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| The Tech Savvy Realtor |
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Articles and Advice |
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| 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. |
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| Homeowners, be careful signing divorce papers By Benny Kass DEAR BENNY: I am recently divorced. We had two houses. In the divorce, I got one and he got one. We both signed quitclaim deeds to each other. However, I needed to refinance mine to pay off the bills I accumulated just to get my house back into livable shape. (It was a rental while we were married.) Both houses have mortgage loans: Mine carries a rate of 6 percent and his is at 5.75 percent interest. Needless to say, there is no incentive for him to refinance that favorable loan rate. My ex is not the healthiest man, and my name is still on his loan. I told my lawyer several times through the divorce process that I wanted it stated in the divorce agreement that we both have to refinance. It did not happen. Even though a quitclaim was signed, what is my exposure if something happens to my ex, considering my name is still on the loan? –Becky DEAR BECKY: Why did you sign the divorce papers when they did not require your ex to refinance so that your name will get off of that loan? You might want to explore whether your lawyer did not properly represent you -- although there may be legitimate reasons why that did not happen. Should your ex die, his estate will most likely have to be probated. The most likely outcome will be either that the heirs to the property will assume the mortgage and keep the property, or will arrange to have it sold. Under either scenario, you are protected. However, if your ex stops making the monthly mortgage payments, and goes into default, since your name is still on the loan, the lender has the right to either foreclose on the property -- which will be a blemish on your credit rating -- or sue you for the balance of the note. I assume that when you were married and borrowed the money, you signed a promissory note, which indicated that you were both -- jointly and severally -- obligated to repay the loan. You should immediately contact the other lender and advise them that you no longer own the property. Make sure that you provide them with your current mailing address, so that any notices of default will go to you as well as to your ex. Should that happen, you should immediately retain a lawyer (a different one) who can take all appropriate steps to protect you, including filing suit against your ex. You have a problem that at the present time can be resolved only if your husband refinances. DEAR BENNY: I am a recently divorced woman. After many years of marriage in the same residence, I was decreed full ownership of the family home. However, I had to secure a substantial loan on the home to give to my ex-husband in order for him to move out. Because of my financial situation, I could not secure the loan without keeping him on the loan and on the deed. However, in the divorce settlement there is a quitclaim deed stating that I have five years to refinance the loan and get my ex-husband's name off the loan and off the house deed. I will not quality for a loan myself. However, I have a son, a recent college graduate, who has an excellent job and salary, and who is living downstairs and helping to pay the mortgage. Should I go ahead and record the quitclaim deed? My name has been changed. Would the mortgage company be alerted and would they then require the loan to be paid in full? Would I then be forced to sell sooner than the five years? Also, I know my ex-husband's name would still be on the loan. They may make me refinance with my name alone (I would not qualify), but maybe with my son's credit I could qualify, making him part owner with his name on the deed. Could you please clarify the most prudent steps for me to take to keep my home and free myself of the quitclaim deed? –Amy DEAR AMY: I bunched your question with the one above, since the issues are similar. First, federal law does not permit the lender to call your loan just because you changed your name or add your son to title. I suggest the following: Assuming that your son qualifies for a loan, have him buy half of the house. You then will both apply for a new loan, which if approved will pay off the existing loan, and your ex will be out of the picture. DEAR BENNY: My husband and I own a rental property that is paid off. We have been talking about separating, and my husband has said that I can keep the house. How can I get his name off the house and put my name on, or should we just sell it? I would like to continue to rent the property for a while longer because my daughter lives in it. –Virda DEAR VIRDA: I assume that your daughter is paying you rent. If you think that the property will continue to be a good investment, it's quite easy to have the property put exclusively into your name. Your husband just has to prepare a deed -- usually called a "quitclaim deed" -- conveying the property to you. In some states, it may be necessary for the two of you to convey back to you as sole owner. If you are still married, then (depending on state law) you may not have to pay any recordation or transfer tax. The filing fee should be nominal. But that's the easy part. You also have to explore the tax consequences of such a transfer. According to the tax code (section 1041 to be exact), when your husband transfers the house to you there is no taxable gain. Thus, your husband will not have to pay any capital gains tax. However, you should consult your tax advisors to determine if this will trigger any gift-tax consequences. When the house is transferred to you, (unless your husband is a nonresident alien) your husband's tax basis becomes yours. What does this mean? Let's say you initially paid $100,000 for the house. Each of your bases for tax purposes was $50,000. Now, when you become the sole owner of the property, your tax basis will be the full $100,000 (plus any improvements that have been made to the property over the years). So please explore all legal and tax implications before making the transfer. DEAR BENNY: My question is about the two-year residence requirement for tax exemption when selling your main residence. We owned the bare land for years and built a home on it in 2006. We actually moved out of our rental and into the home on Nov. 6, 2006, and by Dec. 31 the home was 99 percent complete. However, the final approval wasn't signed off until March 2007 when the required pool cover was installed. When I read the law, it states "primary residence date," but would that be the date we actually moved in or from date of final sign off by the building department? –Carol DEAR CAROL: Yours is an interesting question that will have lawyers and probably the IRS issuing dozens of opinions, many of which will be contradictory. I don't know the answer. The law says that you have to have owned and lived in the house for two out of the five years before the property is sold. I would argue that the target date would be when you actually moved into the house, namely November 2006. But if you can hold off until March 2009 -- which will be two years after you received the final clear-off from the county -- that would be the safest course to take. DEAR BENNY: I live in Florida and am executor of the will of a friend in New York City who owned a one-half interest in a condo in Ocean City, Md. She wanted to give that interest to my nephew upon her death. How do I go about transferring her interest to him? Do I need an attorney? –Ronald DEAR RONALD: Even if you went through probate in New York, since the deceased owned property in Maryland, you will have to open up what is known as "ancillary" or "foreign" probate in Maryland. It's not too complex, although you may want to retain a local attorney in Ocean City to assist you. Once the Maryland court probate proceeding has been established, you should have no problem issuing a personal representative (executor) deed to your nephew. To avoid any issues of conflict of interest, I assume that the will specifically states that the property interest is to go to your nephew. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. |
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| 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. |
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| 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. |
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| Pest repairs are turnoff for buyers By Dian Hymer In a perfect world, houses wouldn't deteriorate over time. In reality, the wear begins as soon as a house is built. Older houses tend to have more maintenance issues. But even new homes can develop problems within a few years if they were poorly constructed. Most homes are inspected for damage caused by wood pests -- such as dry rot, termites, fungus, decay and wood-boring beetles -- before they are sold. Who pays to correct the damage -- buyer or seller -- is often subject to negotiation. In a hot seller's market with a high percentage of multiple offers, buyers frequently buy "as is" regarding known defects to better their chances. This was common several years ago when home prices were rising rapidly. At that time, owning a home was more important than the condition of the property. One problem with buying "as is" with respect to pest work is that it's easy to overlook the fact that the work needs to be done. Many buyers who bought "as is" in recent years have not taken care of the pest repairs. These buyers who are trying to sell in today's market may find they have less equity than they thought they had. Not only have home prices declined in many areas recently, but today's home buyers are unlikely to buy "as is" regarding a large pest bill that was passed on from the previous owner. HOUSE HUNTING TIP: In soft markets, buyers are more prone to factor in the cost of curing deferred maintenance into their price. Ideally, sellers should have pest work done before they put their homes on the market. This removes the need for negotiation over pest repairs. Plus, the houses in the best condition that are priced right for the market are the ones that sell. It's not always possible for sellers to have pest work done before marketing their homes, either due to shortage of time or funds. In this case, make sure that you have presale inspection reports done before you market the property and price it to take into account the cost of the repair work. Also, you should make every effort to have the house looking as good as possible. In a soft market, sellers have a lot of competition from other sellers. Even if you can't replace a shower or a rotted mudsill before you market the property, at least have it showing at its best. This will get buyers interested in the property, particularly if the list price reflects the work that needs to be done. There is nothing wrong with buying a property in its "as is" condition as long as you have complete knowledge of the work that needs to be done. But, it is essential that you factor in the cost of the necessary work and ongoing maintenance. Many buyers overlook this and later discover that they can't afford to continue to own their home. It's rare that every item on a pest report needs to be done immediately. But, at some point the deferred maintenance needs to be corrected. Ask your inspector to prioritize the items on the report in terms of urgency level. A deck that's rotted to the point that it's unsafe should be replaced as soon as possible. However, if the bathroom floor needs replacing, but poses no danger, you might want to hold off having this work done until you remodel the entire bathroom, if that is in your game plan. THE CLOSING: In fact, in this case, replacing the floor would be a waste of money. |
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| Sellers use disclosure to their advantage By Dian Hymer Forty years ago, seller disclosures weren't part of the home-buying process. The rule of the game was buyer beware. Now most states have seller disclosure requirements, although they vary from one state to the next. Consult with a Realtor, the Department of Real Estate, or a real estate attorney in the area where you're buying or selling if you have questions about what a seller is required to disclose. Seller disclosures came into being in order to protect home buyers. However, seller disclosures can also protect sellers. For example, a seller of an older home in the hills of Oakland, Calif., disclosed in writing that the basement flooded during heavy rains. A few months after the sale closed, the listing agent received a call from the buyer. He was upset that there was water in the basement following an overnight rain storm. He insisted that no one had informed him of this situation before he purchased the property. The listing agent reviewed the transaction file. The sellers had disclosed in writing that the basement flooded during heavy rains. The buyer had signed to confirm receipt of this information before he removed his inspection contingency from the contract. What could have been a nasty lawsuit disappeared immediately. During times when it's difficult to sell, sellers may be tempted to conceal negative information about their homes for fear that it will keep the home from selling. Sellers should resist this temptation. Concealing a material fact can have severe consequences. Another seller stated in his seller disclosures that he had never had any water problems at the house. He had also remodeled the basement and presented it as a usable family room. Not long after the buyers moved in, bad weather set in. So much water ran into the basement that the cozy family room was uninhabitable. The buyers sued the seller and recovered a hefty sum. HOUSE HUNTING TIP: Think of disclosure as damage control. Although this may seem counterintuitive, you want any negative information affecting the property to be revealed before, not after, the home sale. If buyers know that the roof is at the end of its life, they can make a determination before buying about how much they can pay for the house, or if they can even afford to buy it without help from the sellers. Problems arise when sellers withhold this sort of information. A less-than-candid seller was sued successfully by the buyer when the roof leaked soon after closing. The seller's disclosure statement mentioned no problems with the roof. The new owner became friendly with his next-door neighbor who told him that the seller had talked to several roofers and was planning to re-roof the house before the rainy season. What you choose to conceal could be disclosed for you by a neighbor. The goal in selling your home is to sell for the best price and on the best terms possible. You defeat the purpose if you end up having to pay back part or the entire sale proceeds to settle a lawsuit. It's not always clear if a fact is material. For example, the sellers of a home in the trendy Rockridge neighborhood in Oakland knew that a cleaning person who worked for the past owner had been raped in the house. The seller, who was an attorney, decided to disclose this fact. This caused a nervous single woman to decide against buying the house. But, it made no difference to the ultimate buyer. THE CLOSING: And, the disclosure had no negative impact on the selling price. |
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| Hot Links |
| My Web Page http://www.tonybalsamo.com Realty Times http://realtytimes.com/ Pacifica Mortgage http://www.surfforloans.com San Diego Association Of Realtors http://www.sdar.com San Diego Events http://luvinsandiego.com/events.pdf |
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