jackie, Cathy, Shirley, Fran, Laura and Jeanne "Thank you for helping me about the glen property appraisal value. Thanks again" - Sunny Kim Realtor Thanks again Warren. I appreciate all of your help. - Nancy Cota _____________________________________________________________________ "From each sister's home city, a gift to represent. To say thank you for everything, Even fixing the blind that was bent. An avocado bowl from Fallbrook, For follow up on those who came to look Olives to represent La Mirada, For offers that came up "nada" Orange goodies for Anaheim, For going for the very last dime From Temecula comes champagne, For sticking strong in a market that started to wane And finally from Murrieta, a cowboy hat, To say thank you again and that's that!" - Kathy Quigley, Linda Edwards, Betty Claude, Cyndi Olson and Suzy Gibson _____________________________________________________________________ "Thank you for your efficiency and pleasant demeanor. It was so refreshing to work with an agent with integrity, follow through and just plain up front candidness. Perhaps there will be another opportunity in the future. I look forward to it!" - Barbara Gonzales Re/Max Metro __________________________________________________________________________________________ "I am delighted to congratulate you on achieving the prestigious 2003 CENTURION Producer Award. The CENTURION Award is a symbol of excellence earned by only an elite group of CENTURY 21 Producers. This eliter group represents the depth of talent and experience found within the CENTURY 21 System. You have proven your commitment and dedication to the CENTURY 21 organization over the past year. You have demonstrated exceptional professional standards and dedication to your clients. We salute your accomplishments and pledge to provide continuing support and encouragement to insure your personal and professional success. On behalf of the entire organization, I commend you for your award winning efforts. Best wishes for another outstanding year. We look forward to seeing you onstage at our International Convention in Las Vegas." - Van Davis President Century 21 Real Estate Corp. "Congratulations on a job well done! Your dedication to providing exceptional customer service now distinguishes you with those who have joined the ranks of a very special group of real estate professionals. You are now recognized within the CENTURY 21 system as a "Quality Service" real estate agent. Enclosed please find a lapel pin with the words Quality Service. Our customers deserve, and will receive, the finest service ever offered by any real estate organization. By providing outstanding quality service, you are helping us realize our vision for the future. You are truly an asset to your office and the CENTURY 21 system. CENTURY 21 looks forward to our continued association with you and your satisfied customers." - Larry Ross CEO Century 21 Real Estate Corp ___________________________________________________________________________ "Keep up the excellent work. I'm in the insurance business.Working with Warren Nass, I feel that I found my equal in the real estate business. He's personable, professional and gets the job done!" "The seller presented some big problems during the escrow. Our agent presented some excellent solutions to solve these problems." - Tim and Wendy Shorr ________________________________________________________________ "Congratulations! Because of a lot of hard work, determination, and tenacity, the deal regarding 14419 Cullen, is closed. I want to thank you for your significant contribution. It is easy to see why you are a success. My career is leveraged by working with other professionals in the industry. This is not a one way street. If there is anything I can do to help you, please let me know. I have enclosed for your enjoyment a gift certificate from Starbucks Coffee Shop. Again, it has been a pleasure to do business with you." - Rick McGrail Realtor Hi Warren - I just wanted to take a moment to say 'thanks' for the excellent service you provided to me and the McReynolds. You can be certain that we'll be looking out for any futere opportunities to refer to you. All the best - Steve Simmons Remax Olson & Associates, Inc. ______________________________________________________________________________________________ "Just a note to thank you and bring your peers up to speed with all that you do for your clients. When we sold our condo in Hillsborough we tried another Realtor first; boy did we learn from that mistake. Your commitment to use all possible means to expose our listing, your dedication to follow up on all possible leads and your expertise of the area lead to the offer on our home. During the offers and counter offers you were quick to guide us and always available until closing the sale. It was for this effort and ability that we chose to use you to make our next home purchase, even though it was out of your working area. You kept us up to date with current listings in the Fullerton/La Habra area. Several times you made yourself available to showings for us on short notice due to my demanding schedule. We looked at over 100 homes in a three week period until we found our new home. Again during the offer and counter offer process, your guidance and expertise closed the deal. It has been a fun and enjoyable experience to go through, all due to your genuine interest in us during the entire process. Many thanks........" - Scott, Elayne and Megan Bastian ___________________________________________________________________________________ "Since I have bought and sold two condos and purchased one house, I have worked with many Realtors; however, none of the escrows have been processed as smoothly as the recent one involving you and your office. I appreciate the fact that you were able to anticipate some problems and solve them before they arose. Your sugesstions regarding some repairs helped bring about a quick sale and a final walk through that allowed escrow to close without problems. Your availability to appraisers, termite inspectors, and others was very helpful since I had a very busy schedule. Both you and Pioneer Escrow worked together to see that all paperwork was completed ahead of schedule. I know that even though you worked with another realtor, it is to your credit and hard work that made the deal go through. I appreciate your services and would definitely use them again in the future, should the occasion arise." - Karen Farhat Condo #129 at the Glen "Well, I can't give you a million dollars, but I want to thank you a zillion times for working so hard to find me comps for my condo. I should know about approval of my refinance sometime this month. If it wasn't for you, the package wouldn't have gone to the underwriter for a very long time. My sincere thanks." - Lori Chee "Persistence" - David and Therese Doyle "Keeping us current on any and all transactions, walk-through, advertisements, and correspondence, to mention a few. We were moved out and the house was empty, plus we were moved out of state. Good job, Mr. Nass" - Edward and Carollyn Blazevich Las Vegas "CENTURY 21 Real Estate Corporation 1 Campus Drive, Parsippany, New Jersey 07054 (877)221-2765 Dear Warren: I am honored to congratulate you on your extraordinary achieving of becoming a member of the 2004 CENTURION Honor Society. Your ability to achieve this status is outstanding. You have proven that consistency and hard work assures superior results. Your commitment and dedication is unsurpassed, and widely recognized. The success of our system is due largely to your unparalleled efforts and accomplishments. On behalf of the entire organization, I salute your efforts and pledge our continuing support and encouragement to insure your personal and professional success. Best wishes for another exceptional year. Sincerely, Thomas R. Kunz - President & CEO" "Dear Warren: I am delighted to congratulate you on achieving the prestigious 2004 CENTURION Producer Award. The CENTURION Award is symbol of excellence earned by only an elite group of CENTURY 21 Producers. This elite group represents the depth of talent and experience found within the CENTURY 21 System. You have proven your commitment and dedication to the CENTURY 21 organization over the past year. You have demonstrated exceptional professional standards and dedication to your clients. We salute your accomplishments and pledge to provide continuing support and encouragement to insure your personal and professional success. On behalf of the entire organization, I commend you for your award winning efforts. Best wishes for another outstanding year. Sincerely, Thomas R. Kunz - President & CEO" CITY OF LA MIRADA spring Beautification Warren & Cathy Lee Nass MOST IMPROVED In recoginition of your property's beautifully maintained exterior appearance and significant contribution to improving the quality of your neighborhood. Presented this 13th day of June 2005 by the La Mirada City Council. Bob Chotiner, Mayor La Mirada spring Beautification Award Winner 2007 Warren and Cathy Lee Nass with La Mirada Mayor Steve Jones at Spring Beautification Awards July 2007 _____________________________________________________________________________________ Certificate of Appreciation We hereby present Warren Nass with this Certificate of Appreciation, in recognition of your dedication and outstanding service during Career Day at Benton Middle School on this day May 23, 2007. Sarah Gilbert, Coordinator Michele Dreiling, Coordinator Craig Hauke, Principal Warren Nass, Thank you very much for participating in our career day. Our Staff and students appreciate the time you have given us. Sincerely, Benton Middle School "Hello Joel, Thank you for your assistance with Warren Nass in selling my home... a $1,100,000 value...a City record while it lasts!! This is now the fourth transaction through you, your office and Warren. Warren is a great guy. He's very professional, detail oriented and my wife and I will continue to utilize his services in the future." Friendliest regards, Tim Shorr, President & CEO Shorr Agency, Inc. February 24, 2008 Warren - Happy Anniversary! It was 16 years ago that you joined Westworld. May the next year bring you Health, Happiness and Prosperity. Shelia and Joel _________________________________________________________________________________________________________________ Escalona Examiner Volume 1, Issue 6, Page 2, March 2006 The students of Escalona had a JUMPIN' time on February 10th participating in the Jump Rope For Heart event. For the second year in a row students have helped raise over $15,000 to help support the American Heart Association. Students and sponsors are helping people in our community fight America's No. 1 and No. 3 killers - heart disease and stroke. In 2005, students raised $6,980 and exceeded their goal this year to raise $8,223.59. Thank you to the sponsors who helped make this possible. If you didn't see the Eagles out jumping on the event day, you probably heard them. Escalona was fortunate to have Mr. Nass, a grandparent from Escalona help DJ the event. Students got to try many different styles of jumping to a variety of upbeat music. The Eagles not only had a fun time jumping rope, they also found enjoyment in raising money for a well needed cause. 4th grade student, Deja Savoy in Mr. Brown's class raised $530 for the American Heart Association. Escalona also had nine students who raised over $150 and will be entered into a drawing for a trip to Walt Disney World. Next year Escalona hopes to again meet their goal and to continue helping the community fight against heart disease and stroke. Thank you parents and family members for making this possible! "Thank you for agreeing to be our "Principal for a Day" on Thursday, March 6th." - Gary Dixon Principal Gardenhill School Warren, I know this is a belated thank you, but please know how much our staff, students, and I appreciate you sharing your talents with Gardenhill! You add "specialness" to our events like no other! - Sharmayn and Gardenhill Have you sent in your testimonial? Please email or mail yours today to warren.nass@century21.com or mail to: 15058 Rosecrans Avenue, La Mirada, CA 90638
Wave of Foreclosures Wave of Foreclosures Drives Prices Lower, Lures Buyers By JAMES R. HAGERTY and KRIS HUDSON WSJ.com Oversupply Triggers Lenders' Fast Sales; Mr. English Bids March 25, 2008 A glut of foreclosed homes of historic proportions is starting to drive down U.S. home prices faster as lenders put more properties on the market and buyers show signs of interest. The ability of America's lenders to manage this fire sale will be crucial to determining how long the housing market stays in the dumps -- and how quickly blighted neighborhoods can heal. The oversupply is severe: In some major markets, including Las Vegas and San Diego, foreclosure-related sales have accounted for more than 40% of all sales in recent months. On Monday, new data suggested that pressures like these are starting to drive prices low enough to attract some buyers back into the market. Sales of previously occupied homes jumped 2.9% in February from the month before, the National Association of Realtors said, the first increase since July. The median price dropped 8.2% from a year earlier to $195,900, the biggest drop recorded by the Realtors in the current slump. In some beaten-down markets, the price cuts have been stark. The Detroit Board of Realtors recently found that home sales in the city (excluding suburbs) in the first two months of this year jumped 48% from a year earlier, to 1,540. The average home price there sank 54% to about $22,000. 'Got to Move Things' Banks and others holding foreclosed property have concluded "we've got to move things" and are finally willing to slash prices, says Thomas Lawler, a housing economist in Leesburg, Va. The supply is piling up fast. Overall, the total number of lender-owned homes doubled last year but sales grew only 4.4%. At the same time, the specialist firms that sell foreclosed homes for lenders say banks are sending them additional properties much faster than they can be sold. "They're coming in [at a rate of] two new properties for every sale," said Claudia Smith, vice president of operations for First American REO Outsourcing, which is handling roughly 8,000 foreclosed homes for lenders. MORE ON THE HOUSING MARKET • Foreclosure Rate Outpaces Sales by Lenders • Home Resales Up 2.9% in February • Mortgage-Security Rules Could Ease Crisis • Ring Charged With Defrauding Homeowners • Economists React: Housing Reaching Its Bottom?First American CoreLogic, a research firm based in Santa Ana, Calif., that collects data from lenders and county clerks, estimates that foreclosed properties held by lenders accounted for 493,000 of all homes on the market in January, up from 231,000 a year before. Properties like these represent roughly one of nine currently listed for sale nationwide, compared with a one-in-15 ratio a year earlier. "This is both a crisis and an opportunity," says Rafael Cestero, a senior vice president at Enterprise Community Partners, Columbia, Md., a national nonprofit group that invests in housing for low-income people. Clusters of empty, foreclosed homes attract criminals and hurt neighborhoods by undercutting property values for everyone. Brenda Lawrence, mayor of Southfield, Mich., where about 3% of all single-family homes are in foreclosure, calls foreclosed homes "a cancer." But foreclosures also can help bring prices in high-cost areas down to levels that are affordable to teachers, fire fighters and other middle-class buyers who may have been priced out of the market during the housing boom. U.S. Rep. Barney Frank, a Massachusetts Democrat, recently announced plans for legislation to provide $10 billion of federal loans and grants to help local government and nonprofit groups buy and renovate vacant foreclosed homes. The homes would have to be sold or rented to people with low or moderate incomes. The overabundance of foreclosed homes in the market is likely to push down home prices in much of the country for the next several years, says Ivy Zelman, chief executive of Zelman & Associates, a housing-research firm in Cleveland. Off the Sidelines Until recently, all of this distressed property has been encouraging potential buyers to stay on the sidelines in anticipation of lower prices later. But Lawrence Yun, chief economist of the National Association of Realtors, says the latest data show that sales are perking up in some areas where owners of foreclosed homes have become more aggressive about their pricing. Prospects for the housing market also depend heavily on the job market. As measured by the S&P/Case-Shiller national index, home prices jumped 74% in the six years through 2006. During the same period, U.S. median household income rose just 15%. (Neither figure is adjusted for inflation.) That discrepancy made housing unaffordable for many Americans. The home-price index already has come down about 10% from its peak in mid-2006. But prices might need to fall much further, some analysts say. A recent Credit Suisse report projects that average home prices have another 40% to fall in the Miami metropolitan area, 36% in Phoenix, 26% in Los Angeles and 20% in Las Vegas if they are to become more in line with income levels. Lenders face dueling pressures when deciding how quickly to sell foreclosed properties. On the one hand, foreclosed homes tend to depreciate faster than occupied ones because they get less maintenance and quickly look forlorn. And the longer they sit unsold, the longer the lender must keep paying monthly expenses, including insurance and property taxes. On the other hand, lenders must balance the pressure to clear their books with the fact that selling too quickly -- and at deep discounts -- could trigger big write-downs and devastate their quarterly results. "Somebody has to jump on the hand grenade," says Michael Cercone, a real-estate investor in Marblehead, Mass. Lessons of S&L Crisis William Seidman, a TV commentator and former bank regulator, served as chairman of Resolution Trust Corp., an agency created by Congress to sell the assets of failed savings and loans in the aftermath of that late-1980s financial crisis. "Our view was that we should sell [real estate] as quickly as possible," he says. Mr. Seidman advises today's sellers to take a similar approach. In some cases, buyers are ready to act. Marc S. English, a beefy, 6-foot-4-inch Texan in ostrich-skin boots, walked into a private auction of 80 foreclosed homes at an Embassy Suites hotel near Dallas on March 9 and predicted that bargains would be scant due to the attendance of more than 1,000 rival bidders. "If you can't make 20%, 25% off these deals, you're wasting your time," said Mr. English, who occasionally buys and sells homes to supplement his regular work with a commercial builder. Yet Mr. English wound up buying two of the four homes he had scouted in advance. For instance, he agreed to pay mortgage investor Fannie Mae $37,000 for a three-bedroom, two-bathroom home in Fort Worth with a value of $69,600 in the county appraiser's records. After the auction, the lenders initially rejected his winning bids as too low. But a week later, they relented. The fastest way to move foreclosed homes might be to sell in bulk to big investors, although that kind of transaction is highly unusual in the real-estate business. Nevertheless, some hedge-fund operators, including New York-based Paulson & Co., are considering whether to seek deals like these. There are big obstacles, however. One problem: Hedge funds aren't equipped to manage small properties scattered over large areas. Another sticking point is price. Mary Coffin, an executive vice president who heads the loan-servicing business of Wells Fargo, says investors have approached her bank to discuss "fire sale" bulk purchases of homes, at as little as 20% to 30% of what the bank thinks the properties are worth. "We're not there," Ms. Coffin says. She thinks Wells can do better than that by selling homes one by one. Still, she says, Wells needs to prepare for the possibility of doing some bulk sales. Nonprofit groups are angling to get in on the action. Enterprise Community Partners plans to provide financing for local organizations to buy foreclosed homes and renovate them for sale or rent. Enterprise's Mr. Cestero says the group expects to raise at least $50 million to $75 million initially from foundations, financial institutions and other sources for such programs in Cleveland, Dallas, New York, Baltimore and Columbus, Ohio. Mr. Cestero says Enterprise Community Partners potentially could pay 50% to 70% of a property's estimated value. It has held talks with big lenders, although no deals have been reached. The San Diego Reinvestment Task Force, a body set up by the city and county, has proposed to create a "land bank" that would buy foreclosed homes, repair them and make them available for sale or rent in order to prevent blight from engulfing hard-hit neighborhoods. Jim Bliesner, director of the task force, plans to seek funding from foundations and government agencies. In the most dire cases, some lenders have teamed up with community-service groups essentially to donate foreclosed homes for use by low-income residents. In December, Fannie Mae began transferring 182 foreclosed homes, most of them in Detroit, to the Michigan State Housing Development Authority and the Michigan Land Bank Fast Track Authority. The agencies paid $32,000 for the entire group of 182 homes -- enough to cover title-processing charges on each home. Once the titles are cleared, the agencies will donate the properties, which range in value from $5,000 to $70,000, to Michigan municipalities, charities and housing programs. One big problem for sellers is that mortgage lenders have severely tightened their terms, requiring larger down payments and better credit records. As a result, many people interested in buying foreclosed homes can't get loans. Another hurdle is that the lenders responsible for selling the homes don't own all of them. That's because many mortgages are sold to investors in the form of securities; therefore, the investors in those securities actually own the homes. The trust agreements that create securities like these require lenders to show that they are getting the best price possible for the homes. That makes it tough to cut deals with potential buyers seeking huge discounts. Among the big owners of foreclosed properties are government-sponsored mortgage investors Fannie Mae and Freddie Mac, along with the biggest lenders, Countrywide Financial Corp. and Wells Fargo. Fannie Mae owned 33,729 homes at the end of 2007, up 34% from a year earlier. Another big seller is the Department of Housing and Urban Development, or HUD, which operates the Federal Housing Administration. The FHA insures banks and investors against losses on mortgages, and ends up owning foreclosed homes. The average time it takes to sell has grown to 196 days from 175 a year earlier, says Laurie Maggiano, a HUD official. About 30% of HUD's homes are in Ohio and Michigan. In those states, HUD late last year began offering a $2,500 rebate to buyers. HUD also has programs that allow buyers to make down payments of as little as $100. The $1 Home HUD also has programs under which it sells homes at deep discounts, and sometimes for as little as $1, to local nonprofit developers who provide housing for low-income people. Ms. Maggiano says HUD is looking at ways of letting investors bid for large groups of homes. The foreclosure crisis has been a blessing for companies that specialize in selling foreclosed homes, often under contract with lenders. One such firm, FIS Asset Management Solutions of Westminster, Colo., has doubled its staff in the past year to 260 and expects to sell 20,000 foreclosed homes this year, roughly twice last year's figure. From a cubicle at FIS's headquarters, Bernadette Fleming sells, on average, one foreclosed home a day -- houses she never visits in person. She reads reports on their condition and the state of the local market, and confers with local real-estate agents. If a house doesn't sell, she re-evaluates every 30 days to see if price cuts are called for. On March 10, Ms. Fleming weighed a low-ball offer on a three-bedroom, two-bathroom home in Pomona, Calif. The home had gone on the market four months ago for $329,000. Three price cuts later, it was at $269,900. Now, however, a would-be buyer was offering $210,000 plus help with closing costs. In an email, the lender told Ms. Fleming to reject the offer -- but also decided to cut the asking price a bit more. "It's not in the worst shape," Ms. Fleming said of the property. "The landscaping needs attention. But we'll probably reduce the price again and get a contract on it." --Gregory Zuckerman contributed to this article. Write to James R. Hagerty at bob.hagerty@wsj.com and Kris Hudson at kris.hudson@wsj.com Sponsored By RELATED ARTICLES FROM ACROSS THE WEB Related Content may require a subscription | Subscribe Now -- Get 2 Weeks FREE Related Articles from WSJ.com • Home Prices Fell by Record 11.4% In January, According to S&P Report Mar. 25, 2008 • Of Markets and Mortgages Mar. 25, 2008 • Home Resales Rose 2.9% Last Month As Median Price Dropped 8.2% Mar. 24, 2008 • Business World Feb. 27, 2008 More related content Powered by Sphere
21 Questions to sell your home faster! Century 21 Questions By Warren Nass 21 Questions To Help Your Property Sell Faster by Warren Nass Answers to these questions will help you get more cash for your property in a shorter period of time and with the greatest of ease. 1. What is the buyer’s first impression of the exterior of the house? 2. Shall I reseed the lawn and get my landscaping in top shape? 3. Does the exterior or interior of the house need painting? 4. What about door mats? Should I replace them with new ones that are neutral and omit our family’s name? 5. What about the screens? Any holes? What about the windows? Are any cracked? Do they work well? 6. Should I give my Realtor a list of things my family likes about the house, schools, and the neighborhood? 7. What are buyer’s first impressions as they step inside my house? What can I do to improve it? 8. Are pets under control at all times? 9. Does the carpet need cleaning? How about replacing? 10. Are all appliances in good working order? 11. Can I take items from kitchen cabinets and counter tops to make them more spacious? 12. Do any cabinets need to be touched up or refinished? 13. Is there any furniture I could store or dispose of to make the rooms appear larger? 14. Since a buyer will be looking in the closets, should I take some of the clothes out to make them look roomier? 15. Should I remove any item that a buyer may want as part of the house? For example, a special chandelier? 16. Are the garage and storage areas as neat and clean as they should be? 17. Should I stay out of a prospective buyer’s way? 18. Should I ask my Realtor for a list of recommendations prepared specifically for helping market my house? 19. Are the price and terms offered going to appeal to most of the buying public in my price range? 20. Do I need to be aware of other houses similar to mine also being offered for sale? 21. Before spending needless time and money, should I consult my Realtor, Warren Nass? Contributed by Warren Nass at Century 21 Westworld Realty,15058 Rosecrans Avenue, La Mirada, CA 90638. Selling Real Estate full-time in La Mirada and the surrounding areas since 1992. Please call Warren with any questions about this article or Real Estate in general. Search for your new home at warren4realestate.com. 714-606-0329
Don't pay off entire mortgage with extra cash By Benny Kass DEAR BENNY: I am confused about paying off our mortgage on our primary home or on a secondary home/rental. My husband is totally against paying off either loan, even though we could pay off at least one of the mortgages. Our home mortgage has 10 years left at 5.25 percent interest and the other is a 30-year at 5.75 percent interest. One of my girlfriends says you should definitely get your mortgages paid off, and yet another person who has his own business and is in his fifties says he is going to get the longest (30- to 50-year) mortgage he can get on his next home. I don't know what to do. I would feel much more secure personally if we had one of the mortgages paid off, especially our primary. I must say though that we may sell in the next couple of years and move our primary home to Florida. This is where the second home is. –Cynthia DEAR CYNTHIA: You have asked perhaps the most difficult questions in residential real estate: Should I pay off my mortgage? And if so, when? Some people like to have the comfort of having their home "free and clear" of any debt. Others -- like your 50-year-old friend -- want a large mortgage so that they can take advantage of the tax benefits. But there is no easy answer. Personally, I believe in having a mortgage on my home. Why? Because over the years, my home will appreciate in value (notwithstanding the current real estate market). Let's take this example. If my home currently is worth $300,000, conservatively speaking it will appreciate 3-5 percent per year. And this appreciation will take place regardless of whether I have a mortgage. So instead of paying off my mortgage, why not use that money for some other purpose -- whether it is for personal travel, entertainment, or just to have it for that rainy day? The more equity I have in my house -- and assuming that the property will appreciate -- the more it is "dead equity." I know that readers will differ with me, but that's my opinion. You have to look to your own situation, as everyone has different issues and concerns. In your case, because you plan to sell your current home in the next few years, I see absolutely no reason to pay off that mortgage. Use that money -- if you so choose -- to pay down the second home in Florida, which carries a slightly higher interest rate. And here's a suggestion: Instead of paying off the mortgage completely, if you can make one additional payment each year, you can reduce a 30-year loan down to approximately 22 years. For example, if your monthly mortgage payment is $2,000, each month add $166.66 (1/12th of the monthly payment) when you send in your check. But make sure that your check -- and the coupon -- clearly indicates that you are making an extra payment. DEAR BENNY: We are selling a $620,000 home. As a part of the inspection addendum, the buyers are demanding that we put down a $500 security deposit with the title company, refundable if there is no damage to the home between now and move out. Our home is in superb condition. The refund of our money would be based on the buyer's subjective opinion, because they included no specifics on how they would determine if we would receive the money back. (They also have asked for every single nit-picky item that the inspector found to be remedied). What are the pitfalls of agreeing to put down this deposit and how do we protect ourselves? –Shelly DEAR SHELLY: If that's the only way to save the sale -- especially in today's market -- I would go along with their request. You could have an attorney prepare an escrow agreement, spelling out the terms and conditions by which the moneys would be returned, but the legal fee involved would not be worth it. Put the money in escrow and know in the back of your mind that you probably will never get any of it back. However, you should insist that the buyer has a walk-through of the house the morning of settlement, to determine the condition of the house. You or your real estate agent should be present to observe. DEAR BENNY: I understand that a couple is allowed up to $500,000 free from taxes on any profit made in their residence when it is sold. My situation is this: I sold one investment condo and bought another one under the 1031 exchange, and later sold the house I lived in and made the 1031-exchanged condo my home. Do I have to pay the delayed taxes on the 1031 exchange when I sell this condo property? Since it is now my home, and has been for more than five years, if we sell it shouldn't we get the benefit of the full allowable appreciation of up to $500,000? –Gene DEAR GENE: Because you have owned and lived in the house for five years, if you are married and file a joint income tax return with your spouse, you are eligible to claim the up-to-$500,000 exclusion of gain. A couple of years ago, all you had to do was move into the replacement home, which was involved in a 1031 Starker exchange, live there for two years, and then take advantage of this gain exclusion. However, Congress plugged this loophole in 2004. Now, if the home was acquired in connection with a 1031 exchange, and you ultimately opt to treat it as your principal residence, you can take advantage of this exclusion only after you have owned it for a full five years. Section 641 of the American Jobs Creation Act of 2004 has imposed a five-year restriction on this loophole. The new law states: "If a taxpayer acquired property in an exchange in which section 1031 applied, (section 121(d)) shall not apply to the sale or exchange of such property if it occurs during the 5-year period beginning with the date of the acquisition of such property." It's still a good way to avoid having to pay any capital gains tax, so long as you have owned the property for a full five years. You only have to use it as your principal home, however, for two out of the five years before it is sold. DEAR BENNY: My partner and I have a very serious decision to make quite soon. We hope you can help us with your knowledge and resources or at least direct us to where we need to continue searching. Can unmarried, co-titled adults on a property, having fulfilled the 24-out-of-60-month occupancy requirement each be eligible for the $250,000 exemption? –Pamela DEAR PAMELA: The answer is yes. So long as both of your are on title, and have owned and lived in the property for two out of the five years before the property is sold, each of you is entitled to take the up-to-$250,000 exclusion of gain. For more general information, I suggest that you go to www.irs.gov, click on Publications, and access and print Publication 523, entitled "Selling Your Home." In fact, the Internal Revenue Service has a number of publications on many aspects of real estate, and all are free and worth reading. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland.
Foreclosures drying up flow of HOA fees By Benny Kass DEAR BENNY: I live in a 12-unit condominium complex. We self-manage. One of the units will probably be going into foreclosure in the very near future. What does the complex need to do to collect the monthly dues and yearly assessments once the unit is in foreclosure? –Sara DEAR SARA: Unfortunately, this is a very common problem that many condominium associations throughout the country are facing. It has a downhill spiraling effect: When a unit owner is delinquent on his/her mortgage payments, that owner doesn't pay the condominium fees either. The first thing you should do is to consult an attorney in your area who understands community association law. There are to my knowledge some 12 states in the country that make the condominium assessment a priority lien. For example, in the District of Columbia where I practice, when a lender forecloses on a unit, up to six months of back condominium fees must be paid when either the bank or a third-party buyer at the foreclosure sale takes title. If you are in one of those "super-priority" states, you or your attorney should put the foreclosing lender on notice of this law. And regardless of whether this law exists in your state, you have to carefully monitor the status of the foreclosure sale. Just as soon as title passes -- either to the bank or to a third party -- the new owner becomes a unit owner, and is legally obligated to pay all future condominium fees. Actually, as harsh as it may sound, if a unit owner is in deep trouble and facing foreclosure, you want the sale to take place as quickly as possible. The longer the process takes, the more money your association will be losing if the delinquent owner is not paying the monthly condo fees. DEAR BENNY: In April 2005 we bought a lot in Missouri and received a general warranty deed a month later. The deed described the lot and its conveyance to us as husband and wife. Shortly thereafter, we began construction of a house. The house was completed in February 2006 and we began residing there at that time. We own the lot and house with no mortgage. The deed has not been changed to include the improvements, and there is no wording such as "joint tenants" or "right to survivorship." Your recent Mailbag article regarding the importance of this kind of wording has made me question whether we have what is necessary to describe ownership of both lot and house as well as protection of the surviving spouse's rights. –Ed DEAR ED: You raise a two-part question. First, the 2005 deed that you received conveyed the property to you and your wife. The fact that you constructed a house on the vacant lot does not change the fact that both of you own the property. I would not worry about that. I don't know Missouri law. You have to confer with a local attorney to make sure that your deed is properly worded. In many states, husband and wife take title as "tenants by the entirety," which is a form of title reserved exclusively for married people. Such a deed has the same effect as a deed that is held as "joint tenants," but actually gives the husband and wife more protections. But your state may take the position that the mere words "husband and wife" is sufficient. Not all states use the concept of tenants by the entireties. DEAR BENNY: Can you please define "capital gain"? You mentioned the term in one of your previous articles, but I did not quite understand how it would benefit me. My husband passed away five years ago and I am ready to sell our home and downsize to a smaller one. The house is 30 years old and the mortgage was paid off two years ago. I would appreciate any information you could give me on the subject. –Linnie DEAR LINNIE: Capital gain is the profit you have made on your house. You take your original purchase price, add to it the cost of any improvements you may have made, and you add certain expenses that you paid when you first went to closing (escrow). These expenses can be found in IRS Publication 523, entitled "Selling Your Home," which can be downloaded from www.irs.gov, and click on Publications. This is called the "tax basis" of your house. Then you take the selling price of your house, and deduct any real estate commission you may have paid, as well as other expenses such as advertising, legal fees associated solely with the selling of the house, and any loan charges you may have paid for your buyer. This is the adjusted selling cost. To get your gain you subtract your tax basis from the adjusted selling cost. This is a very oversimplified explanation. I have not discussed your situation about where your husband died, because you will get a stepped-up basis that will differ depending on where you live. Furthermore, I have not discussed the up-to-$500,000 exclusion of gain (up to $250,000 in your case because you cannot file a joint tax return) that you can take if you have owned and used the house for two out of the five years prior to its sale. You should carefully review the IRS publication, and if you still have specific questions, talk with your own tax and legal advisors. DEAR BENNY: I want to buy my brother's home (essentially for the amount of the mortgage), which I would allow my brother to continue to live in, and which I would use as a second (vacation) home. When my brother leaves the house (death, nursing home, etc.), I plan to sell the house and use the IRS $250,000 capital gain exclusion (assuming at least two years of ownership). Are there any potential problems with this plan? Would it be wise to place the house in a trust? –Frank DEAR FRANK: You have to talk with your attorney as to whether to put the house in trust. There are many variables, which are individual and possibly unique to your situation, so I don't believe it would be appropriate to give you advice on this issue. I see no real problems with your proposed plan. However, you should know that the new Housing and Economic Recovery Act of 2008, signed into law by President Bush on July 30, 2008, puts some restrictions on your ability to claim the full $250,000 exclusion of gain. This is complicated, but suffice it to say, if you sell a second home (whether it be a rental property, a vacation home or the type you are describing) the exclusion will be allocated between the time you owned the property and the time that you actually lived in it. In simple terms, the period of time you used the property as your principal residence will be eligible for the gain exclusion; the time that it was not your principal residence may be taxed. There is a formula to determine your taxable situation: The numerator is the amount of time (after Jan. 1, 2009) that the property was not your principal residence, and the denominator is the total amount of time of ownership from when you first bought the property. DEAR BENNY: My wife and I are considering renting our current primary residence for a short time after we build a new house with the idea of letting the housing market stabilize before we sell our current home. What are the tax rules regarding renting a primary residence and still counting it as a primary residence when sold? –Michael DEAR MICHAEL: Good suggestion, and hopefully that stabilization will occur quickly. In order to be eligible for the up-to-$500,000 exclusion of gain ($250,000 if you are single or do not file a joint tax return), you have to own and use (live in) the property for two out of the previous five years before the house is sold. In your example, if you already have owned and lived in the house for at least two years, you can rent it out for one day less than three more years. Be careful, however. If you rent out your house, will potential buyers be interested in buying when there are tenants? Will you be able to get the tenants out of the property in time to sell before the three years are up? Perhaps an investor can be found to buy and let the tenants stay in the house, but you cannot count on finding such a buyer. If you decide to rent, my suggestion is to make sure that the lease completely expires in two years. This will give you one full year in which to find a buyer. Otherwise, you will have to pay capital gains tax on any profit you make, unless you either hang on to the house as a long-term investment or do a 1031 (Starker) exchange. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.
When can my rental become my dream home? Clearing up confusion over 1031 property exchanges By Benny L. Kass DEAR BENNY: In a recent column, I read that 1031 property transfers had to be held for a period of one to two years to establish "intent." I thought that a law was passed in October 2004 that stated the "intent" period was five years. I bought a 1031 property in California in 2005 and would appreciate this being clarified. Nancy M. DEAR NANCY: The column was correct and so are you -- but you both are referring to different aspects of a 1031 (often called a "Starker") exchange. Issue #1: Here, too, there are two issues: (a) How long can you hold the replacement property before you can exchange it again? and (b) How long do you have to keep the property as investment before you can move into the property and treat it as your principal residence? As for (a), the statute clearly says that in order to get non-recognition of gain, you have to keep it for at least two years. As to (b), as that recent column properly stated, there is absolutely no IRS official guidance. Some tax lawyers take the position that one year and one day (i.e. go through one tax year) is sufficient. Others rely on what we call the "old and cold rule," namely that if the transaction took place more than two years ago, the exchange will generally not be reviewed by the IRS. I have lots of clients who exchanged their investment rental property for a retirement home in Florida or Nevada, and want to know how long they must rent it before they can move in and establish it as their principal residence. The safe harbor is two years. Issue #2: That leads us into the second part of your question. You are correct in that Congress a couple of years ago made some changes to 1031 exchanges. If you do an exchange and then convert it to your principal residence, in order to take advantage of the up-to-$250,000 exclusion of gain ($500,000 if you are married and file a joint tax return), you have to own the property for a full five years before it is sold. You also have to meet the two-year occupancy requirement. The actual text of the law reads as follows: PROPERTY ACQUIRED IN LIKE-KIND EXCHANGE -- If a taxpayer acquired property in an exchange to which section 1031 applied, subsection (a) shall not apply to the sale or exchange of such property if it occurs during the five-year period beginning with the date of the acquisition of such property. I hope this clarifies the confusion. DEAR BENNY: My wife and I and another couple are in the middle of buying a condo together and should be closing this month. The other couple has already been preapproved for 100 percent financing. We've been told that since they are already approved that they should go ahead and buy the condo and then amend the title while we're in escrow and add my wife and I to the title. I was curious as to whether this would work. --Josh DEAR JOSH: I don't think so. Your friends have been approved for a loan, but you have not. At closing (you call it escrow) the lender will give specific instructions that will include that your friends will have to sign the promissory note and deed of trust. I seriously doubt that the escrow company will permit you and your wife to be added without the approval of the lender. Can you qualify for the loan? Have you discussed the situation with the lender? The lender may also want to consider this an investment loan, which could result in an increase in the mortgage. Your friends could, of course, add your name to the title after escrow, but that might be grounds for the lender to call the loan based on the "due on sale" clause that I am sure will be in their deed of trust (the mortgage document). So, I suggest that you talk to the lender and see what can be done between now and the escrow date. But, your question raised two additional issues that concern me. First, you state that the loan is 100 percent. I don't know your financial situation (or that of your friend) but such loans have recently been associated with the many foreclosures that are taking place throughout the country. Have you -- or your friend -- carefully examined the terms of that loan? At some point, that loan will change whereby you will have to start paying principal and interest -- but at what interest rate? I am not a fan of such 100 percent loans. Of equal importance, do the four of you have a written agreement as to how you will handle the property? What if you and your wife want out of the deal? What if someone dies? What if one of the partners gets divorced? What if someone cannot pay his or her share of the monthly mortgage payments? All of these issues must be reduced to a written partnership agreement. The time to resolve these issues is when you are talking to each other. DEAR BENNY: My wife and I are considering helping our son buy his first house. He is a recent college graduate with a well-paying professional job. He has been working for about a year, with about four months in his current job. He is living in our home paying some rent while saving the bulk of his paycheck. Given the cost of homes in the area and his lack of credit history, my wife and I figure he would need our help to buy his own home. Do you have any suggestions on how to approach this situation? We are not crazy about the idea of co-signing, as we consider that a risky proposition, but would be more amenable to co-ownership. Even if we agree to co-ownership, how can we protect our interest if the property is not maintained properly? Any tax consequences for us? --Steve DEAR STEVE: Good question and very timely. As you suggest, property values nowadays are out of reach for many young adults. There are several ways to approach this. First, do you have the money to buy the house and then rent it to your son? Every year, you and your wife could gift him up to $24,000 of the value of the house (you can gift up to $12,000 per person tax- and gift-tax free). You will need an attorney to assist you with this arrangement. Next, can you be the bank? Can you lend him all the money and take back financing? He would pay you a fixed interest rate, which could even be greater than you are currently getting from your investments. Finally, you could enter into what is known as a "shared-equity" arrangement. For example, you and your wife would own 50 percent of the property and your son would own the other half. You have to discuss with your attorney how title will be taken. But with a shared-equity arrangement, you both pay your share of the mortgage, taxes and insurance, and your son pays you rent for the half of the house that you own. You need a written agreement, which will spell out all of the terms and conditions regarding the property. You asked about maintaining the property; the agreement will include provisions that should give you the protection you need. There are two benefits for a shared-equity arrangement. Many lenders will give you a loan based on a personal residence rather than as an investment loan. Thus, you would get the benefit of a lower interest rate. Second, while you would have to pay tax on the rental income you receive from your son, you will also be able to deduct for tax purposes your share of the mortgage interest and real estate tax. You should also be able to take depreciation on the portion of the property that you rent to your son. DEAR BENNY: What is a "hard-money lender"? I have read that they are entities that lend money out at 10 to 12 percent interest. They stay in business because the people who borrow their money will pay the higher interest to get the money faster and without a credit check. Do people who buy at foreclosure sales or get involved with short sales use this as a means of financing these properties? Where do I find these "hard-money lenders"? --John DEAR JOHN: There are good and bad hard-money lenders. These lenders usually make short-term, high-interest loans, and often they are "bridge loans. For example, you want to buy a new house but have not yet been able to sell your current one. You have sufficient equity in your house, so you borrow money using your house as collateral. You hope that your house will sell quickly and thus are not concerned that the interest rate is higher than you can get from a commercial lender. Usually, these hard-money lenders rely on the equity in your house rather than on your financial ability to pay. But that's where problems start. Too many lenders make such loans knowing that the borrower will not be able to make the monthly payments, and thus the lender will ultimately foreclose on the property. In effect, these loans are designed to fail. They are called "predatory lenders." You can find hard-money lenders just by typing those words in your favorite Internet search engine. But they should be the "lender of last resort." If you have to rely on a high-interest, short-term loan, maybe you are not ready to make that purchase.
Dos and don'ts of home selling By Dian Hymer An energetic real estate agent can have your home on the market in a day. However, to provide the kind of marketing exposure you need to sell in today's market takes a little longer, unless your home is photo-ready when you list. Ideally, you should start planning for your home sale months before you want your home to be on the market. First, find an agent to represent you. Then, create a game plan together for the premarketing phase of the process. Use your agent as a resource. Walk through your home with your agent to get feedback on work, decluttering, and rearranging that needs to be done before the house is photographed for advertising and shown to prospective buyers. If your agent doesn't have a good eye for design, ask for a recommendation of a staging decorator. HOUSE HUNTING TIP: Preferably, your home should not be submitted to the multiple listing service (MLS) or home-sale Internet sites without photos. Studies have shown that many buyers don't consider a listing that doesn't have photos. Some sellers have presale inspections done to find out if repairs should be made before the property goes on the market. This wasn't as important several years ago when buyers were enthusiastic about the prospect of making money in the residential real estate market. Now buyers are much more cautious, and property condition is a critical variable. One seller did a beautiful job fixing up her house for sale. She ordered a termite report and had some of the work done. But she didn't hire a home inspector to inspect the house. The interior was top-notch. In fact, more money was spent on this than was necessary. The listing agent was hired after the work had been done so the seller didn't benefit from the agent's advice about how much to spend and on what. The house sold with multiple offers. However, the buyer's home inspection report revealed that the house needed a new foundation. Fortunately, there was a backup buyer. But, the price was negotiated down significantly. In hindsight, it would have been better to have fixed the foundation and done a less expensive redo of the interior. A couple sold a similar home. They worked with their agent for months before the house was marketed. They did presale inspections and got estimates for painting, staging, furnace replacement, making necessary structural modifications and fixing miscellaneous defects referenced in the termite report. Then, they prioritized, with input from their agent, and had the most critical repairs and enhancements done before the listing hit the MLS. There was no renegotiation necessary with the buyers after they completed their inspections. Make sure buyers receive copies of proposals and paid invoices for work you did to your home so they know which items in your presale inspection reports have been repaired. Another couple, who plan to move in a few years, decided to get their home ready to sell now. They put in a new master bathroom, refinished floors and plan to replace a dry-rotted deck. They will enjoy the improvements for the remaining years they stay in the house. Most sellers wait until the last minute to get their house ready for sale. It can be very stressful trying to get all the work done in a short time frame. Doing work gradually over time is a saner approach. Sadly, most homes never look as good as they do when they're sold. THE CLOSING: Now is a good time to have work done. A lot of contractors are looking for work. You might receive more competitive bids and be able to have the work done when you want. Dian Hymer is a nationally syndicated real estate columnist
Water conservation tips By Amy Westervelt It seems you can hardly open a newspaper these days without reading the headline "Water is the new oil." But what does that mean exactly? In fact, water shortages may cause more severe problems than oil shortages: our lives literally depend on water, plus there are several alternatives to fuel but none really to water. We can technically "make" more water through techniques like rainwater catchment and desalination, but few individual homeowners have their own catchment tanks and even fewer are likely to rig up their own desalination plant. Even if such things were easy, it would still behoove us all to reduce our water usage first, not only because water is scarce, but also because we could all stand to shave a few dollars off our water bills. With that in mind we compiled the following tips to help you do exactly that. In the Shower Install water-saving shower heads or flow restrictors. Readily available at any hardware or home store, low-flow shower heads deliver 2.5 gallons of water per minute while traditional shower heads use 5 to 7 gallon per minute. Take a Shorter Shower. You don't have to be a hero, just shave off a couple of minutes. According to the EPA, even a one or two minute reduction in shower time can save up to 700 gallons per month. Use the Cold Water. If your shower takes awhile to warm up, catch the cold water in a bucket and use it on your lawn or in the garden. In the Bathroom High Efficiency Toilets. If your toilet is from 1992 or earlier, you probably have an inefficient model that uses between 3.5 to 7 gallons per flush. New and improved high-efficiency models use less than 1.5 gallons per flush - that's 60 to 80 percent less than their less efficient counterparts. According to the EPA, over the course of 10 years, one high-efficiency toilet can save a family of four roughly $1,000 without compromising performance. Displace Water. Here's an old-fashioned trick: Put a plastic bottle or bag weighted with pebbles and filled with water into your toilet tank. Displacing water in this manner allows you to use less water with each flush, saving between 5 and 10 gallons per day. Check for Leaks. To check your toilet for leaks, put dye tablets or food coloring into the tank. If color appears in the bowl without flushing, there's a leak that should be repaired. To check showers and faucets for leaks, read your water meter before and after a two-hour period during which no water is being used. If the meter does not read exactly the same, you probably have a leak. Fixing a leaky toilet saves up to 400 gallons of water per month, while fixing a leaky faucet can save up to 225 gallons per month. Brush and Shave Efficiently. Turn off the water while brushing your teeth or shaving. Fill the bottom of the sink with a few inches of water to rinse your razor. Turning off the water while brushing and shaving saves six gallons of water a day. In the Yard Timing Is Everything. Sprinklers running when it's raining? Not cool. Put your irrigation system on a weather-based schedule. If you set it to water in the early morning, that's even better. Using weather-based irrigation scheduling on a moderate-sized yard can save up to 37 gallons of water per day Maintenance. Make sure a leaky sprinkler head isn't costing you dollars and gallons. Go Native. Use native plants in your landscaping that are adapted to the local weather, and you won't have to water them as much (if at all). Native plants in the yard can reduce residential water use by 20 to 50 percent.
Three ways to reduce capital gains tax By Benny Kass DEAR BENNY: I was told by a prominent accountant that there is a loophole in the law that states that you can be exempt from paying capital gains (if you are in a home less than the two-year period) if there are "unforeseen circumstances" involved. Are you aware of this? Can you doublecheck to make sure? This accountant is well trusted by a lot of businesspeople! At the time I was going through an "unforeseen" divorce. –Patricia DEAR PATRICIA: In general, in order to take advantage of the up-to-$500,000 exclusion of gain ($250,000 if you file a separate tax return), you have to own and live in the house for two out of the five years before it is sold. However, the law does allow a partial exclusion under certain circumstances. There are three "safe harbors" (meaning that if you meet these tests the IRS will not challenge you): (1) change in employment; (2) health; and (3) unforeseen circumstances. In this third category, if you could not have anticipated an event before you purchased your house, you may also be able to claim a partial exclusion. While this is fact-specific -- and in many cases you will have to get a special ruling from the IRS -- there also are some safe harbors that the IRS will recognize. These include: an involuntary conversion of your house; natural or manmade disasters resulting in a casualty to your home; divorce or legal separation; and multiple births resulting from the same pregnancy. It would appear that you may qualify based on your divorce. The exclusion is equal to the number of days of use times the quotient of $500,000 divided by 730 days. Note that 730 days is two full years. If you are single -- or do not file a joint tax return -- change the $500,000 to $250,000. Your accountant knows what he is talking about so you should ask him to do the calculations. However, I do not think he said that you can escape all capital gains tax. DEAR BENNY: What happens to any additional money in a foreclosure action if the highest bidder pays more for the house than the amount that the bank is owed? Is the money given to the person who was foreclosed upon, or does it go to the county or state? –Monique DEAR MONIQUE: It is a rare case that there is any money left over after a foreclosure sale. The lender, their attorneys and the auctioneer (including advertising costs) will get paid out of the price that the property is sold at the sale. The professionals who buy at foreclosure sales will generally want a good deal and will not bid much higher than the initial bid price set by the lender. And in many cases, there is no buyer, and the lender ends up owning the property. However, if there is a surplus, the money goes back to the person whose home has been foreclosed upon. DEAR BENNY: Do you know of any books or brochures that help explain the responsibilities of a condominium developer/owner? We live in an unfinished condo development in St. Louis. There are construction and maintenance issues that the current residents believe are the responsibility of the owner/developer, not the condo association. The items/issues are not covered in the bylaws. –Natalie DEAR NATALIE: There is an organization in Virginia known as the Community Associations Institute. You can find them on the Web at caionline.org [1]. This group has a number of valuable resources that may be helpful to you, including books and publications on a number of community association subjects as well as suggested names of attorneys who may be of assistance in helping you learn your rights. DEAR BENNY: I recently purchased a home and directly next to it is a piece of railroad property that separates it and two other properties. All properties have access to the streets. The railroad took the land by eminent domain many years ago, and the prior owners are now long gone. When I contacted the railroad about purchasing the land they said because they took it they cannot sell it but would be willing to abandon it for a small fee. If I pay this fee how do I get title to this land? It does appear that they took a portion of the lot I already purchased and they said so to me. How do I keep someone else from getting it once abandoned? Also, the portion they took (of my lot) was already being used as a driveway by my lot for at least the last 30 years that I know of, and the other lots appear to also have been abandoned years ago. –Robert DEAR ROBERT: This is a complicated legal issue and you should retain an attorney versed in real estate to assist you. I do not know why they can't just sell you the land, and you should ask them for an explanation. If the property has been abandoned, you may have the right to file a lawsuit claiming adverse possession. This means that you (or your predecessor) have, for the period of years authorized by your state statute, openly, notoriously and hostilely used the property. As I stated, these are technical legal issues, which must be reviewed by your attorney. If, in fact, the railroad company is willing to state in writing that they have abandoned the property, you may also be able to file what is known as a "quiet title" action, asking a judge to review the facts and determine who owns the property. DEAR BENNY: I have just found out that my neighbor's septic tank leach line and leach pit is on my property. I was going to buy the property when it was recently up for sale, but I was not given the chance. I did file a lawsuit against the seller. The contract purchaser has not yet taken title to the property. Do I have a legal claim against not just the seller but the buyer if he does indeed go to closing and take possession of the property? I am hoping that after the buyer learns that there is a lawsuit on the property, he will back off and not buy it. What happens in a case like this? –Leo DEAR LEO: You have filed a lawsuit that should put the title (escrow) company on notice. You or your attorney should contact both the title company as well as the buyer and advise them of the lawsuit. There is a concept in law called "lis pendens," meaning that litigation is pending. Ask your attorney if he is able to file this lis pendens document in your case and have it recorded among the land records on your neighbor's property. Clearly, the title (escrow) company will see that there is a pending lawsuit when it searches the title for the buyer. The buyer would be foolish to buy the property until your lawsuit is resolved. I would also try to reach an amicable arrangement with the buyer. After all, if he does buy the property, he will be your next-door neighbor. DEAR BENNY: How can I get a title company to release funds being held in an escrow account for a unreleased deed of trust for a loan 20 years ago from a bank that no longer exists? --C.R. DEAR C.R.: State law differs on how old a deed of trust (mortgage) has to be before it will no longer have any force and effect. Are you sure that the title company still holds the funds in escrow and is still in existence? If you are sure that the money is still there, you can file a suit for quiet title, asking the judge to cancel the note and deed of trust and order the release of the escrowed funds. However, the judge will carefully review the facts to make a decision as to who is the rightful owner of these escrowed funds. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland.
Staging tips that sell By Dian Hymer Home prices have fallen and many homeowners are mortgaged to the hilt. This makes it difficult for some sellers to justify spending a penny to get their home ready for the market. However, the home-sale market also is very competitive in areas that are still bloated with inventory of unsold homes. When buyers have a choice, they pick the best. They want a home at a good price, in a good location, and one that they can move right into without having to do any work. Investor buyers are snapping up foreclosures at an increased pace. These homes are usually not in good condition. And, in some cases they are selling for half of what they sold for four or five years ago. If you're a seller who's selling in a market where there is competition from distressed-sale foreclosures or from other sellers who are offering their homes in top condition, you will be at a disadvantage if you don't fix up your home before selling. It will take longer for you to sell and you could sell for a lot less than if you had invested time and money in properly preparing your home for sale. There is a lot you can do to get your home ready that doesn't cost much money -- it just takes time and hard work. For instance, most people have too many personal possessions in their homes, particularly if they have lived there for years. Decluttering benefits you in a couple of ways. You won't pay to move things you no longer want or need. More importantly, buyers will be better able to see what your home has to offer instead of focusing on your things. HOUSE HUNTING TIP: It's worthwhile to consider hiring a home staging decorator. Some sellers only need a consultation of one to two hours. Ask the stager what you should keep and what should be moved out before you start showing the house. Also, get recommendations for furniture and artwork arrangement. The way you live in your house is not necessarily the best way to show it off to prospective buyers. For example, many homeowners place their sofa across from the fireplace, which can mean that a buyer is greeted by the back of the sofa when they walk into the room. It stops them in their tracks. If the sofa is moved to one side and two chairs are placed opposite the sofa, the room will appear more open and the traffic flow won't be obstructed. Sometimes the scale of your furniture isn't right for showing your home to its best advantage. Recently, buyers who had been looking for more than a year for the right house saw one that they thought could be it. However, they were concerned that the bedrooms were too small. They had the good sense to go home and get a tape measure. They came back to the house and measured the rooms they were concerned about. It turns out they were larger than they appeared. The house was furnished with beautiful pieces, but they were large and made some rooms appear smaller than they actually were. Today's buyers have a lot to think about when they buy a home. Are they buying at the right price and time? Will the house work for the long term? Can they qualify for and afford the financing they need? It helps the process along if you can create an ambiance that enables a buyer to fall in love on the first visit. THE CLOSING: You need to create the wow factor so that when buyers walk in they say, "I better act quickly. This house won't be on the market for long."
Despite lower jumbo rates, refi may be unwise By Dian Hymer Borrowers assumed when the conforming loan limit increased from $417,000 to $729,750 in high-priced areas like New York City, Los Angeles and the San Francisco Bay Area that lower rates on jumbo financing would follow. Unfortunately, the conforming jumbos (also called jumbo lights) were initially priced considerably higher than the conventional conforming loans. For example, on May 2, 2008, a $417,000 conforming loan was available with a 5.38 percent interest rate and one point. Points is the term lenders use for the loan origination fee. One point is equal to 1 percent of the loan amount. At the same time, a jumbo light was priced around 6.25 percent and one point. Mortgages are offered with or without points. The mortgage interest rate will be about one quarter percent lower if borrowers pay one point than it would be if they paid no points. On May 8, pricing on the jumbo light conforming mortgages was brought in line with the conventional conforming loans. This is good news for both home buyers and homeowners who need to refinance. A 30-year jumbo light fixed mortgage was offered at 5.625 percent and one point and 5.875 percent with no points on May 9. Conforming loans in amounts to $417,000 were offered for the same interest rate, with a 1/4 or 3/8 percent discount on the origination fee. Nonconforming jumbo financing is still running about 7 percent. With the recent rate reduction on conforming jumbos, borrowers searching for larger mortgages will be able to achieve a lower blended rate by combining a $729,750 conforming first mortgage with a home equity loan of up to $500,000 with an interest rate as low as 5 1/8 percent. Homeowners who purchased four to five years ago using a fixed ARM mortgage product have been worried about refinancing in today's difficult financing arena. It was anticipated that when the mortgage reset from fixed to adjustable, much higher mortgage payments would follow. Fixed ARMs are mortgages that have a fixed interest rate for a period of time (often three, five, seven or 10 years). At the end of this period, the loan converts to an adjustable-rate mortgage (ARM) with an interest rate and monthly payments that fluctuate. ARMs are tied to an index, which is a cost of funds. A margin -- usually in the 2-6 range -- is added to the index rate to determine the current mortgage rate. HOUSE HUNTING TIP: Many fixed ARMs are tied to either a Treasury or London Interbank (LIBOR) index. Thanks to the Fed's rate-cutting campaign, these indices are relatively low today. You may find that it makes more sense financially to keep your mortgage for now even though it converts from fixed to adjustable, particularly if you plan to move soon. On May 8, the 1-year LIBOR rate was 2.99 percent. If your mortgage reset on May 8 to an ARM that was tied to the 1-year LIBOR and had a 2 percent margin, your interest rate would have adjusted to 4.99 percent. To find out if it makes sense to refinance or not, look at your note. It spells out the terms of the loan such as the interest-rate adjustable schedule, the index that your interest rate is tied to and the margin. Your lender can provide you with a copy of the note. There are risks involved in waiting to refinance. If market values decline, your home might not appraise for enough at a later date to pay off your existing loan balance. Also, the Fed is watchful for any indication that inflation is getting out of hand. THE CLOSING: If inflation fears rise, the Fed will stop lowering interest rates, and could start increasing them again.
Buying an existing home that’s “green” By Michelle D. Alderson With rising energy costs and growing awareness – and availability – of environmentally friendly products, it's no wonder that interest in purchasing green homes is rising. Green remodels on existing homes both save the environment and save homeowners money on monthly bills. As green home remodeling becomes more abundant, so does the demand to purchase these homes. This increased interest in existing green homes has created a need to educate buyers on what is really considered "green." Over the past several years, many organizations such as Build It Green, (http://www.builditgreen.org), an independent nonprofit organization, have been created to offer a third-party unbiased evaluation. Because of the growing desire to purchase existing green homes, states Bruce Mast, development director at Build it Green, "the Real Estate Council has been setting the stage to incorporate GreenPoint Rated results into MLS listings in several areas." What is GreenPoint Rated? Mast explains that, "GreenPoint Rated provides an independent assessment of a home across five categories: community design, energy efficiency, indoor air quality/health, resource conservation, and water conservation." Other organizations that have similar rating systems for homebuyers include the U.S. Green Building Council (http://www.usgbc.org), a non-profit community; and Green Globes (http://www.greenglobes.com), an assessment and rating system. The USGBC has created the REGREEN (http://www.greenhomeguide.org/guide_for_green_renovation/index.html) program in partnership with the American Society of Interior Designers' Foundation. Working with LEEDs for Homes, a LEED (Leadership in Energy and Environmental Design) certification offers an unbiased green home inspection for possible buyers. In addition, Green Globes boasts a rating system that has an easy-to-use online questionnaire for a minimal cost. Once the questionnaire is completed, the user automatically receives a report. All three organizations have online tools to answer questions and guide interested parties through the certification process. Part of this process includes understanding what different elements make a home green. The elements can range from simple re-landscaping to more complicated structure updates. But all share a common goal: to help preserve the planet and save on energy costs. The following are just a few examples of "greening" a home: • Buying ENERGY STAR (http://www.energystar.gov) appliances is the most popular way to go green. These EPA- and Department of Energy- approved appliances use less energy than conventional appliances. • Another easy way to green a home is by replacing standard light bulbs with energy-saving CFLs (Compact Fluorescent Light Bulbs), (http://www.energystar.gov/index.cfm?c=cfls.pr_cfls) which can be found at most supermarkets and drugstores. • Using VOC (volatile organic compounds) (http://www.epa.gov/iaq/voc.html) also receives green certification recognition. VOC paint is just one example of how this compound is used. • Installing low-flush toilets, solar paneling, and low-emittance windows helps lower water and energy bills. • Planting native vegetation and drought-resistant landscaping can save on water usage as well. When thinking about purchasing a green home, a buyer might wonder if it's really worth all the effort and cost. Aside from saving the planet, green remodels on existing homes have proven to be cost-efficient. Veronica Cortes, a homeowner in Northern California recently did an entire green remodel on her 1957 ranch-style home. Currently she pays $30 per month on average for her energy bill after installing solar paneling. In the winter months, her neighbors pay anywhere from $276 to $500. Cortes says all the heartaches of a remodel were worth it: "Our house nurtures us in ways that it never did before: … the place is flexible and its spaces can accommodate different uses depending on our needs, [and] it's cheap to run."
Desperate plan to keep home after falling behind on property taxes Why loaning father-in-law money is better than him quitclaiming ownership By Ilyce R. Glink and Samuel J. Tamkin Q: My father-in-law owns property with his sister. He lives on the property, but she doesn't. They each own an equal share of the property, but he now can't afford to pay the expenses. He wants to quitclaim his half of the property to me and my wife, and I'll take over his property taxes plus pay all past-due taxes. Do I need a lawyer to help fill out the forms or is this something we can do ourselves. Also, I should tell you that the property is mortgage-free. A: You certainly can try to do it yourself, but you would probably be wise to talk with a real estate attorney to know what you are getting into. While paying past-due real estate taxes might sound simple, in some cases it can be cumbersome. Also, if your father-in-law has paid all the expenses on the property and has lived there, does his sister still want to own her share of the property? If she dies, her share of the property will go to whomever she has listed in her will. If you or your wife are listed as the heirs to her share of the property, that will help. But if you are not named the heir of the property and there are other siblings or relatives, you should know that you may be setting yourself for a big problem by taking over your father's share of the property. You should sit down with your father-in-law and his sister to discuss the property and what they really want to do with it. There are other ways to handle this situation other than with a quitclaim deed. If your father-in-law still wants to or needs to live on the property, you may want to help him with his expenses or even loan him money for the payment of those expenses. He and his sister can then give you a mortgage in return for the loan. You would protect your money and your father-in-law could continue to live on the property. In many states if you own the property and live there as your primary residence, you get substantial tax benefits, such as the homestead exemption. You might lose these benefits if your father is no longer on title. Furthermore, if you take title of the property now by a quitclaim deed, your father-in-law would effectively be gifting you the property prior to his death. The value of the gift would be your father-in-law's share of the value of the property when he purchased it plus any improvements made on the property. If the property has appreciated in value substantially, you will end up paying taxes on the appreciation. If you and your wife were to inherit his share of the property, you would inherit the property at its value at the time of your father-in-law's death. There is more to your question than just the transfer of the title to you. There are tax consequences and estate-planning issues you should consider. The best thing you can do is to consult with an estate attorney or real estate attorney who can help you think through these issues and decide what course of action to take. Q: I hired a builder to build a custom home. We had ordered some upgrades and two weeks prior to closing I asked the builder for the final price of the home to secure financing. He gave me the number and said we would be fine. So we closed with that purchase price. Two weeks later, he said some more bills had come in and that we owe him an additional $14,000. Is this my responsibility or is he out of luck because we have already closed? A: There are multiple variables that would determine whether you owe the builder the amount he now claims. If the builder made an honest mistake and you recognize that he made this mistake, it would seem unfair to deprive him of the money he is owed. However, your purchase contract should govern the transaction. Some contracts have language in them that would permit the parties to revisit an error like the one you are describing. If the contract has no such language, the builder may be out of luck. The price he set at closing would be the price for the sale. First, you need to determine whether the builder is right about the numbers and whether he may be entitled to reimbursement. If you think he is, you should sit down, read over the contract, then talk to a real estate attorney and decide whether you will use the terms of the contract to shield yourself from paying the builder. If you clearly recognize that the builder is owed the money, you might decide to pay him anyway. It would be a good-faith gesture, and in so doing you might be able to get the builder to extend the warranty on the home or get something else in return.
Don't fix house before you own it By Dian Hymer Recently, a couple buying a home in the desirable Upper Rockridge neighborhood in Oakland, Calif., asked the seller if they could have some work done to the property before closing. Ordinarily, this is something that real estate agents discourage for a number of reasons. However, in this case, the buyers wanted to have a chemical treatment done that was recommended in the wood pest inspection report. They have a baby and didn't want to risk exposing their young child to chemicals by having the work done while they were living there. The sellers were already out of the house, so they agreed to let the buyers have the work done early. An amendment to the contract was drawn up stipulating that the buyers could have the work done before closing, at their expense. The buyers had purchased the property in its "as is" condition; the sellers weren't required to have this work done. The buyers' loan was formally approved; all contract contingencies had been removed. The work was scheduled for one week before closing. The risk factor in the above scenario was minimal. The work was being done by the sellers' pest company. The sellers knew the contractor and trusted that the work would be done properly. The cost of the work was $1,100 -- not an insignificant amount, but not a huge amount either. The deal was firm and the buyers had made a considerable good faith deposit that would be at risk if they backed out at the last minute. In a worst-case scenario, if the buyers defaulted and the sellers had to remarket the property, it would be in better condition that it was the first time around. HOUSE HUNTING TIP: In most cases, it's risky for buyers to have work done on a property they don't own. If the deal falls apart, the buyers have paid to improve someone else's property. The sellers could be left with a job that's half completed, or one that's done badly, which will need to be corrected before the house can go back on the market. It might seem like a good idea to have work done before closing, particularly if the house is vacant and no one will be disturbed by work in progress. Refinishing hardwood floors and interior painting in particular are jobs best done when no one's around. From the buyer's standpoint, you could be out a sizable amount of money if for some reason the transaction never closes. Usually, neither buyer nor seller is happy when a deal collapses. Chances are slim that the seller will be inclined to reimburse you for your costs. Then there are concerns about such issues as to who's responsible if someone is hurt on the property during the course of the job. And, who pays for damage inadvertently caused by one of the contractors? Some contractors won't do work on a property for someone who isn't an owner. In the above example, the contractor required that the work be authorized and scheduled by the property owner -- not the buyer -- even though the buyer was paying for the job. The sellers have potentially more to lose by letting a buyer do work before close. If the buyer doesn't close, they could be left with a mess to clean up before they can resell the property. This could cost a lot of time and money, not to mention inconvenience. THE CLOSING: A better solution to buyers doing work before they own a home is for the buyers to delay their move-in date and schedule fix-up work to start the day the transaction closes.
Great time to buy and sell! Four reasons why it is a good time to buy? By Warren Nass 12/10/2007 1. Prices are lower now due to a lot of foreclosures, short sales and bank owned properties. If you sell your home for a low price, there is a good chance that you will buy a home at a low price too. It is all relative. 2. Interest rates are low. 3. There are many properties to choose from. 4. By using Warren Nass, you would have expert, professional representation to guide you through the whole process.
Will shopping multiple lenders hurt credit? By Dian Hymer It's not uncommon for home buyers to talk with several mortgage brokers or lenders to compare loan products and interest rates. One buyer who shopped around was scolded by a mortgage broker when he found out she was talking to more than one broker. He told her that she was ruining her credit score by allowing multiple credit inquiries. Too many credit inquiries can negatively affect your credit score, but you can control the damage. And, credit inquires make up a relatively small part of your credit score. For example, the FICO credit score from Fair Isaac Corp. that is widely used by mortgage companies for qualifying borrowers uses five types of information to calculate a credit score. Each type counts as a percentage of the total credit score. They are: payment history (35 percent); amounts owed (30 percent); length of credit history (15 percent); new credit (10 percent); and types of credit in use (10 percent). Credit inquiries fall into the "new credit" category, which accounts for less than 10 percent of your credit score. Only voluntary inquiries are taken into account, such as the inquiries made at your request when you shop loan rates. Loan agents usually need to know your credit score before they can quote you an interest rate. The FICO credit-scoring model ignores all mortgage inquiries made within the last 30 days, so they will have no impact on your credit score. An older version of the scoring formula uses a 14-day time span. A newer version uses 45 days. The lender decides which version of the scoring model it wants to use. There's no need to panic if you don't line up your mortgage in 30 days. The scoring formula looks for mortgage inquiries older than 30 days. It counts all the mortgage inquiries within a certain period, which varies depending on the scoring model used, as one inquiry. For some borrowers, one inquiry might not affect their credit score at all. If it did, it should be less than five points off your score. Let's say you talked to four lenders during a week in September. You authorized each to check your credit. Then you postponed buying until November, when you shopped rates again within 30 days prior to closing the sale. The most recent credit inquiries wouldn't affect your credit score. The four that were made in September would count as one inquiry. HOUSE HUNTING TIP: There’s a wide range of rates being quoted. This is a time when it could pay off to shop carefully for the best rate and mortgage product to suit your needs. For example, one mortgage broker quoted 6.75 percent on a conforming loan (to $417,000) for a 5-year, interest-only, adjustable-rate mortgage (ARM) with no points. (One point -- a loan origination fee -- is equal to 1 percent of the mortgage amount). Another broker offered a 5-year ARM that is fixed for the first five years at 5 7/8 percent with no points. And, this rate was available for loan amounts up to $650,000. Nonconforming jumbo financing for mortgage amounts over $1 million is still high -- in the 8 to 9 percent range. Some buyers are achieving a lower blended rate by combining a conforming jumbo (to $729,750) with a second loan. Borrowers who have good credit and an established banking relationship with a lender might be able to arrange a preferential rate. Before you authorize a credit check, find out what kinds of mortgage products a lender offers and provide a brief summary of your financial situation. Try to focus your rate shopping within a 30-day time period. THE CLOSING: Don't authorize a credit check until you've narrowed your search down to likely prospects.
Sellers: Don't withhold bad inspection report By Dian_Hymer Inspections are an important part of home buying, but the inspection process can be nerve-racking for both buyers and sellers. Both parties want the deal to go through without a hitch. However, sometimes problems surface that the buyers weren't aware of when they entered into contract. All houses have defects, even new ones. So it should come as no surprise when defects are discovered. The pertinent issues are: Is there a problem? How serious is the problem? How much will it cost to repair? A home inspector may have a contractor's license. But, few inspectors also are engineers, architects, and plumbing, heating, roofing, wood pest (termite) and drainage contractors. Nor are they pool, spa, sprinkler or security-alarm specialists. For this reason, most home inspection reports are loaded with disclaimers and recommendations to contact the appropriate specialist to evaluate the severity of a problem. HOUSE HUNTING TIP: It's highly recommended that buyers follow up with further inspections, and get estimates to repair defects that are a concern before removing an inspection contingency. An inspection contingency protects the buyers, but only if they carry through and complete necessary inspections. Don't be surprised if a second opinion confuses rather than clarifies an issue. For example, a home inspector might be concerned about the internal mechanics of an older furnace. And, he may not have the expertise necessary to say with confidence that there is no problem. So, he recommends that the buyers consult with a licensed heating contractor. Just because an inspector suspects there might be a problem doesn't mean that one exists. Several years ago, buyers of an older home in the Oakland Hills east of San Francisco were advised to have a heating contractor check the furnace because the home inspector thought it might need replacing for safety reasons. A furnace with a cracked heat exchanger leaks carbon monoxide fumes that can be deadly. The buyers called in a heating contractor who inspected the furnace and said that it needed replacing. The buyers were disappointed, but wanted to continue with the sale. So they asked the sellers to share in the expense of a new furnace. The sellers weren't convinced that the furnace needed replacing. And they didn't want to contribute to the cost of a new one if it wasn't necessary. They contacted a second reputable furnace contractor who inspected the furnace and said it was fine and didn't need replacing. To resolve the dispute, the buyers and sellers agreed to call in an inspector from the local utility company who would have red-tagged the furnace and put it out of commission if it was dangerous. The verdict was that the furnace was fine and had years of life left. More and more, sellers are having their homes inspected by professionals before putting their homes on the market. This is done so that sellers have an opportunity to make repairs before marketing or for disclosure purposes. It is risky for sellers to hide a bad report from buyers. There have been cases where sellers chose not to give the buyers a report they didn't like. Later, the buyers coincidentally called in the same contractor for an opinion who informed the buyers that they had already done a report on the house for the sellers. Lawsuits have resulted from sellers withholding detrimental reports, although disclosure laws vary from state to state. Check with a knowledgeable real estate attorney for answers to questions about a seller's disclosure obligations. THE CLOSING: Sellers who aren't pleased with a report should consider getting a second opinion and disclose both reports to the buyers.
Sellers list right to avoid price reductions By Dian Hymer In most areas of the country, 2007 marked a change in the residential home-sale market. Buyers gained clout for the first time in over a decade. Inventories of homes for sale grew to record levels in some places. Price reductions, which carried a negative stigma when listings were easy to sell, came to be seen as a necessary part of the home-sale process. That is not to say that price reductions are a good thing. They are not. The initial marketing effort is a prime opportunity to attract attention to a new listing. When the merchandising and pricing are on target, a timely sale occurs. If the opportunity is missed either due to poor planning and preparation, or to a price that's too high for the market, the only hope for success is to lower the price quickly to an acceptable level. Many sellers balk at the notion of reducing the list price soon after the property is listed. However, the timing of a price reduction is critical. If you wait too long, hoping for the impossible, it could be difficult to kindle enthusiasm for the property. This is particularly so in an area where there are a lot of new homes coming on the market and where the sales volume is low. This means that the competition from other listings grows as you wait for the unlikely: a knight in shining armor to appear and pay the asking price or more. HOME SELLER TIP: The best time to make a price reduction is as soon as you discover that your home is priced too high for the market. Waiting too long to lower the price can cost money in the long run if the market is moving lower. Reducing too little, too late can lead to a series of further reductions and ultimately to a lower selling price. Ideally, you should avoid such an unpleasant downward spiral. The goal is to sell without having to reduce the price. To do this, you must accept current market conditions. You also need to recognize that no matter how wonderful you think your home is a buyer will find fault with it. To be a successful seller in this market -- and to some extent in any market -- requires separating pride of ownership in the property from the task as hand, which is to sell for the highest price possible. It's not easy for most sellers to put their emotional feelings about their home on ice. It helps to stop thinking of the property as "home" and to start looking at it as a commodity you want to sell. Before listing a property for sale, sellers should seriously consider their motivation. Successful sellers in today's more difficult marketplaces have a compelling need to sell. They don't simply want to sell if someone will make it worth their while. Many of today's prospective home buyers have a wait-and-see attitude about the market. They are looking, but it will take a fabulous home offered at a great price before they'll commit to buy. Sellers should also check out the temperature of the local market. Residential real estate is a localized business. Even if you live in a city where prices are down, that might not be the case in your neighborhood. The supply of homes for sale and demand for housing are critical variables, as is the local employment picture. There is a common theme to the listings that sell well now. These listings look great, are in good condition, don't have incurable defects and are priced right for the market. THE CLOSING: Being realistic about what to expect is half the battle.
Buying home for parents comes with risks Finances, credit at mercy of cash-strapped relatives By Ilyce R. Glink Q: I have a question on behalf of my brother-in-law. His mother and stepfather have asked him to purchase a home for them in his name since they do not qualify. My brother-in-law has a good credit score and credit history. The reason he hasn't purchased a home himself is because he is in the military. He is constantly being transferred from base to base, if not to Iraq. I advised him to purchase a home for himself and rent it out as an investment since he does have the resources. His mother and stepfather are looking to purchase a home for almost $500,000 dollars. They claim they will transfer the property to their name within two years, and get a mortgage at that time. I want to know if it is possible for them to qualify to take over a mortgage of that amount in two years' time since they are not even close to qualifying right now. Also what would be the advantages and/or disadvantages for my brother-in-law if he purchased a home entirely under his name but then let someone else use it. A: It takes more than good credit to purchase a $500,000 house. You also need to show that you can afford to make the payments on this property. If your brother-in-law has good credit, is prepared to put down a substantial amount of cash on the property, and has the income to qualify for the loan, he may be able to buy the home for his mother and stepfather. It's a very different question, whether his mother and stepfather will develop the credit and income to qualify for the home if they can't qualify now. A conventional lender would allow him to borrow three or maybe four times his gross annual income, and that's with a 20 percent down payment. He would need $100,000 in cash, and then be able to afford a monthly mortgage payment of $2,528 on a 30-year fixed-rate loan. If he did an interest-only loan, he'd pay around $2,100 per month. That's fairly hefty mortgage for anyone to shoulder. Of course, if he has saved $200,000 or more in cash, it changes the equation. Assuming he can afford to buy a home at this price point, let's talk about the advantages (of which there are few) and disadvantages (of which there are many) of this kind of arrangement. As far as I can see, the only advantage is the emotional quotient of the transaction. He may feel it's worth a lot to help them out in this situation. As for disadvantages, your brother-in-law is putting his credit and cash on the line for his parents. I assume they'll make the mortgage, taxes and insurance payments each month, plus do the required maintenance and upkeep of the property. If not, your brother-in-law could find his good credit wiped out. That would prevent him from buying his own property when he is ready. His credit will be tied up with this $500,000 home for a long time to come. Leaving aside the issue of being compensated for his investment and trouble, it's important that he make sure he's not hurt in doing his relatives this big favor. What else could he do? I think your advice is sound: If his in-laws are looking for a place to live, your brother-in-law should purchase something he can afford particularly if the home his mom and stepfather want may be beyond his reach and rent it to them. If, in time, they're able to make the payments, they can purchase the house from him down the road with a conventional mortgage. Q: I signed a quitclaim when I purchased my first new home because I am partnered with a woman. I was told this was a way that she could have something to hold on to in case we were ever to break up. I just want to know if this means I no longer have ownership in our property. I know it's pretty late in the game to be asking this question but could you please help me understand if I still have ownership in our home? Thank you. A: I'm not sure what you've done, so it's tough to give you advice. But, I'll make an educated guess. The quitclaim deed you signed, if executed correctly, would have given away some or all of your ownership interest in the property. You did not add your partner to the mortgage, however, which you are still obligated to pay in full. How much did you give away? You might have given your partner some or all of the property. It's hard to know without seeing the actual document you signed. (You may have also violated your mortgage obligation to the lender if you gave away all of the property.) What I'm unclear about is why you did this. You clearly wanted to protect your partner, but there are easier and smarter ways to do it. If you were worried about her surviving you after your death, you might have purchased an inexpensive term life insurance policy. For a few hundred dollars a year, you could have named her the beneficiary of a policy worth up to $500,000. You could have also written a will naming her as owner of the property after your death. Once you're gone, she would have had ownership of the property and a tidy amount of cash to help her make the payments. If you wanted to give her something in case you broke up, it would have been easier to retain full ownership of the property and simply sell the house down the line or take out a home equity loan and give her cash. By giving her some or all of the property, you've lost control. If you break up, she may be able to force you out of the home and you may still have to make the payments on the mortgage, or risk ruining your credit. This is a lot of control you've handed over. What I'd like you to do now is gather up your documents and make an appointment with a very good estate attorney. You can get a referral to someone through your local bar association. The estate attorney might have other suggestions for your situation. The suggestions may include having wills and even a partnership agreement for the home and other joint interests the two of you may have. You need to understand what you've done, what the potential ramifications of your actions are, and what you can do now to make the best of this situation. You may be able to help your partner and yourself out in different ways by structuring the ownership of your home by other ways.
Staging your Home Getting your home ready for sale By Warren Nass Staging is one of the best ways to get top dollar for your home as you prepare it for sale. This is something you can do on your own or hire a professional. Homes that are staged correctly usually sell faster and for more money! Staging costs less than your first price reduction. Staged homes sell 50% faster than non-staged homes and can increase prices from 2 to 10% in a moderate market. This is because staging sets the scene throughout the house to create immediate buyer interest in your property. It gives the buyer the sense that less will have to be repaired because it appears to be in good condition. This will then lead to your home selling for the highest possible price in today's market. Hiring a professional stager trained in interior design and feng shui is an option. Feng shui (pronounced "fung shway") is the ancient Chinese practice of placement and arrangement of space to achieve harmony with the environment. The literal translation is "wind and water." Feng shui is not a decorating style. and a discipline whose guidelines are compatible with many different decorating styles. Hiring a professional could be expensive but may lead to larger profits. Trying it on your own with the help of your Realtor might work also. With all of the television shows such as, “Design on a Dime,” “Design to Sell,” “Million Dollar Listing,” etc, you can get a lot of ideas for free. Drop by all of the local model homes to see how they decorate a home to sell. The builder paid a lot of money to a designer, so use their ideas. It is necessary to make the home a little less personal. The focus should be on the house and its best features. The buyer should not leave the home remembering the picture of the cute baby on the wall instead of how spacious the living room was. The buyer should walk in and feel comfortable and be able to place their furniture in the house. Furniture placement may make a room look smaller than it really is. Lighting is important too. The home should show bright and airy. Remove unnecessary window coverings and items that date the home. If the room looks like it needs painting, paint it. The less the buyer feels he has to repair or remodel, the more a buyer will be willing to pay for the home. Do not take offense to those who offer ideas to get the home SOLD. In today's changing market it is necessary to try different things until your home has sold and closed escrow. Remember, the way you live in your home, and the way you market and sell your house are two different things. Contributed by Warren Nass at Century 21 Westworld Realty located in La Mirada at 15058 Rosecrans Avenue 714-606-0329. Selling Real Estate full-time in La Mirada and the surrounding areas since 1992. Please call Warren with any questions about this article or Real Estate in general. Search for your new home at warren4realestate.com.
Homeowner's insurance hang-ups By Dian Hymer After paying out huge settlements to clean up mold damage, homeowner insurers pulled back from issuing new policies on homes where a water damage claim had been made within the last five years. They also minimized their exposure to mold claims by excluding mold coverage altogether or limiting their coverage. Currently a common cap on such claims is $5,000, although this can vary from one company to the next. Some insurers are less concerned about water damage claims today. However, they are concerned about the profile of the insured. Homeowner insurers want to insure people who don't have a history of making claims. Some companies won't write a new insurance policy for someone who made a claim within the last three years. Insurer guidelines for coverage vary from company to company. And, individual companies' policies change over time depending on their loss history and the marketplace. Some homeowner's insurance companies may cease writing policies altogether for new customers in certain states or in specific areas within states. However, those companies may write new policies for current policyholders. If your house is insured with one of the companies that is not writing new policies, and you sell it and buy another home in the area, that company may write a homeowner's policy for you on your next home as long as the house meets certain criteria, for example. HOUSE HUNTING TIP: More and more homeowners are selling first and renting for a time before buying their next home. In this case, if the homeowner is insured with a company that isn't writing new business in your state, it would be prudent to carry renter's insurance through this company. The company would then be likely to cover your next home because you have been a continuous client. For this strategy to work there can't be a break in coverage. Renters who have never owned a home and who are having trouble finding homeowner's insurance should check with their renter's insurance company. This company will often write a homeowner's policy for an existing renter's insurance customer. If you made a claim within the last three years with your existing company and you buy another house, that company will probably insure you on the new home as long as coverage is continuous. However, if you made two or more claims during the last three years, you could be denied coverage. Or, there might be a surcharge. This is usually determined on a case-by-case basis, with leeway given to long-term customers. Even though you're gold-plated in terms of insurability, an insurer might turn you down because of the property. For example, it can be difficult to insure older homes with some companies. Outdated plumbing, electrical, heating and roof are red flags. Some companies won't insure houses with wood siding in fire-prone areas. There is flexibility with some insurers who will insure a home with older wiring as long as the buyer agrees to upgrade the electrical within a month or so of closing. When you're shopping for homeowner's insurance, make sure to compare like-kind coverage. Some companies will pay only 100 percent of the coverage amount in the case of a total loss. Others will pay 120 to 200 percent of the coverage amount. Find out what's excluded from coverage. With older homes, it's a good idea to pay for a code upgrade rider. This doesn't cost much when you consider what it would cost to upgrade an older home to meet current code requirements in case of a catastrophic loss. THE CLOSING: Because it's risky to make a lot of claims, consider increasing the deductible. This will reduce your annual insurance premiums. Dian Hymer is a nationally syndicated real estate columnist and author.
Facing foreclosure: When must I move out? By Benny Kass DEAR BENNY: I am one of the unfortunate who has to deal with eventual foreclosure. Can you tell me how long I can remain in my home until legally having to vacate? –Constance DEAR CONSTANCE: Before the foreclose takes place, please talk to your lender -- and not just a low-level loan officer but someone high in the company. With all the foreclosures taking place throughout the country, lenders (at least the legitimate ones) do not want yet another foreclosure on their books. If no one buys at the foreclosure sale, the lender will be stuck with the house and will have to pay real estate taxes and insurance. Also, check with your county and state governments. Many governments now have programs to assist borrowers who are in trouble, so you may be able to save your house. How long do you have to stay in the house if it is foreclosed? Technically, you have to move out when the house is sold. But again, talk with your lender. They may be willing to let you stay for a period of time, if you can pay some rent. Lenders do not want houses to be vacant. If the home is scheduled for foreclosure, I would attend that sale. Find out who bought it -- it may be the lender itself if no one bids. Then discuss your situation with the buyer; once again, you may be able to strike a deal with that buyer. To my knowledge, although you have to move out, it has been my experience that many homeowners whose property has been foreclosed upon just stay in the house until eviction proceedings are brought, and then they move out. DEAR BENNY: I live in North Carolina and my neighbor recently planted trees, two of which are on my property. Where do I stand? –Brian DEAR BRIAN: I can't give you advice about North Carolina law because I don't practice law in that state. However, I suggest that you arrange to have a survey made of your property so that you will know exactly where your property line is. If your neighbor's trees are even one inch on your property, I would try to meet with your neighbor and discuss the situation with him or her. Be friendly; perhaps you can invite the neighbor over for coffee. If the trees are on your property, you have the absolute right to demand that they be removed. If you do not object to those trees, then perhaps you can reach an agreement that the neighbor will maintain the trees. And while it may be a very small amount of money, you may want to ask your neighbor to pay the percentage of your real estate tax on which the trees stand on your property. Finally, depending on your own state law, so long as you will not injure anyone or cause any property damage, you should have the right to cut down the trees if they are on your property. DEAR BENNY: I'm a 66-year-old female living in California. I'm divorced and own three homes -- two rentals and one primary residence. I plan to leave my children an equal interest in my real estate holdings upon my demise. I do not have any other investments, savings, IRAs or holdings worth mentioning. I need to generate a living trust, but keep postponing it due to the cost. I ran a search online and saw that one can order the necessary paperwork for the price of $149. I am a REALTOR® (retired) and would be able to obtain prelims on my properties myself. What do you think? Would it be binding? –Marianne DEAR MARIANNE: I cannot recommend that you use what is generally referred to as "off the shelf" legal documents that you can get on the Internet. These documents are general in nature, and may not be specific for your needs. Since you have the ability to assist a lawyer, I am sure that you can negotiate the attorney's fee. But I strongly recommend that you consult a local attorney who understands real estate and living trusts. DEAR BENNY: I presently have a Starker (Section 1031) exchange with my brothers invested in a rental property. We had this set up for about five years. If we sell the whole property, can it be divided into three shares with each one of us owning one share for another exchange? It is hard to work with three owners when we live in different areas of the country. –Marilyn DEAR MARILYN: If the property is in the name of a partnership -- instead of in your three individual names -- then when the property is sold, you either have to pay the appropriate capital gains tax or do another exchange. The new property (called the replacement property) must be in the name of the partnership. If, on the other hand, the property is titled in your individual names, then when it is sold, each of you has the right to enter into another exchange on your own (or pay the tax and keep the balance of one-third of the sales proceeds). If the property is in the name of a partnership, here's a tip: In the year before the property is sold, formally dissolve the partnership and put the property in the name of the three of you. Then, next year, you each have the right to do with your one-third as you so desire. DEAR BENNY: I purchased a townhouse in my brother's name until I resolved my financial difficulties. He already owns several properties. I am not really benefitting from this transaction. My intent is to have him transfer ownership to me this summer. How do I get my name on the deed and the mortgage? –Janet DEAR JANET: Your brother will have to deed the property to you. You and your brother will have to explain the situation with the current mortgage lender. They may be willing to allow you to assume the obligations of that mortgage, and they may also release your brother from his obligations. Much depends on the lender and the kind of loan currently on the house. If it was an ARM (adjustable-rate mortgage), the lender may be willing to cooperate with you. On the other hand, if the existing mortgage contains a lower rate of interest than is currently available, the lender will probably not allow you to take it over. If you have cleared up your credit, and can qualify for a mortgage on your own, then it may all work out alright. If you are unable to qualify, ask your brother if he will guarantee the loan. This may convince the lender to allow the transaction to take place. But your brother should consult a tax accountant to determine any tax consequences he may have when he transfers the property to you. DEAR BENNY: My tenants are divorcing. I received a 30-day notice from the husband. His spouse was not part of the 30-day notice. She would like to continue renting the property. My concern is that she does not have a job, and will be able to afford the rent only from monies received from spousal or child support. Her mother (who lives out of state) has offered to cover the rent if this becomes necessary. What should I do: create a new month-to-month tenancy? Who would be named? What precautions should I take? –Monica DEAR MONICA: I would recommend that you enter into a new lease with both the current tenant and the mother named as the tenants. Make sure that the lease states that the tenants are "jointly and severally" responsible for paying the rent. This means that each tenant is legally obligated to pay the full monthly rent. How long a term should you have? That really depends on you. If you think that the tenant will take good care of the house -- and that with the assistance of her mother, the rent will be paid timely -- then why not consider a year's lease? The mother may be concerned that a month-to-month is too short a period of time. DEAR BENNY: Are title examination and loan origination fees legitimate or just junk fees? –Lee DEAR LEE: There are some consumers who believe that most, if not all, of the lender's charges are "junk" fees, which means that they are not necessary for the settlement (escrow) process, but are primarily used to increase the lender's profits. For years, lenders would charge between $50 and $75 for a credit search. As a result of litigation on this matter -- and the fact that everyone can get a free credit report at least once a year -- lenders now charge a lot less for the credit search. Loan origination fees are, in my opinion, junk fees. But in most cases, if you want to get a loan, you will have to pay this to the lender. You should try to negotiate this fee as well as all other charges when you begin the loan application process. The title examination, on the other hand, is legitimate. The mortgage lender is going to give you a large sum of money and wants to make sure that your house will serve as good collateral to secure the loan. You will sign a deed of trust (the mortgage document), which will be recorded among the land records in the county where the house is located. This document gives the lender the right to foreclose on the house if you cannot make the monthly payments. But if there are other lenders -- or other clouds such as tax liens or mechanic's liens -- on title, the new lender will not have the security that it needs. So a title search must be obtained to satisfy the new lender that it will be in first position against your house. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.
Why home purchases fall apart at last minute By Dian Hymer Most buyers and sellers feel relieved when the negotiations are done and the purchase agreement has been signed by all parties. It's a milestone. But, you might want to hold off celebrating until the transaction closes. Current market conditions have complicated the home sale industry. Lender requirements for mortgage qualification and the types of home loans available are changing daily. Before getting into contract to buy a home, make sure you double check with your lender or mortgage broker to confirm that the loan you were qualified for several weeks ago is still available. For example, a week before closing, buyers who were purchasing their first home -- and who had been assured that their financing was in order -- were informed that their lender was no longer providing the type of loan they needed to complete the transaction. These were well-qualified buyers who had enough cash for a 10 percent down payment and closing costs. They needed to borrow a first mortgage for 80 percent of the purchase price and a second mortgage for the remaining 10 percent. The lender who was providing the 10 percent second mortgage decided they would no longer provide 10 percent second loans to first-time buyers. In a similar situation, buyers who had been approved for 80-10-10 financing were told by their lender at the last minute that their underwriting guidelines had changed. The lender would no longer provide a second mortgage for 10 percent of the purchase unless they were also providing the first mortgage. A year ago, financing was readily available to just about anyone who wanted to buy a house. And, most of what sold appraised for the purchase price. It was rare to see a listing back on the market because the buyer couldn't get financing. If a deal fell apart, the most likely culprit was an irreconcilable difference over an inspection issue. HOUSE HUNTING TIP: Due to the change in the credit markets, buyers are wise to include financing and appraisal contingencies in the purchase contract in addition to an inspection contingency. A contingency should give the buyers a period of time to satisfy the condition in question. If they act in good faith and attempt to satisfy the condition, but are unable to, they may have the right to withdraw from the contract without penalty, depending on how the contact is written. When buyers find themselves in competition, it's tempting to waive contingencies. A year ago, many buyers felt comfortable waiving contingencies for financing and property appraisal. There was a loan product for everyone and appraisals weren't an issue. This is no longer the case. Most lenders have stopped doing easy-qualifier, no-cash loans and pay-option mortgages, to name a few. Lenders have also tightened up on appraisals, credit score and verifiable income requirements. Buyer's remorse is a more serious issue in a slow market where home prices are soft than it is in a market where prices are escalating. Sellers can help prevent buyer's remorse from sinking a deal by properly preparing their homes for sale. This includes pricing accurately for the current market so that the buyers don't feel they overpaid when they see the inspection reports. Obtaining pre-sale home inspections will also help keep buyers from having second thoughts. The more buyers know about the condition of the property before they make an offer, the less chance they will back out due to inspections. THE CLOSING: A soft market makes an offer that is made contingent on selling another property more risky. Even if your buyer has lined up a buyer for his house, if that deal falls apart so does yours.
Buying to flip not smart in today's market By Dian Hymer There are deals to be made in the current real estate market. Home buyers in many areas finally have the upper hand. Ironically, buyers tend to pull back when the market is soft and buy when the market is high. Savvy investors attempt to buy when the market it low and sell when it's high. But, it's impossible to time the market, so there is always an element of risk involved. Here are some guidelines to keep in mind if you're considering buying a home in the current market. Short-term investing paid off for many investors a few years ago. In most cases, this strategy should be avoided today. Although the home-sale market is localized, generally the current housing market is soft and is expected to take a year or more to recover. You don't want to be caught having to sell in a year or two when the value of your house might be less than or equal to what you paid for it. After taking into account the costs of sale, you could find yourself selling at a loss. With this in mind, don't buy unless you're economic future is secure, and you're sure you won't be relocating during the next five years. Also, don't base your decision solely on price. You might be able to buy a small two-bedroom, one-bath home for a low price in this market. But, if this won't suit your long-term housing needs, don't buy it. Not too long ago when the market was racing upwards, many first-time buyers bought small starter homes. They stayed in these homes for two or three years and then sold for a profit. This helped fund the purchase of a larger long-term home. This strategy could get you into trouble today. You might be better off waiting to buy until you can afford a home that will provide a long-lasting solution to your housing needs. Avoid houses that could be hard to resell. These are usually houses that lack broad-based buyer appeal, like houses that are too small or that are located next to a freeway. If you do buy one of these houses, make sure you get it for a good price. Keep in mind that unless you sell in a hot market, you could have difficulty selling in the future. HOUSE HUNTING TIP: Some home buyers are so anxious to move that they will settle for less than they need. Or, they buy a home that doesn't quite work with a plan to remodel it to correct its deficiencies. This home-buying scheme is not for everyone. For example, some Oakland, Calif., homeowners purchased several years ago and subsequently completed costly renovations. They sold recently for more than they paid, but not for enough more to cover the renovation costs. The finance markets have been in turmoil. Many mortgage companies have had to shut their doors due to fallout from the subprime lending crisis. Some of these companies left buyers in the lurch when they failed to fund loans just before closing. It might be wise to submit applications to two lenders so that you have a fallback, if necessary. Don't skimp on inspections. Property condition has a big affect on property value. If you buy a property that has deferred maintenance, make sure you buy it for a good price. Plan to take care of correcting defects, many of which will worsen over time. THE CLOSING: Financial planning for a home purchase should include factoring in the cost of curing deferred maintenance, as well as the cost of ongoing maintenance.
Troubled borrowers find temporary mortgage relief Payment programs aim to reduce foreclosure rate By Tom Kelly I once asked an accountant why a homeowner had to face a surprising penalty from the Internal Revenue Service after losing his job and his home because of a downtown in the economy. When the homeowner had to sell his home for less than its purchase price (known as a short sale), the bank also forgave a portion of the mortgage. The amount forgiven, $15,000, showed up as taxable income on the homeowner's tax return. According to the accountant, the initial intent of the law was not to further penalize distressed borrowers. The initial idea was to find a way to account for parents and friends who provide seller financing for their children and associates and then simply forgive the debt once the kids have settled in to the new home. Regardless of the roots of mortgage forgiveness penalties, many borrowers today are facing higher payments and possible default and foreclosure resulting from the upward adjustment of an adjustable-rate mortgage. Whether it is a conventional ARM leaping from 4.5 percent to 6.5 percent or a subprime loan tied to a high-interest-rate second mortgage and a prepayment penalty, the possibility of a home-sale loss or short sale is higher now than in nearly a decade. While there is a move afoot in the nation's capital to keep a lender's mortgage forgiveness from being classified as income, there is no federal income tax deduction for losses accrued on the sale of a primary or secondary residence. The principal residence has always been viewed as a personal asset. The gain on the sale of a principal residence has been taxable as a capital gain (after the $500,000 exclusion for married couples and $250,000 for single persons), but losses have never been allowed. Although the capital gain thresholds have been increased in the past 10 years, previous proposals to address capital losses have been defeated. Given the occurrences of the past few months, most lenders will bend over backwards to help borrowers who are behind. Many have longstanding, alternative loan payment programs available, while others have installed new packages -- especially for genuine subprime victims. Alternative programs for mortgage payments are typically lumped into one category called "forbearance." Forbearance is not free, nor does it mean forgiveness. It usually is a short-term agreement between borrower and lender permitting partial payments until normal payments can be resumed. Typically, forbearance agreements run three to six months. Credit reports will show delinquent payments when full payments are not received. So, if you make partial forbearance payments for a short period, it's best to petition credit bureaus to remove any "black marks" after full payment has been made. Explain the circumstances to the credit bureau in a letter to protect your future credit. Forbearance does delay foreclosure, the process by which a homeowner who has not made timely payments of principal and interest on a mortgage loses title to the home. The foreclosure clock starts ticking once the borrower is in default. A borrower technically is in default one day after a payment is due. However, most lenders do not mail the borrower a Notice of Default until two to three payments are missed. Most mortgage bankers do not eagerly await a default on the family home. Bankers are in the business of loaning money and they do not wish to have your home back. It takes considerable time and money (about $100 a day) to manage and maintain foreclosures. Lenders would prefer to spend their energies on processing applications and recruiting customers. If you have little or no equity in your home and wish to stay there, the lender probably will be more agreeable to adjusting your mortgage contract if you can show that you will be able to repay the debt with a lower-paying job. However, remember that while a lender will help solve temporary financial problems, a permanent financial setback could result in having to sell the home -- especially if you have significant equity. The lender is out to avoid, or cut, his losses, and your equity will provide that assurance. If you must sell, you will avoid delinquencies, keep your credit rating, and retain the equity in your home. If you are facing mortgage problems, conduct a genuine assessment of your future possibilities. Perhaps you can dip into savings to get you over the hump. Then, talk to your lender and explore all options. If you don't ask, you'll never know what's possible.
Rid hardwood floors of doggy scratch marks Remedy depends on how deep the damage is By Paul Bianchina Q: My dog's nails have left minor scratches in my wood floors. Is there any way to repair this without complete refinishing? --Judith K., via e-mail. A: If the scratches are not all the way through the finish and into the wood below, there are a couple of things you can try: 1. Sand the scratched area with 0000-grade steel wool to blend the scratch into the surrounding area. 2. Use a very small brush and apply a small amount of polyurethane just to the scratch itself -- keep it off the surrounding area as much as possible. Many hardwood floor companies also offer polyurethane scratch repair kits. 3. Rub a small amount of paste wax directly into the scratch, using a clean, soft rag. Let the wax dry, then buff the area around the scratch. If you have dark-colored floors, use a dark paste wax that's formulated for darker woods. 4. Use a color-putty stick in a color that matches the floor. Rub it lightly into the scratch, then let it dry. 5. Try one of the commercial scratch removers available that work primarily by filling in the scratched area and eliminating the reflected light from that area, making the scratch seem to disappear. All of the products you need are available at most home centers, paint stores or retailers of flooring-related products. Try the repair in an unobtrusive spot such as a closet before tackling more obvious areas. If the scratch is through the finish and into the wood beneath, you need to have the area sanded and recoated. However, many hardwood floor contractors can sand and coat just a portion of the floor, so it still may not be necessary to do the entire floor. Q: I had the siding replaced on my home, and now there are several bumps and holes in my interior walls, like the nail heads have come through. The contractor says there is nothing you can do about this. Is that true? --Ria M., via e-mail. A: What you are seeing sound like nail pops. These occur when the nails holding the drywall to the studs either come slightly out of the wood, or the drywall joint compound that covers the nail heads comes off. The repair is pretty simple, and entails tapping the nail back into the drywall, then recovering and re-texturing the resulting "dimple," followed by touching up the paint. As to your specific question, the answer is yes and no. Nail pops can certainly be caused by pounding on the opposite side of the stud from the drywall, as would be the case with the installation of siding. If the drywall was not installed well in the first place, it can be very difficult for the siding installer to prevent these nail pops from occurring. On the other hand, a siding contractor is aware of the possibility of nail pops during any siding job, and would typically check the interior of the home early on to see if any damage was occurring, or at least make you aware of the possibility so you could keep an eye out for it. My best advice is to sit down with the contractor and see if you can come up with a mutually agreeable solution. Perhaps he could do the drywall repairs and you could do the painting, or you could agree to split the cost of having someone else do all the repair work.
Making an attractive home-purchase offer By Dian Hymer It's easy to assume that negotiating is adversarial. You, the buyer, are on one side -- the side that wants to buy a property for the lowest price possible. The opposition on the other side is the seller who wants to sell for the highest price possible. You're locked in a tug of war to see which side will win. It's more productive to look at a negotiation as a problem-solving process. You and the seller may have different ideas about what price the property should sell for. However, you're united in a common goal of consummating a deal. The challenge is to resolve your differences through a process of give and take until you either reach your common goal, or decide to go your separate ways. Of course, you have to arrive at a mutually agreeable selling price for a sale to go through. Sometimes this will happen quickly; sometimes it's a drawn-out process that can last over days or even weeks. HOUSE HUNTING TIP: Patience can be your ally. Sometimes rushing the process can quicken its demise. In fact, you may be better off waiting before starting the process if you think that the asking price is too high. For the first time in years, we are in a market where some home sellers -- typically those who bought recently -- won't be able to sell their home for a profit. But, they may need to test the market to be sure. If this is the case, the best negotiating strategy may be to offer nothing until the sellers are close to reducing their asking price. There can be a benefit to making an offer just before a price reduction is made. If you wait until the price is lowered, you could end up paying a higher price if other buyers suddenly become interested. In order to make sure you know that the sellers are contemplating reducing the price, ask your real estate agent to talk to the sellers' agent and make sure that the sellers are made aware of your interest. Don't be bashful about the fact that you are interested, but not at the current price. This way, you may receive a call when the sellers decide they'd like to see an offer from you. When you make an offer and there's no competition from other buyers, your initial offer price should leave you room to move up in price. But, it should not be so low that it's insulting to the seller. Otherwise he or she might not respond at all. An offer that's much lower than the market would give the seller the impression that you can't afford more, so there's no point in issuing a counteroffer. Buyers often think that if they start too high initially, they'll end up paying too much. Your initial offer price should be good enough to entice the seller into a dialogue. It's a price to get the ball rolling. From there, you can move up in small increments, if necessary. Don't get so caught up in negotiating the price that you overlook other opportunities for consensus building. Most good negotiations have a sense of fairness about them. During the process of your negotiation, you and your agent should brainstorm all the possible ways that you can accommodate the sellers. Do they need a quick close? If so, they might be willing to give more on price for a speedy close. However, you might want to hold up offering this information at the beginning of the dialogue. That way, you have something more of value that you can offer the sellers in exchange for a further price concession. THE CLOSING: When you get close on price, offering to split the difference can put a seal on the deal.
Selling home difficult when neighbor's a slob One man's clutter, another's real estate nightmare By Robert J. Bruss DEAR BOB: My mother's neighbors moved in about four years ago. Since then they have accumulated cars (on blocks), a shed that is overflowing, and many piles with blue tarps. I am afraid when my mother wants to sell her home (she is 84), she will have problems. What recourse does she have? --Darlene H. DEAR DARLENE: Your mother should consult the appropriate city or county code-enforcement officials to see if the neighbors are violating any ordinances. If so, ask the government to enforce its ordinances. If there is no law violation, however, there isn't much your mother can do unless the situation is a fire hazard or creates other danger. She should consult a local real estate attorney to see if the situation is so bad it constitutes a private nuisance, which can be abated by court action. LIVING TRUST IS USUALLY BETTER THAN A LIFE ESTATE DEAR BOB: I have encouraged my mother to create a revocable living trust to avoid probate when she passes on. Since her only major asset is her house, her attorney in Minnesota is trying to dissuade her from creating a living trust. He tells her it would be cheaper to create a "life estate remainder deed" or "enhanced life estate deed." What do you think about the comparative merits of such deeds compared to a living trust? --Michael D. DEAR MICHAEL: If you are a regular reader of this column, you know about all the problems that can arise with life estates and remainders. Presuming you are your mother's heir, I don't see any advantages of a life estate for her or you, but there are lots of potential disadvantages. I suggest she consult an attorney who specializes in living trusts to discuss the advantages. HOW CAN HOME BUYER KNOW ABOUT LOWER MORTGAGE RATE? DEAR BOB: When a mortgage broker receives a "yield spread premium" from a lender for producing a home loan with an interest rate higher than the lender requires, how can a home buyer know there was a lower-interest-rate mortgage available from that lender? --Carolyn C. DEAR CAROLYN: When applying for a mortgage, ask the mortgage broker if he or she will be receiving a "yield spread premium" from the lender. That tells you whether you are being overcharged and could obtain a lower interest rate from the lender.
Homeowners find it pays to go green By Dian Hymer The green revolution is spreading as the public becomes aware of the need to reduce dependence on foreign oil and improve the environment through conservation and recycling. Today's recession-wary homeowners are reluctant to spend a penny on home improvements. However, some effective energy-saving home improvements don't cost much and can save you money in the long run. For example, a tight house prevents heat loss. To keep your home from leaking, weatherstrip by sealing voids around windows, doors, vents, cables, electrical outlets, and switches and electrical wires. HOUSE HUNTING TIP: Some utility companies offer rebates for weatherstripping. Visit the Database of State Incentives for Renewables and Efficiency on line at www.dsireusa.org. Then click on your state to find a list of incentives offered in your area. Be aware that incentives may be taxable. Another inexpensive way to save money by adding green features to your home is by changing light bulbs from incandescent to fluorescent. Replacing five heavy-use bulbs will save you about $100 per year on your electric bill, according to the U.S. Green Building Council. Using a programmable thermostat and setting it to reduce output when you are sleeping or are out of the house will save another $100 or more per year. Have your furnace and cooling system checked regularly to keep it running efficiently. Insulate your hot water heater. When you buy new appliances, buy ENERGY STAR appliances that meet high-level energy efficiency. Rebates are available for purchasing some energy-efficient appliances. It will cost you nothing, just discipline, to break old habits that will save you money and conserve resources. Take shorter showers. Wash only full loads of dishes and clothes. Turn off lights when you leave a room. According to Kerry Mitchell, Green Real Estate Education, you can reduce your energy bill by 9-10 percent by unplugging electronics when they're not in use. A TV uses 25 percent of its energy when it's plugged in but not on, according to Mitchell. Plug infrequently used electronics into a power strip. Leave the power strip off when the electronics are not in use. There are also incentives available to help offset the cost of installing more expensive energy savers such as solar systems, home insulation, dual-pane windows, and graywater systems that use waste water from washers, showers, tubs and sinks to water landscaping. Will green features pay off when you sell your home? If buyers had a choice between a house whose owners pay low water and energy bills and one where the bills are high, they'd probably choose the home with lower operating costs. Recently a home with large single-paned windows sold in the hills of Oakland, Calif. Three buyers seriously considered buying it. All three factored the cost of installing dual-pane windows into the price they would pay. According to the “2008 Remodeling Cost vs. Value Report” from the NATIONAL ASSOCIATION OF REALTORS® and “Remodeling” magazine, on a nationwide basis window replacements returned more than 76 percent of the cost when the home sold. Combine this with a possible incentive, lower energy bills during your ownership and the appeal to buyers when you sell, and it's worth the investment. Homebuyers should be skeptical of green advertising. Some agents advertise that a house is green when in fact the home might have only one green feature, like a solar hot water heater. The city of Berkeley, Calif., has had a modest energy retrofit ordinance for years. Recently, there was an attempt at the state level to require California homeowners to comply with a more stringent energy retrofit at the time of sale. THE CLOSING: It's quite likely that energy retrofit requirements for older homes will be required at some point in the future. Dian Hymer is a nationally syndicated real estate columnist and author.
Selling home to offspring has its benefits By Benny Kass SCIN. No, it's not the stuff that covers our body. It's a highly complex legal and financial transaction that may be of interest to elderly homeowners. SCIN stands for "self-cancelling installment note." Let's take this example: Your parents own their house but their financial situation makes it difficult to maintain the house. You are prepared to buy the house and rent it back to your parents, but because you currently have your own house, you are unable to qualify for another mortgage loan. Your parents purchased the house back in the 1960s for $30,000, and it is now worth $600,000. Over the years, they have made approximately $100,000 in improvements. They are eligible for the up-to-$500,000 exclusion of gain, because they file a joint tax return and have owned and lived in the house for a very long time. When they sell the house -- to you or anyone -- they will not have to pay any capital gains tax, as $600,000 (sales price) minus $130,000 (cost basis) equals $470,000 (capital gain), which falls within the $500,000 exemption limit. Since the house is free and clear of any mortgage, your parents are prepared to take back the entire sales price. You sign a promissory note for $600,000, and the note is secured by a deed of trust (the mortgage), which is recorded among the land records in the jurisdiction where the property is located. The note carries an interest rate of 6.25 percent, which is what commercial banks are currently charging for similar mortgage loans. You go to closing and take title to the property. Your parents sign a lease whereby they agree to pay you a monthly rental. While this is income to you, it will most likely be offset by the various tax deductions you can get -- such as depreciation, mortgage interest, real estate tax, insurance and maintenance of the house. Although this sounds like a routine real estate transaction, there is one unique feature. The promissory note that you signed in favor of your parents contains the following language: In the event of the death of both of the lenders (i.e. the parents) prior to the final payment of principal and interest, the unpaid principal and interest shall be deemed cancelled and extinguished as though paid upon the death of the last lender. This is a SCIN -- a self-cancelling installment note. Why is this such an important tool? When a person dies, estate tax must be paid on the value of the decedent's adjusted taxable gifts. If your parents made gifts to you that exceeded the yearly gift-tax exclusion (currently $12,000 per parent), you should discuss this with your own accountant to get a clear picture of the estate-tax consequences. A bona fide SCIN cancels the remaining obligation upon the death of the lender, so there is nothing left to be included in that decedent's gross estate, and thus no tax is owed on that cancelled debt. Note that I used the word "bona fide." That's Latin legalese, which Black's Law Dictionary defines as "in or with good faith ... without deceit or fraud." The Internal Revenue Service is constantly challenging the bona fides of these SCIN transactions, claiming that they are not done in good faith but are designed to avoid having the pay the estate tax. A SCIN signed by family members is presumed to be a gift and not a bona fide transaction. But according to one federal court, "This presumption may be rebutted by an affirmative showing that there existed at the time of the transaction a real expectation of repayment and intent to enforce the collection of the indebtedness." (Costanza v. IRS, Sixth Circuit Court of Appeals, decided Feb. 19, 2003). Space in this column does not permit me to recite all of the facts upon which the Sixth Circuit overturned the tax court and held that the SCIN was, in fact, legitimate. Here, however, are some suggestions to assist you in rebutting the presumption: 1. The note must be secured by a valid and enforceable deed of trust, which is recorded in the appropriate land records office. The borrower would want this anyway, because mortgage interest cannot be deducted unless the mortgage (deed of trust) is recorded; 2. Go to the Internet and find out from the mortality tables what the life expectancy is for your parents. The promissory note should come due prior to that expected death. For example, if your mother's life expectancy is 22 years (based on her current age and the mortality tables), the loan should mature no later than 20 years from the date it is entered into. 3. The sales price must be market value or higher. Otherwise, even if the SCIN is held to be valid (i.e. bona fide) the IRS has the right to assess a gift tax on the difference between the sales price and the fair market price at the time the sale took place. In fact, to avoid having the IRS claim that this was really a gift, you should either increase the sales price above the market value or increase the amount of the mortgage interest rate so as to show that there was consideration for the cancellation provision. After all, if this was not a family transaction, the lender would not want the note to be cancelled without getting some premium for that. 4. Treat the entire transaction as if the parties were strangers. Have a lawyer prepare the legal documents, and go to a title attorney's office for the settlement. 5. Finally, have your parents document in writing their need and desire to have the monthly payments for their retirement years. A SCIN can be a valuable family tool, if done properly. Otherwise, the amount of the cancellation will be considered part of the estate and will have taxable consequences.
Why most real estate gifts escape taxes Lifetime exemption limit extends to $1 million By Robert J. Bruss DEAR BOB: I sold my principal residence to my daughter in 2006, using gift equity. The loan officer structured the loan as a $400,000 purchase price with a $307,000 mortgage. My question is will I owe taxes on the $93,000? I owned and lived in the house for four years --Perie L. DEAR PERIE: If the home was your principal residence at least 24 of the last 60 months before its sale to your daughter, then up to $250,000 of your capital gain is tax-free. Purchase Bob Bruss reports online. Although your letter is a bit confusing, it sounds like you received the $307,000 mortgage proceeds and gave your daughter a gift of the $93,000 equity. Because that gift amount exceeds the annual $12,000 tax-free gift exemption amount per donor, you must file a federal gift tax return. But no gift tax will be due if your total nonexempt lifetime gifts are less than $1 million. When you die, your total lifetime nonexempt gifts up to $1 million will be subtracted from your federal estate tax exemption (currently $2 million). For this reason, most real estate gifts are not taxable. For full details, please consult your tax adviser. NO TAX DEDUCTION FOR HOME-SALE FIX-UP EXPENSES DEAR BOB: We plan to sell our house in 2007. I seem to remember that home fix-up costs prior to a sale are deductible from the sale price for tax purposes. Does this deduction still exist, and what timing or other conditions apply? --Richard B. DEAR RICHARD: In 1997, Congress abolished that tax subtraction (not a deduction) for home fix-up expenses incurred shortly before sale. However, if you make significant home capital improvements, the cost can be added to your home's adjusted cost basis to reduce your capital gain upon sale. Your tax adviser can provide full details.
Green TV By Elyse Umlauf-Garneau The June transition to digital TV promises improved viewing, but it also could trigger a wave of abandoned TV sets as people use the opportunity to upgrade to bigger, sleeker TVs. If you’re committed to making green choices, there are several topics to consider. They include: Energy -- Visit http://mygreenelectronics.com/EnergyCalculator.aspx to see how much energy your TV, DVD players and satellite boxes are chewing up. The EPA estimates that such gear represents about 10 percent of a household’s annual electricity bill. If you decide that reuse is the best approach and now isn’t the time for upgrades, you’ll need a converter box to allow old analog TVs to work. Consider energy efficient digital converter boxes, such as those offered by ENERGY STAR. They consume no more than eight watts in the on mode. New TVs -- Energy efficiency standards have been toughened in recent years. The simplest approach, according to Rozanne Weissman, senior director of consumer campaigns for the Washington, D.C.-based Alliance to Save Energy, is to buy ENERGY STAR -qualified TVs. “They use less energy in both the stand-by and on/off modes and they’re available in every price category.” According to ENERGY STAR, TVs with such labels consume about 30 percent less energy than standard units. As you’re shopping, however, keep in mind that the bigger the TV is, the more energy it will consume. Ditching old TVs -- Because they’re loaded with environmental dangers, including lead, it’s not safe to simply dump old TVs into the trash. Thus, part of the equation in getting a new TV involves finding new homes for old sets. After all, TVs contain resources—metal and glass, for example--that use energy for their mining and manufacturing. By recycling you do a good turn for Mother Nature by allowing recyclers to extract reusable materials, dispose of hazardous materials safely, and cut greenhouse gas emissions that stem from manufacturing processes. It may not seem like tossing one TV would be too treacherous, but when multiple TVs reach the end of their life, the amount of e-waste generated can be staggering. According to the Environmental Protection Agency, consumer electronics, such as TVs, computers, phones, and so forth, comprise two percent of the municipal solid waste stream. Though it seems like a small figure, such waste added up to about 2.5 million tons in 2007. Ancillary products -- Check with cable and satellite TV providers to see whether they offer energy efficient equipment. Again, when shopping for new DVD players or other add-ons, seek out the ENERGY STAR label. Phantom power -- Be wary of power usage of add-ons like satellite dishes, TIVO, and gaming products, even when they’re off. Resources: ENERGY STAR TVs -- Locate efficient TVs, DVDs by brand and type at: http://www.energystar.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=TV ENERGY STAR Labels -- When shopping, compare savings by interpreting the information on the energy labels properly. Consumer Reports offers a quick guide at http://www.consumerreports.org/cro/home-garden/resource-center/energy-star-has-lost-some-luster/how-to-interpret-the-energyguide-label-/energy-star-interpreting-energyguide-label.htm Recyclers -- Punch in your ZIP code www.earth911.com to find charities and recycling centers that accept TVs or locate California e-recyclers at www.erecycle.org. -Digital TV—Questions about DTV are answered at http://www.dtvanswers.com/ TV manufacturers -- Several companies, including Sony, and Panasonic, Sharp, and Toshiba are participating in an Environmental Protection Agency program http://www.epa.gov/epawaste/conserve/materials/ecycling/tv-challenge.htm to increase e-waste recycling and they’ve established centers to collect their brands for free and the recycling of other brands for a small fee.
GFCI electrical outlets are lifesavers By Paul Bianchina Q: What is a GFCI electrical outlet? Are outlets of this type required in all homes, and if so, where? --Allen D. A: GFCI stands for ground-fault circuit interrupter. A GFCI outlet reacts much more quickly to the presence of an electrical short circuit than a standard circuit breaker does, so they provide additional protection against the possibility of injury should an appliance, tool or other electrical device malfunction. The electrical codes throughout the country require the use of GFCI outlets adjacent to any sink in the kitchen, bathroom, laundry room or similar area; for garages and exterior outlets; and in certain other specific areas such around whirlpool bathtubs. You can check with your local building department for a complete list of GFCI requirements. GFCI outlets are easily recognizable by the "test" and "reset" buttons located on the face of the outlet, and they should be regularly tested in order to confirm that they are operating correctly. To perform the test, simply plug a circuit tester into the outlet and press the outlet's test button -- the light on the tester should go out. Press reset, and the light will come back on. You can also plug in an electrical device such as a radio or a lamp and test the outlet that way, but a plug-in circuit tester -- available inexpensively at any home center or electrical supply retailer -- will also confirm that the outlet is properly wired and grounded. Q: I live in an old house that was built in 1907. I want the garage to have a patio door to be able to see and go out to the backyard garden. I need to cut part of the foundation to do this. Is it OK to cut the foundation? Is this safe? --Midori C. A: A foundation consists of two parts. The footing, which is wider than it is high, is the lowest part of the foundation and is intended to distribute and transfer the weight of the building evenly over the ground. On top of that is the stem wall, which is higher than it is wide and is used to raise the structure above the surrounding grade. In most cases it is OK to cut into the foundation stem walls in order to install a new door, provided that the footing is not cut. You would want to use a licensed concrete-cutting contractor to do the work, and he or she can determine if there are any other circumstances at your particular home that would prevent them from making the cut. Q: Can all types of paint be tinted? Also, how much do they usually charge to add the tint? --Jim D. A: Virtually all paints and primers can be tinted at your local paint store, although there are some types of paint that are pre-colored at the factory and can't be tinted. When you select a color from a paint chip, the store will begin with the appropriate white tint base, and add tinting colors as needed to get to the right color. If you want a primer tinted to go with that paint color, they will typically tint it to about half the shade of the finished color. If you have a specific color that you want to match, any good paint store will custom blend the paint to match whatever sample you bring in. And while home centers are fine for mixing a paint to match one of the color chips for the product lines they sell, I have found that it takes the experience and keen eye of the people in a paint store to do very accurate paint and stain color matches. As to cost, if you are buying the paint from that store there should be no charge for tinting. If you bring in your own paint and want to have it tinted, or if you have a particularly difficult color match, the store may charge you a small hourly fee.
Some plumbing materials shouldn't be mixed By Paul Bianchina If you're doing any remodeling or repair work on the plumbing system of an older home, it's a pretty safe bet that you'll encounter the need to transition from an older type of pipe to a one of today's newer materials. It might be a transition from threaded galvanized water pipes to copper pipes, or from old cast-iron sewer lines to today's ABS. Luckily for all of us, these transitions are common enough that there are a number of fittings on the market that make dissimilar pipe connections quick, easy and safe. The fittings are readily available in home centers, hardware stores and plumbing supply retailers. COPPER PIPE TO THREADED STEEL PIPE If you've browsed through the plumbing section at the home center, you no doubt noticed that there are threaded copper pipe fittings that you can solder right onto the end of the pipe, and they will screw directly onto older threaded galvanized water lines. So what's the problem? The problem is that the zinc used for galvanizing the threaded water pipes doesn't get along very well with the copper. If you make a direct connection, these two materials will interact in a chemical reaction that will corrode the joint and eventually cause it to start leaking. To safely connect copper and galvanized steel, you have two options. Since brass doesn't react with either the copper or the zinc, one method is to make sure you have a threaded female end on both the copper and the steel pipes, and then connect the two by simply inserting a short threaded brass nipple between them. The second method is to use a special transition fitting called a dielectric union. The dielectric union has a threaded steel female fitting on one end, which is threaded onto the steel pipe. The other end has a female copper slip (non-threaded) fitting, which is soldered onto the copper pipe. The two halves of the joint are then connected using a lock nut and two insulating washers that prevent the copper half from contacting the steel half. The fittings cost under $10, and not only is the transition easier to accomplish, but it also leaves you with a joint in the line that can be disassembled later if you need to perform other work on the lines. PLASTIC PIPE TO COPPER OR STEEL PIPE Making the connection between plastic pipes such as ABS or PVC and metal pipes such as copper or galvanized steel is very straightforward. The chemicals used in the manufacture of any of these pipes do not react with one another, so you don't have the corrosion factor to worry about. The connection between plastic and metal is simply a matter of choosing a threaded fitting of the proper size and configuration to make the transition. Remember that copper pipe will need to have a threaded male or female fitting soldered onto the end first. For example, suppose you're installing a new sink and you want to use a one and one-half-inch ABS trap connected to the two-inch female-threaded steel pipe that's currently in the wall. Plastic pipe fittings are available as either threaded (both male and female threads are available) or slip (non-threaded for making glue joints). First, select a two-inch ABS fitting with a male thread on one end and a female slip joint on the other, and screw the fitting into the existing steel pipe. Glue a two-inch male x one and one-half-inch female transition fitting into that, then glue in your one and one-half-inch trap. When making plastic-to-metal transitions, wrap the threads with Teflon tape to help seal the joint and also to make it easier to assemble. Don't use pipe dope on these connections, as it can deteriorate the plastic. Also, two windings of tape will be sufficient to make the seal -- more layers can stress the joint and actually cause it to leak. PLASTIC PIPE TO CAST-IRON PIPE Transition fittings are also commonly available to adapt ABS pipe to cast iron. Called a band clamp, the fitting is simply a thick rubber tube with a screw clamp on each end. To use the fitting, slip one end over the outside of the cast-iron pipe and the other end over the plastic pipe, then use a screwdriver to tighten down the clamps on either end. These are just a few examples of the hundreds of transition fittings that are available. Simply determine the type and size of the pipes you're trying to connect, and your dealer can help you select the best type of fitting for the job.
Wainscoting improves home's Colonial look Do-it-yourself tips to enhance walls, windows, doors By Bill & Kevin Burnett Q: Thank you for your article on exterior trim. Where in San Francisco can I buy the decorative plantons you describe? A: Plantons? Sounds like some kind of tropical fruit. There is no such thing as plantons, but we have referred to "plant-ons" when describing built-up interior and exterior wood trim molding. We're sure you're aware that there are many milled trim styles available in lumberyards and in the wood section of big-box home stores. But often the selection doesn't have exactly the right profile for a finicky homeowner. Sometimes even the widest casement molding is too narrow for the use a homeowner has in mind. Such is the case for Kevin, who is adding some details to his Idaho home. We've described Kevin's house before -- large rooms with 9-foot ceilings throughout give the home a more spacious feel than the 2,500 square feet it actually is. Big rooms need oversize casement and baseboard trim. Originally Kevin went for the no-case, no-base look, choosing instead to wrap the corners of the windows and doors with Sheetrock and rounded corners. After 10 years he's tired of the look. To enhance the detail of his Colonial-style house, Kevin is installing wainscoting in the dining room and family room, and casing on the windows and doors in the public area of the house. Being ever frugal, he's cut the 5 1/2-inch flat stock for the vertical and horizontal pieces of the wainscoting and casing from sheets of 3/4-inch medium-density fiber board (MDF). It sands smooth, paints great and costs about $15 per sheet. It also allows him to be creative. Inside the frames of the wainscoting he's "planted on" pieces of standard quarter round to soften the look a bit. On the top horizontal piece of the wainscoting Kevin's installed an MDF cap that he's routed to form an ogee pattern. A small piece of quarter round under the cap finishes it off and gives a more interesting profile. For the windows and doors, Kevin started with square 5 1/2-inch MDF for the casing and added a piece of 1 1/2-inch brick molding on the sides surrounding the opening. The difference in thickness between the square stock and the brick molding gives depth and a more interesting look. The brick molding is 1 inch thick at its narrowest side and 13/8 inch at its thickest. So with a little imagination, a router and a table saw, he's been able to achieve a Colonial look by adding several different types of stock moldings. As to where to get "plant-ons" -- anywhere stock moldings are sold. Q: We bought a post-and-beam cabin in a remote area, and we're in the process of insulating the raw 3-inch-thick original walls with sleepers and foam insulation. We want the finish wall to be Sheetrock but have been told that the expansion and contraction of heating and cooling because of sporadic weekend visits would eventually cause the drywall to crumble. We wanted a white wall that could break up the pine floors and ceiling and brighten the room, and not add to the already busy appearance of planks. Is this true about drywall, or are there types we can choose from? A: We notice that your e-mail comes from Wisconsin. Although we imagine it can get mighty cold up there, we've never heard of drywall disintegrating because of extremes of heat and cold. Of course, Bill lives in San Francisco and Kevin lives in Idaho. Neither place is subject to extreme cold. Just to make sure, we would check with the United States Gypsum Co., which makes Sheetrock, to see if this is true. On the Web, go to www.sheetrock.com. There you'll find a list of U.S. Gypsum products and links to contact them and ask the question. If you're not sold on drywall, how about using half sheets of MDF? As we noted above, it paints great and you could cover the seams with battens of 1/2-inch-by-1 1/2-inch pieces of square stock.
Security deposit too small to cover pet, smoke damage Can landlord raise deposit or is he stuck paying repair bill? By Robert Griswold Question: I have a rental unit that I have leased out with only a $200 security deposit. I inadvertently rented to a smoker with a small dog. I was aware of the dog, but not the smoking. The tenant seems to be a chain smoker -- when I enter the unit to do repairs it smells like an ashtray. He never leaves the door open and the windows are always closed. He hardly lets his dog out and I also noticed that his dog pees on the carpet. I feel that by the end of his lease the carpet will be totally trashed and the smell unacceptable. The deposit is not enough to cover the replacement of new carpets. In the meantime, is there anything I can do? James McKinley, an attorney for landlords, replies: Since neither the dog nor the smoking is prohibited by the lease, there is little that you can do at this time. However, in order to avoid further damage to your property, you should give your tenant notice that you do not intend to renew the lease 30 days before the lease expires (or a longer notice if required). After you give your tenant notice of termination of the tenancy, you are required to notify your tenant, in writing, of his option to request an initial inspection of the premises and his right to be present at the inspection. You should also consider meeting with the tenant prior to the end of the lease to give your tenant an opportunity to remedy the identified deficiencies, in order to avoid deductions from the security deposit. After the inspection, you are required to give your tenant a statement specifying repairs or cleaning that need to be completed in order to avoid deductions from the security deposit. After the tenant vacates, you should to give an itemized statement showing how the security deposit was applied to rent, cleaning and/or damages, as required by state or local law. The tenant is still responsible for the costs of cleaning or repairs not covered by the security deposit, but you will have to commence a small claims action or general civil action to recover those damages. Steven Kellman, an attorney for tenants, replies: While you are bound by the lease in allowing the tenant to live there with his dog and his cigarettes, you are not forced to allow the continuing damage to your property. Tenants are entitled to many rights, but they must also act responsibly to earn those rights. I would suggest considering taking a course of action now rather than waiting for the tenant to move out. Pet owners and smokers must conduct themselves in such a manner so as not to cause material damage or create such a significant interference with the quiet enjoyment of the other tenants at the property. If this tenant allows his dog to damage the carpet and if he smokes in such a manner as to cause "smoke damage" to the unit, you may demand that he stop both activities right away. This is in the best interests of your property and the neighbors who do not want to be impacted with offensive smells or increased rent to cover damage costs. You may view the tenant's behavior as a breach of the part of your lease that requires the tenant to maintain the unit without damaging it. In that case, you would give him a legal notice to cure that behavior thus saving the property and his tenancy. If you feel the damage is significant, you may then try to view the conduct as a nuisance, which may result in a termination of the tenancy with a different legal notice. In either case, the appropriate legal notices can be tricky so advice from an experienced local tenant-landlord attorney is recommended before taking such action. If you are forced to wait to the end of the lease, you should be sure to terminate the lease without renewal and handle the deposit as James advises. Property manager Griswold replies: The attorneys seem to have covered what to do at the end of the lease, but I think you are also asking what can you do now and I would like to give you an option. While it isn't popular with many tenants, you do have the legal right upon proper notice to increase the security deposit from the current $200 to an amount that would be more likely to cover your anticipated costs of repairing the damage that may be caused by the pet and/or the tenant. Make sure that you comply with any local restrictions or maximum amounts, but in most jurisdictions you can simply raise the security deposit upon lease renewal or by giving written notice if the tenant is on a month-to-month rental agreement. The purpose of the security deposit is not just to have funds to cover damages but it can also be an effective incentive for tenants to maintain the property during their tenancy as well as make efforts to leave the property in good condition. Most tenants really want and need those funds when they move. If you ever want to see what damage can be done to a rental unit, rent your property to a tenant and don't charge a security deposit or, better yet, offer a $99 move-in special!
Right way to do stucco repair By Bill & Kevin Burnett Q: I have narrowed a leak in my stucco wall to the lower corners of a window. Below it, I had a small firewood pass-through door removed. I've watched various other stucco repairs on our house, and I'm pretty handy, so I have a pretty good idea of what I need to do, but I have a few questions: 1. Once I remove the stucco, what caulk, tar or sealer should I use to cover small holes or leaks? 2. Besides Stucco Patch, is there a bag mix of stucco cement with the right proportions of Portland Cement, sand and lime that I can simply purchase? 3. I know it's probably a good idea, but do I need to use cement adhesive on the prepared edge of the existing stucco for my scratch and brown coats? 4. Previous repairs were made up of three coats: scratch, brown and dashing. The brown coat contained the Mission-style trowel marks but otherwise had a relatively smooth finish. Once dried, the dashing was done with a hopper gun and contained the color. It left a rough, sort of large pimply finish. Was the material used in the dashing just more of the same stucco cement? A: First, we suggest you check out the top of the window. The small leak could be migrating from the top of the window to the lower corners. We assume the plan is to remove the stucco from the affected areas and attack the source of the leak. If that is the course of action, we recommend that you repair any damage you do to the building paper by inserting building paper patches in slits you cut above the damaged section, letting the patch come over the hole. Glue the patch down with roofing mastic so that it's watertight. Roofing mastic comes in tubes that fit a caulking gun to make application neat and easy. Wherever you open the area where the window meets the siding, run a bead of caulking along the edge of the window. If you don't remove the stucco down to the siding, at least run a bead of caulk at the top edge of the window to inhibit any leakage that might be occurring at this area. A silicon latex caulk is the ticket for this job. There is packaged stucco mix available at hardware stores and home centers. But a 50- to 100-pound sack of stucco is much more than you'll need. That's why we recommend "stucco patch" for small jobs. It's pretty much the same stuff, just packaged in smaller quantities. You don't absolutely have to add Portland Cement to the mix, but we recommend it. The additional cement helps the stucco stick to the trowel and to the wall. The dashing, as you call it, is what we know as splatter texture. Whatever the name, the finish is the same material as the other stucco coats -- thinned down to a slurry. For a job this small, a hopper gun is a waste of time and material. To get a similar finish, mix the slurry in a bucket to thick-soup consistency. Dip a stiff bristle brush in the slurry and, using a flick of the wrist, direct a spray of the slurry on the wall. Do this several times until the proper texture appears. To get the flat spots, wait a few minutes for the slurry to set up and lay it off with a trowel or wide-blade drywall knife.
Use of private mortgage insurance climbs in 2007 Tax deduction makes home buying more attractive to those with good income, By Robert J. Bruss Despite all the negative publicity about the so-called "mortgage meltdown" with more than 100 major mortgage lenders either filing bankruptcy or being unable to fund their home loan commitments, low- and no-down-payment PMI (private mortgage insurance) mortgages are readily available if you have steady income and good credit. According to the Mortgage Insurance Companies of America, a trade group, the use of PMI is up 40 percent during the first half of 2007 from the same period in 2006. WHAT IS PMI? Most home buyers have heard of government-sponsored VA (U.S. Department of Veterans Affairs) and FHA (Federal Housing Administration) low-down-payment home loans. But they aren't suitable for many home buyers, especially if you are not a veteran or home prices are too high in your city. If you want to buy a house or condominium but can't obtain a VA or FHA mortgage and are "cash challenged" with only a small down payment, PMI lenders loan 90, 95, 97, 100 and even 103 percent of a home's purchase price. PMI insures the riskiest top 20 percent of conventional mortgages in case of a foreclosure loss to the lender. For example, suppose you want to buy a $400,000 house with little or no cash down payment. If you default and the lender suffers a foreclosure loss, the PMI insurer will generally pay the 20 percent of the lender's loss exceeding 80 percent of the loan balance. That's about $80,000 in this situation. But PMI should not be confused with mortgage life insurance, which pays off your mortgage if you die. PMI protects lenders, not borrowers. It enabled more than 2 million buyers to purchase homes last year. PROS AND CONS OF PMI. PMI monthly premiums, usually paid along with the monthly mortgage PITI (principal, interest, taxes and insurance) payment, typically add between $50 and several hundred dollars per month to the cost of home ownership. There are six nationwide PMI companies: AIG United Guaranty, Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp. (MGIC), PMI Mortgage Insurance Co., Republic Mortgage Insurance Co., and Triad Guaranty Insurance Corp. These PMI companies work with home loan originators such as banks, credit unions and mortgage bankers to prevent mortgage losses by establishing underwriting standards and insuring home loans across the nation. By diversifying, PMI companies minimize their losses if one area suffers substantial foreclosure defaults. Although PMI premiums seem expensive, they enable buyers to purchase homes with minimal out-of-pocket cash. To make PMI, VA and FHA home loans more attractive, their mortgage insurance premiums are now tax-deductible, but only for new PMI, FHA and VA loans originated after Jan. 1, 2007, for borrowers with less than $100,000 annual gross income (AGI). However, this new tax deduction does not apply to mortgages originated before 2007. HOW TO CANCEL PMI PREMIUMS. According to the Mortgage Insurance Companies of America (MICA), 90 percent of homeowners with PMI cancel within five years. Each mortgage lender, not the PMI insurer, makes its own cancellation rules. Generally, when a homeowner's equity exceeds 20 percent, as shown by a new appraisal from an appraiser selected by the mortgage lender, the monthly PMI premium will be canceled by the lender. To qualify, the borrower must have a record of on-time monthly payments. It is up to the borrower to request PMI cancellation and pay for the new appraisal from an approved appraiser. If you think you are eligible, contact your loan servicer. In 1999, Congress enacted legislation requiring automatic PMI premium cancellation when a home loan borrower's loan-to-value ratio drops below 78 percent of the loan's original balance. But this law, applicable to PMI loans originated after July 29, 1999, does not consider (a) a home's market-value appreciation or (b) the homeowner's capital improvements, which added market value to the residence. The result for most PMI borrowers is this law doesn't help much because it takes about 10 years for most home loans to reach the 78 percent level. AFTER CANCELLATION, YOU MAY BE ENTITLED TO A PARTIAL PMI REFUND. If you pay off your PMI mortgage in full or the lender agrees to cancel the PMI based on a new appraisal showing at least 20 percent home equity, some borrowers discover they are entitled to a partial PMI refund. This refund can arise because PMI premiums are collected by the loan servicer each month, but the premium is usually paid annually to the PMI insurer. But the borrower must ask. Refund checks of $100 to $1,500 or more are not unusual. If your lender refuses to account for your PMI premiums and you think you are entitled to a partial refund, the local small claims court is the best place to get the lender's attention and receive a judgment for the refund. FHA HOME LOANS DO NOT HAVE PMI. Just to confuse the situation, FHA borrowers have a different type of mortgage insurance, usually called MI, MMI or MIP. When an FHA home loan is fully paid off, a partial mortgage insurance refund may be due to the borrower. After you have paid off your FHA mortgage in full, ask the loan servicer if you are entitled to an MI, MMI or MIP refund. If you don't receive a refund check within 45 days, contact HUD at 1-800-697-6967 or write to U.S. Department of Housing and Urban Development, P.O. Box 23699, Washington, D.C., 20026-3699. On the Internet, go to www.hud.gov/fha/comp/refunds and enter your FHA case number with exact borrower's full name to see if HUD owes you a partial refund after FHA mortgage payoff. SUMMARY: PMI home loans enable borrowers to obtain mortgages with little or no cash down payments. Unlike VA and FHA mortgages, which often have restrictions to make them inappropriate for most home buyers, PMI mortgages are available regardless of loan amount if you have good income and good credit. For new PMI, FHA and VA mortgages originated after Jan. 1, 2007, the mortgage insurance fees are tax-deductible for borrowers with less than $100,000 adjusted gross income.
Stepped-up basis good for inheritors Is there a limit on number of qualifying properties? By Robert J. Bruss DEAR BOB: I am fascinated with the topic of "stepped-up basis" to market value for inherited properties, which often comes up in your articles. Now I see why you constantly advise parents not to add their adult children to their home titles because doing so would deprive them of the new stepped-up basis. Two questions: (1) does stepped-up basis apply to properties held in a revocable living trust, and (2) is there a limit to the number of properties that can be inherited with a new stepped-up basis? --Marvin G. DEAR MARVIN: (1) Stepped-up basis to market value on the date of the decedent's death applies to inherited properties and other assets held in a revocable living trust. (2) There is no limit to the number of inherited properties where the heirs will receive a new stepped-up basis. For full details, please consult a tax adviser who is familiar with estate taxation. CAN A PARTITION LAWSUIT APPLY TO JOINT-TENANCY PROPERTY? DEAR BOB: I have learned so much from your educational articles. When I read about a partition lawsuit to force the sale of a property, I thought I would never need that information. But now I do. About six months ago my two brothers and I inherited some land from an uncle. Unknown to me, title was taken by the three of us in joint tenancy with right of survivorship. I thought we all agreed to sell the land. But now one brother refuses to sell. He thinks we should hold the land for five or 10 years. It is vacant and is not suitable for rental as farmland so we would have to pay the property tax each year. Can two of us bring a partition lawsuit to force the sale of this joint tenancy land? --Karen V. DEAR KAREN: As far as I am aware, the law of every state allows a partition lawsuit to obtain a court order to force the sale of property held in joint tenancy with right of survivorship. If for some reason the law of the state where the land is located does not allow a partition sale of joint-tenancy property, you and the brother who wants to sell can break up the joint tenancy by deeding your shares to yourselves as tenants in common. For full details, please consult a real estate attorney in the state where the land is located. MORTGAGE RELIEF ON A "SHORT SALE" IS TAXABLE DEAR BOB: Some time ago you explained a "short sale" means the mortgage lender agrees to accept as payment in full a sale for a home's market value even if it is below the mortgage balance. That's what we did in late 2006 to sell our house in Ohio. It was worth less than our mortgage balance and we had to move to obtain a job. The lender agreed to accept a short sale for $183,785 although our mortgage balance was about $210,000. However, we received an IRS Form 1099 from the lender showing we had taxable "debt relief" income of $26,215. Is this right? How can we be taxed on money we didn't receive? --Ron D. DEAR RON: As an alternative to foreclosure when a mortgage borrower stops making payments, some lenders will accept a "short sale" of the property for less than the mortgage balance. They realize it is better for the lender to accept a short sale than to go through a foreclosure sale and lose even more money. However, the IRS says debt relief is taxable. That's why your mortgage lender had to send you that 1099 form showing the exact amount of your taxable debt relief. For more details, please consult your tax adviser.
Should home buyers make backup offers? What to consider when making this type of offer By Dian Hymer Missing out on a home you'd like to own can be heartbreaking. But, not all home sale transactions close, so you might have a second chance. Or, you could consider making a backup offer. A backup offer is an offer that is negotiated like any other offer until the buyers and sellers reach a price and terms that are mutually acceptable. A unique term of the agreement is that it is accepted as a backup offer subject to the collapse of a previously accepted offer that is in primary position. In an active, low inventory market, a seller might receive multiple offers and accept more than one backup offer. In this case, the backup offers would be ranked. For example, backup offer #3 would be subject to the collapse of backup offer #2 and backup offer #2 would be subject to the collapse of the primary offer. Backup offers also come into play in softer markets. The best listings at the best prices attract the most buyer attention regardless of market conditions. Even in a slow market a prime listing can sell quickly. If you're a little late to the table and no one else beat you to it, you might look into submitting a backup offer. But, first, consider the pros and cons. One disadvantage is that you may be tempted to postpone looking at any other listings until you find out if the first deal goes through. By doing so, you could potentially miss out on other good properties. HOUSE HUNTING TIP: If you decide you want a property enough to accept a backup position, continue to look at new listings that fit your parameters. Also make sure that your contract includes a provision that allows you to withdraw from the contract without penalty at any time up until you are notified that your offer is in primary position. Another disadvantage of being in backup position is that your commitment to buy the property could strengthen the primary buyers' resolve to continue with the transaction, even when issues come up like property defects that might otherwise kill the deal. Be aware that the sellers may have the right to renegotiate their contract with the primary buyers. Because of these drawbacks, many buyers shy away from making backup offers. They prefer to wait on the sidelines to see what happens with the first contract. A benefit of this approach is that the sellers might be easier to work with after having had a deal fall apart. There is, however, a risk in this approach. An attractive listing could draw serious interest from other buyers. If so, one of them might end up in backup position and preclude you from buying the property When there's an accepted backup offer, a listing doesn't come back on the market when the primary contract fails. The backup buyer is elevated to primary position without giving other buyers a chance to buy the property. Before deciding whether or not to make a backup offer, try to find out how much interest there is in the property. If there are other buyers serious about the property, it might be worth your while to submit an offer for a backup position. The other risk of waiting to see if the first deal collapses is that you could find yourself in competition with other buyers who are also waiting to see what happens. A lot of time and emotional energy goes in to making any offer. Some buyers would rather save this effort for a listing that is definitely available to buy. THE CLOSING: The best stance to adopt if you're a backup buyer is: If it's meant to be, it will happen.
Navigating home inspection process Poor representation can lead to failed deals, lawsuits By Dian Hymer There's one thing that buyers and sellers agree on: home inspections are no fun. Buyers and sellers hope for a good end result, but something invariably comes up. To complicate matters, inspectors sometimes disagree on what is wrong, what should be done to correct a problem or how much it will cost. Finding the right inspector isn't always easy, but it's often critical to resolving an issue. A home inspector recently found a defect in a chimney. He recommended that the fireplace not be used until the problem was corrected. A chimney contractor looked at the problem and said that fixing it was beyond his area of expertise. The buyer's agent suggested calling a second specialist who said he could repair the defect, but he was too busy to do the work before the transaction closed. Furthermore, he wouldn't be able to issue a firm bid for the repair work without dismantling part of the chimney in order to access the problem. The sellers agreed to fix the problem, but they were unwilling to sign a blank check. So the chimney contractor came up with a cost-not-to-exceed price. The sellers agreed to leave enough money in an escrow account to cover the maximum cost for the repair work; any unused funds would be returned to them after the work was completed. This was a relatively easy solution. The sellers took responsibility for paying for the repairs. And, the buyers agreed to wait to have the work done until after closing. Not all inspection-related negotiations go so smoothly. Some sellers, particularly in the current market, feel that they sold for a bargain price and don't want to give up a penny more for anything. Sellers who adopt a hard-line on inspection-related defects -- particularly if the buyers didn't know about the defects before they entered in to contract -- can sabotage the deal. With an increase in the number of homes for sale in many areas, it's easier for buyers to find another house to buy if a deal doesn't work out. And, they can usually wait if the right house isn't immediately available. HOUSE HUNTING TIP: You can best work out inspection-related issues by hiring a real estate agent before you get into contract to buy or sell a house. The agent should be a strong negotiator, resourceful and have a good track record for keeping transactions together. If you don't have past experience with an agent you're considering, ask for references. Then, contact the references. Be sure to ask if the buyer or seller felt well-represented during the inspection process. Ask for specific examples. Open lines of communication facilitate working through the inspection process. Sellers often balk when they find out at the eleventh hour that there is an issue. Rather than wait until the last minute to gather critical information, start working on your due diligence as soon as your offer is accepted. Frequent conversations between the buyers' and sellers' agents during the inspection process can pave the way to a more successful resolution to issues that arise. Buyers can be understandably upset if they find out only after their offer is accepted that the sellers neglected to disclose a material fact. A material fact is anything that might be relevant to someone's decision to buy or the price he'd be willing to pay. Along with full disclosure upfront, presale inspection reports can be beneficial. Note that disclosure laws vary from state to state. THE CLOSING: The more the buyers know about the property before they make an offer, the less chance there is of a deal falling apart or of the sellers being sued later for failure to disclose.
Seller financing without hiccups By Benny Kass DEAR BENNY: We are in our late 70s and have moved out of our house. We are selling the house to our daughter for approximately $338,000 and we are taking back the mortgage. We have been told the minimal interest rate we can charge her is 1.61 percent without getting in trouble with the IRS. And, it must be renewed each year. Is this correct? Please advise. –Louise DEAR LOUISE: You are referring to what the IRS calls the "applicable federal rate" (AFR). This is the rate that is a safe-harbor. If you go below the stated rate, you will be hit with imputed interest. The IRS breaks this down into three categories: (1) short-term -- loans no longer than three years; (2) mid-term -- loans over three years but not over nine, and (3) long-term -- loans over nine years. Let me provide you with an example. The long-term rate for February 2009 was 2.96 percent. If this will be the term of your daughter's loan, you can safely lend the money to her at 2.96 percent annual interest. (Of course, she can always pay it off sooner, and you have the right to gift her a portion of the loan on an annual basis). If you were to lend at 2 percent, the IRS will require you to declare -- and pay -- as if you actually received the full 2.96 percent of interest. This is known as an "imputed interest." You can find the applicable AFR on the IRS Web site (www.irs.gov) for the month in which you will be making the loan. DEAR BENNY: In a Bob Bruss article years ago, he stated that if you have an undated IRS Form 4506 in the file with no lender's name on it, that is a virtual invitation to the eventual loan owner to pry into your private tax returns. I called my loan company and they sent back this response: "As for the 4506 form, I have spoken with our legal department. The reason the 4506 form remains blank is if we sell your loan. If the page is not signed, we would not be able to provide the loan to you. They have told me that the privacy statement (opt-out document) you signed does not extend to providing information to our investors, and the privacy statement explains if and when we will disclose nonpublic personal information. We can disclose information to an investor at any time because it is part of providing the loan for which you applied.” My question: We did sign and date the Form 4506, but they left the lender name off. Is this a normal practice? –Dean DEAR DEAN: In my opinion, there are just too many legal forms that potential homebuyers (and refinancers) have to sign in order to get a mortgage loan. And, in my opinion, the most objectionable is IRS Form 4506, entitled "Request for Copy of Tax Return." You -- and Bob Bruss, my predecessor -- are correct. By signing this form, you have given a blank check to the holder of the document to have complete access to your federal income tax return(s). Which year? Well, paragraph 7 of the form specifically asks the signer to list the tax years. But most mortgage lenders want you to leave this blank so that they can fill in the years if they ever want -- or need -- to have access to your tax returns. In fact, the IRS specifically states on the form that "if you are requesting more than eight years or periods, you must attach another Form 4506." The IRS makes it clear on the top of the form that you must "not sign this form unless all applicable lines have been completed." Once again, lenders want you to leave this form blank and just write your Social Security number and sign your name. I understand the reason why lenders insist that you sign the form. There are fraud cases, and lenders want to be able to investigate your situation if they feel that you have misled them about your income, assets and expenses. When I conduct real estate closings, I generally fill in the year that settlement takes place in paragraph 7. Thus far, no lender has ever challenged this. But the bottom line is that if you want that mortgage loan, you have to comply with all of the lender's requirements, be they reasonable or not. DEAR BENNY: Your most recent article on creating LLCs for rental properties raised a number of questions. You stated "do not commingle your own funds." What if I set up checking accounts for each of my LLCs, but want to transfer the monthly "leftover" into my personal investments or into my personal checking account where I can use as I please? I have a bank debit card in which I extract funds from for my personal use. They are my investments and I need to have access to the LLC bank accounts to live and enjoy life. That's the dream. Further on you stated that as sole member, I should sign papers as "member." Why not owner, president, chairman, janitor, et al., as I am the only person who is named in the LLC? If I am the only member, my signature should be all that is needed. The problem that I find cumbersome in LLCs is that I have to set up bank accounts for every one of them and thus, I run around with three to four checkbooks. In one LLC, I have several duplexes and triplexes because of the bookkeeping excesses and I would hope that my insurance umbrella of $2 million would cover any law suit. –Bill DEAR BILL: Your "dream" may also be the dream of a creditor who wants to get at all of your assets. If you commingle funds -- i.e. use the funds from one or more of your LLCs as your personal funds -- you open yourself up to creditors who will argue that your LLC is only a sham -- a paper tiger. Furthermore, in your single-member LLC, you are the sole member. You are not the janitor, chairman of the board or anyone else. If you do not add the word "member" after your name, once again, a creditor could argue that you did not sign in your capacity as a member of the LLC but in your personal capacity, and thus you subject yourself to potential liability. A limited liability company (LLC) is a creature of state statute, and all technicalities must be followed very carefully. Yes, it is a pain to have to carry three to four checkbooks around, but it would be more of a pain should you lose all of your investments. Your $2 million umbrella insurance coverage may -- I repeat may -- be adequate protection, but if someone gets seriously injured or killed in one of your properties, it may not be enough. For maximum protection, set up a separate LLC for each of your properties and follow the rules. Ask your attorney for assistance. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.
Contingent sale offers can benefit sellers By Dian Hymer Convincing a seller to accept an offer that's contingent on the sale of another property can be challenging. The odds of acceptance improve if the offer is structured to the mutual benefit of both buyers and sellers. From the buyers' perspective, there are advantages and disadvantages to contingent sale offers. A big advantage is that the buyers don't have to go through with the purchase if their home doesn't sell. They don't risk much. The buyers may incur costs of inspecting and appraising the property, but the expense is minimal compared to buying a new home before selling the old one and ending up owning two homes at once. From the sellers' point of view, contingent sale offers are not desirable because the outcome is uncertain. This is why sellers who agree to a contingent sale offer usually want a release clause in the contract. A release clause allows sellers to continue to market their home and accept other offers in backup position, subject to the collapse of the primary offer. If the first buyers can't perform, they have to withdraw from the contract so that the seller can proceed with backup offer. Buyers can spend a lot of time finding the right house to buy. If they can't sell their current home before another buyer boots them out of contract, they have to start house hunting again. HOUSE HUNTING TIP: A contingent sale offer can be structured to give buyers more certainty about being able to close the deal. Normally, when there is a release in a contingent sale offer, it goes into effect as soon as the contract is ratified. But it doesn't necessarily have to go into effect then. Buyers can request that the release clause not go into effect for a period of time, say 14 to 21 or so days. If the buyers' home is ready to be put on the market and it's priced right and well located, there's a chance it will be under contract before the release clause goes into effect. A release clause that doesn't go into effect immediately should specify that if the buyers' property is under contract within the specified time frame, the release clause will not go into effect unless that deal were to fall apart. Sellers might think this approach benefits only the buyers. However, it can benefit the sellers in terms of their overall marketing strategy. When sellers of a property that's listed on the Multiple Listing Service (MLS) accept a contingent sale offer with a release clause, this information is published in the MLS. It is a material fact affecting the sale. A buyer can make an offer only for a backup position. Many buyers don't want to waste their time. So, a release clause can slow down the marketing of the sellers' property. And, it can be difficult to regenerate enthusiasm about the property if the buyers' property doesn't sell and the sellers' listing is still encumbered by a release clause. The sellers' property will show up as pending in the MLS if the buyers and sellers agree to delay the activation of the release clause. If the buyers' property doesn't sell by the end of the specified time period, the sellers' property will show up in the MLS as back on the market. This quickly and clearly announces that the listing is available for sale with no strings attached. THE CLOSING: Make sure your agent includes in the confidential MLS remarks to agents that the listing is back on the market because the buyers' home didn't sell, and due to no fault of the listing. Dian Hymer is a nationally syndicated real estate columnist and author.
How, What, Where, When: the 411 on Electronics Recycling By Michelle D. Alderson As conscious as consumers are becoming about recycling, every once in awhile it is easy to slip up. Maybe you didn't know where to recycle that AA battery, so you tossed it in the trash when nobody was looking. This is understandable. How much can one little battery hurt? According to the U.S. Environmental Protection Agency, each person in the United States discards eight dry-cell batteries per year. With a population of more than 305 million people, that adds up to a lot of batteries. And that's just the beginning. Think about all of the used cell phones, computers, CPUs, and other electronics languishing and leaching hazardous materials in landfills all over the country. At one time, the only option for recycling common household products was driving to a local Goodwill Store and hoping your used goods were salvageable. But what do you do with those used batteries or electronics that aren't? How do you ensure they don't end up in landfills? To find out where you can recycle these used goods in your neighborhood, we've put together a list of locations that offer recycling programs: AT&T Wireless (http://www.wireless.att.com): In addition to recycling used cell phones, PDAs, accessories, and batteries (regardless of manufacturer or carrier), AT&T Wireless has partnered with the charity Cell Phones for Soldiers (http://www.cellphonesforsoldiers.com/). Cell Phones for Soldiers collects and recycles wireless phones and uses the proceeds to buy free phone cards for United States military personnel and their families. Goodwill Industries (http://www.goodwill.org): In 2007, Goodwill Industries received more than 200,000 computers. Many are refurbished, but some are not. In response to the overwhelming number of electronics the organization receives each year, Goodwill Industries has created an E-Waste Initiative (http://www.goodwill.org/page/guest/about/howweoperate/recycling) to "seek economically and environmentally sound ways to recycle and reuse donated electronic equipment." Sprint PCS (http://www.sprint.com): The Sprint Project Connect (http://www.sprint.com/citizenship/communities_across/project_connect.html) program accepts used wireless phones, batteries, accessories, and connection cards, regardless of make, model, or service provider. All net proceeds go to benefit Internet safety for kids. United States Post Office (USPS) (http://www.usps.com): The USPS launched a new initiative in March to aid in recycling. Through its "Mail Back" (http://www.usps.com/communications/newsroom/2008/pr08_028.htm) program, customers can use free envelopes found in 1,500 post offices to return at no cost inkjet cartridges, PDAs, Blackberries, digital cameras, iPods, and MP3 players. Best Buy (http://www.bestbuy.com) recycles cell phones, ink cartridges, and rechargeable batteries. FedEx Kinko's (http://www.fedexkinkos.com) recycles inkjet and toner cartridges. Office Depot (http://www.officedepot.com) recycles used computers, monitors, digital cameras, fax machines, cell phones, and other electronics. OfficeMax (http://www.officemax.com) recycles inkjet and toner cartridges. Radio Shack (http://www.radioshack.com) recycles cell phones, NiCad batteries, and rechargeable batteries. Staples (http://www.staples.com) recycles used computer monitors, cell phones, PDAs, inkjet, and toner cartridges. T-Mobile (http://www.t-mobile.com): T-Mobile's recycling program accepts any make and model of wireless phones, batteries, PDAs, and accessories. In addition, 100 percent of refurbished product’s net proceeds go to charity. Verizon Wireless (http://www.verizonwireless.com): Verizon Wireless' HopeLine (http://aboutus.vzw.com/communityservice/hopeLineRecycling.html) phone recycling program donates cell phones, air time, and money received from refurbished cell phones to assist victims of domestic violence. The company also recycles used cell phones and equipment from all service providers. Walgreens (http://www.walgreens.com) recycles used dry-cell batteries, NiCad batteries, rechargeable batteries, and inkjet cartridges. If all else fails, a quick check on the earth911.org (http://www.earth911.org) Web site can help you find other recycling locations in your neighborhood. The Web site is very easy to use. Simply type in a ZIP code and the material/product you want to recycle, and find a list of local centers.
Detox your indoor air By Elyse Umlauf-Garneau Everyone seems to love that new-house smell and pine-scented air. Unfortunately, such aromas frequently are the stench of toxins being emitted by construction materials, cabinets, paint and adhesives. Formaldehyde, mold, dust mites and a multitude of other nasty bits may make up the chemical soup that you’re breathing. Air quality is important because more than 80 percent of most people’s time is spent indoors and exposure to bad air can cause symptoms as minor as headaches, watery eyes and sluggishness to more serious ailments like asthma and even cancer. Sources of poor indoor air quality (IAQ) include: -Volatile Organic Compounds (VOCs), involve a host of scary-sounding chemicals like benzene, toluene and formaldehyde. VOC sources include paint and paint strippers, aerosol sprays, disinfectants, dry-cleaned clothes and air fresheners. Matt Golden, president of Sustainable Spaces Inc. www.sustainablespaces.com, recommends being wary of every new thing (especially if they have a smell) you bring into the house. Chemicals in such items—be they small items like shower curtain liners to larger purchases like mattresses—can off-gas into the environment. -Biological pollutants can include bacteria, mold, dust mites and pet dander. Minimize dust and know that dust mites lurk in couches, bedding and mattresses. Washing bedding in hot water is important, and be sure that household appliances and systems, such as stoves, furnaces and air conditioners, are clean and operating properly. Mold often can be controlled by using exhaust fans in bathrooms and kitchens to move moisture outside, and by venting clothes dryers to the outdoors. Also remove moldy items (shower curtains, for instance) and fix leaky plumbing, and inspect for and clean mold from under carpets and on walls, ceilings and floors. Covering mold with paint, varnish or sealers could allow mold to return. “Products don’t solve problems,” Golden warns. He prefers a holistic approach to solving air quality problems—one that identifies and addresses their root causes. Sometimes IAQ problems stem from poor insulation or moisture in the crawl space and others, like mold formation and dry air, result from improperly sized HVAC systems. “Many heating and air conditioning systems are too big and they’re pushing air through leaky ducts and registers that are too small,” observes Golden. He often finds solutions by properly ventilating homes and delivering the correct amount of humidity in the air. Some solutions: When you’re building a new house or renovating, pay attention to air quality. Choose formaldehyde-free products and use low VOC paints, caulks and adhesives. Work with architects and contractors who understand and can address IAQ issues and who know how to balance energy efficiency with proper ventilation. Often correcting IAQ problems is simple. Golden points out that bag-less vacuum cleaners may suck microscopic contaminants and blow them right back into the air. Just switching to a vacuum with a HEPA filter could eliminate many irritants. And though cutting off the heat in an unused room may save energy, you could inadvertently be creating a mold problem. Needless to say, smoking cigarettes indoors is taboo. Swap chemically-based household cleaners for non-toxic ones made from natural materials. They’re readily available at stores and online. Find them at http://www.greenseal.org/findaproduct/index.cfm. Better yet, save money and make your own with easy-to-find products like vinegar and baking soda. Find some recipes at http://greenlivingideas.com/housecleaning/natural-cleaning-recipes.html#Surface. Additional resources: -Learn about improving IAQ during wildfires at www.allergyconsumerreview.com/improve-indoor-air-quality.html. -The sites, www.healthyhouseinstitute.com and www.healthhouse.org/ provide guidance on all aspects of creating a healthy home. -Find healthy household furnishings and building supplies at www.greenfusiondesigncenter.com/index.htm. -The California Air Resources Board www.arb.ca.gov/research/indoor/indoor.htm features IAQ guidelines and fact sheets.
Top home-buying mistakes revealed By Dian_Hymer The first rule of inspecting a home you want to buy is to stay intimately involved in the process, and to leave no stone unturned. If you're busy or traveling during the time period, you have to complete your due diligence investigations by enlisting the aid of a friend you trust to stand in on your behalf -- someone who will keep you well informed as inspections proceed. Buyers want to be sure they get a good deal on the home they buy. This is especially so if they're buying in a soft market. Whether a property is a good deal depends on its condition, its location and the price paid. Most buyers don't take the inspection process far enough. They hire a home inspector to do a general home inspection to make sure that all systems are in working order and that there aren't any serious defects that might affect their decision to buy or not. For some buyers, this constitutes their due diligence inspection of the property. But, in many cases, simply having a home inspection done is not enough to ensure that you don't end up regretting you bought the property. Most home inspectors recommend further inspections. Some buyers take these admonitions seriously and some don't. A recommendation that is often overlooked is to research the permit history. If you don't check the permit history, you could find out later, when you want to take out a permit for a renovation, that there are expired permits for work that never received a final approval from the city inspector. You might be required to reinstate the expired permits and finish the job to the building department's satisfaction before you can take out a permit for a new project. This could be expensive, take time, and at the least, be a hassle. Another item buyers ignore is the cost of routine home maintenance. Some homes cost more to maintain than others. Well-maintained homes will be easier to maintain because you'll have little deferred maintenance to repair. Ask the sellers for information about how much they pay per year for tree trimming, painting, and servicing house systems such as the roof, furnace and drainage systems. Also ask how much the utility bills run in an average winter and summer month. All of this will factor into the cost of owning the home. Buyers usually focus on the price they'll pay upfront for a house. How much it will cost them over time should also be factored into the total cost of home ownership. HOUSE HUNTING TIP: Buyers tend to pay more attention to the condition of the home they're buying than they do to finding out all they need to know about the area in which they'll be living. The home you buy is not a good value if you find out a year later that the neighborhood is declining. Make sure you find out if homeowners are moving in or out of the area. If you see a lot of remodeling going on in a neighborhood, this is a good sign that the homeowners plan to stay put. Another good sign is if there are few listings and the ones that come on the market sell quickly. This indicates a high demand for the neighborhood. You'll also want to find out about crime in the neighborhood, and whether or not there is development planned in the area that might have a positive or negative impact on the neighborhood. And check into the general state of the local economy. THE CLOSING: Are businesses hiring new employees or issuing pink slips?
Foreclosure rescue scams on the rise States make headway, provide victims relief By Tom Kelly Are the usual suspects returning to mortgage-related scams as a result of the subprime lending fallout? Does the practice of illegal "foreclosure rescue" operations extend even into the second-home market? It always seems that when a large group of consumers are in trouble with their home finances, bad guys are around to help the unsuspecting homeowner dig their hole a little deeper. The latest attempt at the age-old practice of equity skimming is foreclosure rescue where scammers peruse county records to find properties that are facing foreclosure for nonpayment of mortgages or taxes. "Foreclosure rescue scams have overtaken illegal property flipping as the most common scam; however, illegal property flipping is still a problem," said Rebecca Jacobsen, Washington state assistant attorney general. Two months ago, the attorney general's office settled a foreclosure rescue case against three Washington-based businesses and their owners accused of taking unfair advantage of homeowners facing foreclosure. Unlike consumers who had fallen behind on their mortgages, these homeowners were targeted because they were in arrears on their property taxes. "They (the defendants) told property owners that they would solve their foreclosure problems," said Rob McKenna, Washington state attorney general. "But often, their real intent was to let the property go to auction and take any excess proceeds from the sale -- money that would have gone to the property owner if the defendants hadn't 'helped' them." Under the settlement reached and filed in King County Superior Court, Tacoma, Wash.-based Fiscal Dynamics Inc. and Cumulative LLC, along with Seattle-based Northwest Assets, denied the state's allegations but agreed to pay a total of $290,000 in consumer restitution. Two individuals -- Walt Scamehorn, who owns Fiscal Dynamics and Cumulative, and E. Arliss Morgan, who owns Northwest Assets -- also denied the allegations but agreed to the settlement terms. The money will be used to provide refunds to consumers who would have received proceeds from the sales of their homes or land had the defendants not diverted the proceeds for their own use. Based on current information, more than 100 consumers may be entitled to receive restitution. Foreclosure rescue scams have made national news the past month in Massachusetts, Colorado and New Jersey. According to the Massachusetts Attorney General's office, the defendants in its case not only obtained the title to the homeowners' residences but also stripped most of the homes' equity though inflated mortgages, false fees for fictitious services and false certifications by closing attorneys. In certain cases, the defendants resold the homes amongst themselves, thereby extracting any remaining equity. While some second homes in Colorado have been selling at a significant loss, rescue scams typically strike only single-property owners. "Many times people who have second homes are more sophisticated and understand that foreclosure rescue operators are offering something too good to be true," Jacobsen said. "The typical target that we are seeing are people with no other assets who really are in a desperate situation." Tom DiMercurio, a veteran of 37 years in the foreclosure business, agrees with Jacobsen about the second-home market. "Some of the wealthy people in this country are looking at the $2 million vacation house they visit two or three times a year," DiMercurio said. "Many have put them on the market and will not get out of them what they put into them, but they don't draw the rescue plans you are talking about. "Obviously, the very rich never worry about anything, but there were instant millionaires a couple of years ago who paid cash for expensive homes who now wished they hadn't." According to Jacobsen, consumers who think they are being scammed should not sign anything until they get the documents looked at by a neutral party. They should contact the Consumer Protection Division of the Attorney General's Office or their lender for suggestions on who would be an appropriate neutral party to review the documents. If someone offers to bail you out, do your best to make sure they aren't simply tossing more water into your sinking boat. Law enforcement officials believe most of the people offering the help are out to help you sink.

Features

Remodels holding more value than home prices By Dian Hymer “Remodeling Magazine's” 2008-2009 Cost vs. Value Report, produced each year in conjunction with REALTOR® Magazine, contains good news about the value of remodeling projects. The recent Cost vs. Value Report showed that renovations on a nationwide basis held their value better than home prices did in 2008. According to the NATIONAL ASSOCIATION OF REALTORS® (NAR), home prices declined 7 percent in 2008, while the value of homeowners' investments in remodeling dropped only 2.8 percent in 2008. During slow real estate cycles, many would-be sellers postpone their move and remodel instead. This makes sense as long as the projects are selected carefully for maximum return on the investment. It's important to avoid renovations that would overimprove the property for the neighborhood. One benefit of remodeling sooner rather than just before selling is that the homeowner is able to enjoy the improvements before moving on. All too often, sellers wait until right before they put their home on the market to enhance its appeal. HOUSE HUNTING TIP: Remodeling, if done smartly, can result in a quicker sale and less negotiation with buyers over perceived shortcomings. Painting the house and updating the kitchen, baths, lighting fixtures and floor coverings are examples of improvements that can improve the sale price. In today's slow economy, there are more contractors looking for work in some areas. And, in some cases, their prices have come down. This positively impacts the return on investment when the home is sold. Recently, an Oakland, Calif., homeowner received a bid of under $20,000 for a midrange kitchen remodel. Four years ago, he received a $45,000 bid for the same work, but decided against going ahead with the project because of the cost. Now that he's ready to sell, he's planning to do the midrange kitchen remodel to enhance the salability of his home. The amount of return from a remodel investment that is recouped when the property is sold varies significantly from one place to the next and from project to project. For example, nationally, 70.7 percent of the cost of a major kitchen remodel was recouped at sale. In the Pacific region (Alaska, California, Hawaii, Oregon and Washington), a major kitchen remodel returned 95.5 percent. In San Francisco, a major kitchen remodel returned 131.5 percent of the investment at sale. Despite higher labor and material costs, The Pacific Coast average cost recouped at sale was 14.8 percent higher than in the rest of the country. Smaller cities such as Jackson, Miss., and Billings, Mont., had high rates of recovery due to lower labor and material costs. Nationally, exterior improvements generated the biggest payback on average. A midrange deck returned 80.8 percent. Upscale fiber cement siding returned 86.7 percent. A midrange minor kitchen remodel returned 79.5 percent. And upscale vinyl windows returned 79.2 percent. These projects increase curb appeal -- an important selling feature for most homebuyers. The data used to generate the Cost vs. Value Report was obtained from surveys sent to more than 150,000 appraisers, real estate agents and brokers in July and August 2008. The cost data was obtained from HomeTech Information Systems, a remodeling estimating software company. The confidence level of the results is 99 percent, plus or minus 2 percent, according to NAR. Homeowners who are concerned about the resale value of their home should first consult contractors to obtain estimates. Then consult with an experienced local real estate agent for input on the estimated cost recovery of the anticipated improvements before moving forward. THE CLOSING: Sellers often spend too much on improvements, or make improvements that don't add value at sale. Some improvements can actually decrease value if they are so specialized that they don't have broad-based appeal. Dian Hymer is a nationally syndicated real estate columnist and author.

Hot Links

Cathy Lee Nass http://cathyleenass.com California Home Search http://od448348.mlsallianceidx.com/Listings/IDXSCAllianceLanding.aspx Search for your new Home on my website http://warren4realestate.com SOLD by Warren! http://warren4realestate.com/career.htm Need an idea of what your home is worth? Call me! http://www.zillow.com/profile/warren.nass

Warren Nass REALTOR® Century 21 Westworld 15058 Rosecrans Avenue La Mirada,  CA  90638 714.606.0329 714.690.9388  warrennass@aol.com http://warren4realestate.com

Your Newsletter is Powered by: