Today's Top Real Estate NewsProvided by Inman News7/4/2008 9:46:26 PM
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Dead landscaping to cost landlord thousands
Can security deposit be raided to fix damage? Robert Griswold Inman News Q: I am a landlord with one rental house. I have a problem with damage done to the landscaping by the tenants who recently moved out. The rental contract states, "The tenants agree to care for and adequately water the lawn, shrubbery and trees." I have always paid the water bill and there was no noticeable change in the monthly amount so I was very disappointed when I met them for their move-out inspection to find they let the trees, shrubbery and grass die. This damage will amount to hundreds, if not thousands, of dollars in repairs before I can rent out the house again. Can the security deposit be applied to the damage done to the yard? A: Based on the language you included in the rental agreement, I believe you have grounds for making reasonable deductions against the tenant's security deposit as they clearly breached the terms by allowing the landscaping to die. Of course, determining what is proper maintenance for landscaping can be very subjective and you need to be fair in assessing the damage to the former tenants. For example, if the grass can recover with watering it would be unreasonable to charge the tenant for resodding the entire yard. Hopefully you had pictures of the landscaping before the tenants moved in to establish the pre-move-in condition of the landscaping. Take pictures now to show that the damage occurred during the tenancy. This will be particularly helpful if the tenants go to small claims court to challenge your security deposit deductions. Also, you should seek at least two or three bids for any replanting or other professional services. It is likely that getting these bids will take longer than the maximum time allowed to account for and refund any remaining balance of the tenant's security deposit, so you should also contact the tenant in writing to let them know of any other deductions and exactly what your concerns are about the damage to the landscaping. Once you receive the bids, select the lowest bid that will do the work properly and send the former tenant the final accounting indicating the remaining balance due or amount owed. Q: I am a concerned parent who has a 22-year-old son attending college out of the area. At the beginning of last semester, without my knowledge or approval, my son decided to give notice and move out of his college dormitory. He has rented an apartment near campus on a 12-month lease with some other students. I recently met his roommates and was unimpressed and do not like the environment that he is now living in. I want to know how I can break the lease and get him to move back on campus? His grades are slipping and I believe that he might even be suicidal. Is this justification to break the lease and get a full refund of his security deposit? A: It would appear that your son has signed a legally binding lease and you cannot unilaterally break the lease without a breach by the landlord. Clearly, if you have concerns about his personal safety then you should take action as his parent regardless of his lease obligation or any concern about his security deposit. One idea is that if your son is truly suffering from a medical condition, you could contact an appropriate health care provider and see if they feel that your son must relocate for medical reasons under the Americans with Disabilities Act. As a property manager, it has been my experience that generally there is no legal basis to break a lease due to a change in personal circumstances (bad grades, or incompatible or questionable roommates). The fact that your adult son did not get your permission is not grounds to argue that the landlord should break the lease. The landlord has every right to expect that your son will honor the provisions of the lease for the entire term. But, assuming your son agrees with your conclusion that he should move, your son should contact the landlord to discuss possible terms under which they would voluntarily release him from his legal obligation. He can also seek to find a replacement tenant to fulfill the balance of the lease as long as the landlord will approve the replacement roommate. If your son is the only one vacating the rental unit, then the landlord would properly require that the security deposit remain in place as long as the other roommates have possession of the property. Then your son would have to make arrangements to handle any issues with the deposit internally with the new roommate or the remaining roommates. This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and co-author of "Real Estate Investing for Dummies." E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com. Questions should be brief and cannot be answered individually. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Inman News
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Elderly couple urged to rethink real estate title
If title isn't fixed, offspring see inheritance trouble Benny Kass Inman News Q: My parents (now in their 80s) own a small apartment building with my brother and his wife. Title is held as joint tenants with right of survivorship. When the property was initially purchased, they agreed that this would be a 50/50 partnership. Both couples also agreed that if they died, their respective 50 percent share would go to their respective estate and not to the remaining partners. I have two questions: Shouldn't they have the title redrawn as tenants in common so as to accomplish what they initially intended? If my brother and his wife refuse to go along with changing the title to the property to tenants in common, can my parents proceed to change it without their partners' consent? My brother has made it very clear that they want their 50 percent share to go to their kids in the case of their death, but they may be banking on acquiring 100 percent of property upon my parents' death (because of their advanced age) if title stays the way it is. A: What ever happened to "brotherly love"? Have you discussed the matter with your parents and with your brother and his wife? Perhaps your parents have changed their mind and want the entire property to go to your brother on their death. First, let's analyze the impact of the title situation. The four owners hold title as joint tenants with rights of survivorship. That means that on the death of any one owner, his or her share will automatically -- by operation of law -- vest in the remaining three. And as other owners die, title will continue to pass to those who are still alive. Probate will not be required. Furthermore, even if your parents each have a last will and testament giving you their interest in the property on their death, that will is ineffective. The deed will control how their interests will be distributed. While you can try to make a strong argument that this was not their intention, the law will not support your position. To accomplish what you claim was the original intention, title should have been held as follows: "Husband and Wife, as tenants by the entirety as to a one-half interest, and as tenants in common with Son and Daughter-in-law as tenants by the entirety as to the remaining one-half interest." (Note: If you live in a community property law state, consult your own attorney for specific advice.) What does this accomplish? If the husband dies first, his wife would own one-half of the property. This is because husband and wife originally owned their half as "tenants by the entirety" (T/E), which has the same effect as holding title as "joint tenants with right of survivorship." The major difference is that T/E is reserved exclusively for husbands and wives. Unlike a joint tenancy, which can be unilaterally broken, the T/E can be divided only by agreement between the parties, death or divorce. Then when your mother dies, because she now owns the property as "tenants in common" with your brother and his wife, her half would have to be probated. Assuming that there are no major financial obligations to creditors -- such as credit-card debt, other mortgage obligations, or judgments against your mother -- half of the house would be given as instructed by her will. So the answer to your first question is yes; if your parents want their half to be distributed by their will -- and not by operation of law to your brother and sister-in-law -- they should arrange to have the title changed as described above. If there is no will, the probate judge will look to the laws in the state where your parents died (called "intestacy laws"), which spell out how the property is to be distributed. But, while I certainly appreciate your concern, this is not your decision to make. You can give advice to your parents, but you cannot force them to make the change. For all you know, they have decided that your brother needs the money from the house more than you and want to make sure that he will own the property on their death. Also, your parents may have provided other benefits for you in their will. As for your second question, yes, a joint tenant can unilaterally change the title into a tenant-in-common arrangement. But once again, that's a decision only your parents can make. It's probably too late for your parents, but there is a strong lesson to be learned. Whenever you enter into any real estate "partnership" with anyone -- even it be a friend or a relative -- make sure that you have a written agreement spelling out all of the terms and conditions regarding ownership and maintenance of the property. Specifically:
These are a few of the basic questions that must be incorporated into a written agreement, to be signed before settlement takes place. It is always better to discuss these matters while you are friendly and talking to each other rather than try to resolve issues at a later date when anger and frustration -- and often lawyers -- are present. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Benny L. Kass
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Family challenges 'cure or quit' notice
Rent it Right Janet Portman Inman News Q: My wife and I received a three-day "Notice to cure or quit" from our property manager. The manager claims my child was throwing thrash and making excessive noise inside the apartment complex. When we asked for proof, they said that they did not have any. In fact, we found out that there were several other children playing with our child on the alleged date, and their parents did not receive notices. I smell discrimination! --Robert A: Your family may have experienced unequal treatment, but that's not necessarily the same as illegal discrimination. Here's the basics: Landlords may not single out people and treat them differently because of a protected characteristic (race, color, religion, national origin, families with children, pregnancy, disability, and sex). For example, landlords may not reject prospects because of their race or terminate the leases of certain tenants because of their religion. Nor should a landlord choose to "write up" a black child and not a white child, for the same rule-breaking behavior. But you haven't told me anything to indicate that your family was singled out on the basis of your race, religion or any other protected characteristic. Unless you can place yourself within a legally protected class and argue that management chose to send the 'cure or quit' notice to you because of your status, you don't have a discrimination beef. If you're not dealing with illegal discrimination, give some thought to what may be going on here. Perhaps your child is perceived as the ring leader, and management wants to remove him to quiet things down. Or, maybe they want to get rid of you for other reasons, and are seizing on this opportunity to send a notice. As unpleasant as some of these possibilities may be, you cannot deal with the situation until you've considered them and honestly evaluated them. It would be a good idea to ask for a meeting with management, hosted by a local mediator (many cities provide landlord-tenant mediation at no cost -- contact your city attorney for information). At the meeting, where the mediator will elicit both sides' versions but won't hand down any decisions, you may get to the bottom of why you, and not the others, received a notice. If you're seriously interested in maintaining good relations with management, you'll need to spend a little time working on it. And in the meantime, speak with your child -- noticeably absent from your question was a denial that the kids were out of line. If they were causing an unreasonable ruckus, that has to stop. Q: My ex-tenants owe me rent but have moved to another state. Can I sue them for nonpayment of rent? What happens if they leave the country? --Kerri A: Suing tenants who are no longer in your state is legally possible, but it may be difficult to accomplish. Let's assume you'd use small claims court, because of the relatively small amount of money involved, and because it's faster and cheaper to handle the case yourself (in fact, if you're suing over a few thousand dollars, it will cost you that much or more to hire an attorney). To get your case before a judge, you'll need to give the tenants the court papers that announce your lawsuit and tell them how to respond (this is called "serving" the defendants). But here's where you encounter a problem: In regular trial courts, you can serve the other side wherever your process server finds them, even out of state (there's a special process for serving defendants in another country, too). But in small claims court, unless the defendant injured you in a car accident in your state or owns property in your state, you have to serve the defendant within the boundaries of your state. Because you probably don't know whether the tenants still visit your state, let alone how to find them if they do, suing them in your home state in small claims court isn't going to work. The next option is to sue them in the state where they now live. Depending on the geography, this might be doable. Some states allow you to initiate a small claims court lawsuit -- and serve the court papers -- by mail, though you will have to show up for trial. Needless to say, suing someone who has moved out of the country isn't an option for you. Landlords who find themselves burned by "skips" have found various ways to respond, from turning the debt over to a collection service to using online "bad tenant" Web sites to blacklist the tenant. Collection agencies have a blunt way of getting some debtors to pay attention -- they threaten to report the debt to a credit reporting agency, which may then place the debt on the debtor's credit report. Often, this threat is enough to get the debtor to pay up, or at least pay a portion. The collection agency will take some of what it recovers as a fee, however, so you may end up with only a small percentage of what you're owed. If you're interested in using a collection agency, tell them how far you're willing to compromise. Q: My sister is in a long-term (six years) rental situation. She had a one-year lease, then went month to month. All has been rosy with her out-of-state landlord until this year. He's announced that he needed to sell the house immediately in order to satisfy an IRS debt. My sister is on housing assistance, so her options for moving are very limited. The agency assists with the rent, but does not help with security deposits. In order to move, my sister needs a refund of her security deposit from her current place. Unfortunately, the landlord made it clear that he expects her to stay (and continue delivering the rent) until he sells, and he has refused to refund her deposit until then. This sticks her there, unable to secure a new home, until he sells, at which time she may have as little as 15 days to get out. My sister always pays on time and keeps a spotless house, so I can't imagine that the landlord will even need the deposit. My sister has now been advised to file a lien against the house in order to recover her deposit so she can begin looking for a new home. She hopes that the threat will bring about action, but I'm not so sure. I don't believe she can afford an attorney, and I'm not sure how well this approach would work. --Krista T. A: Your sister's landlord is entitled to keep the deposit until she moves out, though he must return it (in most states) within a specified or at least a reasonable period of time, minus deductions for only unpaid rent and damage beyond normal wear and tear. Your sister isn't alone in being squeezed at moving time, needing to come up with a deposit on a new home before the deposit from the old has been returned. With rents as high as they are these days, a tenant can easily have a few thousand tied up in the old deposit and need several thousand more for the first month's rent plus the new deposit (which in some states can be twice the monthly rent). Her options are limited, and her best course might be to appeal to family or friends for a very short-term loan. If the place really is in great shape, she should be able to pay off the loan as soon as the full deposit is returned to her. Your sister definitely should not file a lien against the property in an effort to pressure the owner to return her deposit early. A lien is a legitimate device when used properly, by someone to whom the property owner owes money. For example, contractors or subcontractors who have performed work on a property but have not been paid are entitled to a lien, as is the IRS if the property owner owes back taxes. If the matter isn't resolved, the lienholder can force a sale of the property to satisfy the unpaid debt. Because liens stay with the property no matter who owns it, the presence of a lien on a property's title report is a "cloud" on the title, and it will diminish the value of the property and certainly discourage many would-be buyers. A seller will normally clear up any liens before placing a piece of property on the market. If she files a lien, your sister will be doing so fraudulently, because she has no claim of an unpaid debt. The owner will get it removed, but that's not the end of the story. Abusing the legal process will expose your sister to a lawsuit from the owner for intentionally interfering with his business opportunities. Needless to say, she doesn't need this trouble. She'd be better served to begin looking for alternate housing now, giving the legally required notice once she finds a place, and lining up her supporters for help with the new deposit. Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Janet Portman
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Person-to-person loan last hope after bankruptcy
Foreclosure makes it difficult for many to get financing Ilyce Glink Inman News Q: I am in Chapter 7 bankruptcy and will receive my discharge at the end of July. I'm losing my house and car in the bankruptcy. What will be the best way for me to finance a used car with a bankruptcy on my credit? I will be moving into an apartment. A: I'm sorry that you've had such severe financial troubles. I hope that your bankruptcy will allow you to have a fresh start. But, it won't happen immediately. It will take years for your credit history to normalize and your credit score to rise. In the meantime, you may have a lot of trouble financing a car right now. You can shop around, but a lot of what you'll find will depend on how low your credit score is. Your credit score will determine how high an interest rate you'll pay on your car loan. Start by pulling a copy of your credit history and score at AnnualCreditReport.com. (The credit history will be free, but you'll have to pay $7 for a credit score.) Then, start shopping around with lenders. If you can't get a conventional lender to loan you money to buy a used car, consider a P2P lender. P2P stands for person-to-person lending, and it is a growing category of financing, primarily Internet-based. With a P2P lender, you provide your credit history and score and ask for the amount you need to borrow. Investors (who by and large are ordinary folks like you and me) will decide how much of a risk you pose and tell you how much money they'll loan you and for what interest rate. A more personal way to do this is to see if you can get a family member to lend you the cash you need to buy your car. You can write up a formal agreement or go to a site like Virgin Money, which will formalize the loan, create a repayment schedule, and arrange for cash to be automatically withdrawn from your account each month. It's possible that you won't even qualify for a car loan right now, so be sure to figure out a backup plan. Keep this in mind as you're going through the process, and try to develop a backup plan. Q: If I were to get a VA loan to buy my girlfriend's home could she sell it to me for less than the appraised value of the home? And if so, would her income be considered part of my total income on the VA loan? A: According to the Department of Veterans Affairs, which backs VA loans, there is nothing in the rules that prohibits a seller from selling a home for less than the VA-determined value of the property. As far as using a girlfriend's income to help qualify for the loan, it is possible to do this, according to a VA spokesperson. "When a veteran obtains a loan with a person who is not his or her spouse, the VA is only authorized to guarantee the veteran's portion of the loan. This sometimes creates a problem for the lender." It doesn't sound as though your girlfriend is selling you her house. It sounds like she is selling you half of the house, but you are hoping to qualify for the purchase with her. If you buy half of the house from her, and then you refinance the entire purchase, will there be enough money to pay off her old loans on the home? There are other considerations as well. In some states, your "purchase" of your share of the home will cause you to pay transfer taxes and other costs. Your girlfriend, in some circumstances, may be considered to have sold part of the home to you for federal income tax purposes. If she has a gain from the sale of that share and she has not lived in the home for two of the last five years, she might have to pay capital gains taxes on the sale to you. There may be other issues for you to consider and you need to sit down with a good mortgage person to go through them. You may also want to talk to a real estate attorney or estate planner to review your options in moving forward. Since you are not married, you might want an agreement between the two of you to cover the many issues that may arise if you break up -- division of the equity in the home; who would get to keep the home; and forcing the person who stays in the home to refinance to pay off the old debt. Q: I have a legal question I was hoping you could answer. Let's say I have a Web site where tenants can browse around and find rentals. It's free for prospective tenants to use. However, to post a rental on the Web site, the landlord must pay $19.99 a month. Keep in mind I have no real connection to the landlord, and I do not personally take the tenant to the landlord's rental or work with the tenants at all. In a nutshell, the landlords pay me to post their rental(s) on my Web site for tenants to browse and get an idea as to where they want to rent. My question is: Is it legal to receive a commission from the landlord (i.e. the $19.99 per month) for having his or her vacant rental listed on my site even if I don't have a real estate license? In other words, do you need a real estate salesperson's license to receive compensation in this scenario? A: I'm not an attorney, but it seems to me that you're an information publisher, not a participant in the real estate transaction. The investor is buying an ad on your Web site. You get paid whether the unit is rented or not. It appears from your description as though your business isn't all that different from craigslist or a newspaper's online classified advertising section, where real estate agents are charged a flat fee to put their real estate listings on that Web site. Please talk to an intellectual property attorney for further clarification, and good luck with your venture. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink
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TIC with best friend: good or bad idea?
REThink Real Estate Tara-Nicholle Nelson Inman News Q: My best friend and I have been like sisters since we were 10 years old. We happen to both be house hunting in the same area at the same time -- me with my husband, and she with her new-ish (but serious) live-in boyfriend. We stumbled across this super-cute duplex with mirror-image units. It wasn't exactly what either couple was looking for, but the units would work well for both of our households, and we are each qualified for more than half of the price of the building. She and I trust each other implicitly, but the men in the group are wary of all four of us sharing a mortgage. What happens if someone fails to make their half of the mortgage payment? Mindset Management There are lots of lifestyle and relationship considerations to take into account when considering a transaction like you describe -- buying a place with your friends. This is a good point in time for you both to reflect on what your goals for home buying were in the first place and determine whether a shared ownership arrangement will further or hinder those aims. For example, many first-time home buyers look forward to the autonomy of ownership, such as being able to paint your house whatever color you want, playing your music however loud you want, and landscaping your home to suit your whims -- all things that you won't be able to do so freely if you buy a building jointly with your friend. Of course, many owners of condos and homes in planned developments give up such freedoms for the benefits of varying degrees of communal ownership and living arrangements -- just do a check-in to be sure that you're not compromising your vision of home ownership without making a conscious decision to do so. Need-to-Knows 1. Legal Ownership. In most states, the ideal legal ownership vehicle for your sort of transaction is called tenancy-in-common, or TIC for short. In a TIC, owners have the freedom to custom craft the details of the shared ownership arrangement to their precise desires; owners can own the property in any combination of percentages of ownership, and can negotiate their own rights and obligations vis-à-vis the property and each other. In your situation, it sounds like the two couples would own the property 50/50. However, there are still lots of things to negotiate in terms of how common bills will be apportioned and paid; how the property will be maintained and repaired; rules and regulations for daily living (e.g., music, pets, noise-making activities, elective remodeling), etc. More importantly, you'll need to specify the particular areas of the property to be exclusively used by each couple, the particular areas that will be shared, and any guidelines or restrictions on selling a unit. All of the arrangements you negotiate must be reduced to writing, in a document called a TIC agreement -- I beg you to hire an attorney to help you, your BFF and your respective sweethearts negotiate and document this agreement. A good TIC agreement may cost you a couple thousand dollars, but it may help you (a) know before you even close escrow whether the relationship can withstand the deal, and (b) avoid issues later by resolving them before they truly become "issues." 2. Mortgage. The TIC form of legal ownership allows you two mortgage options. First, you, your husband, your friend and her boyfriend can simply all apply for and share a single, regular old mortgage. You would all agree to joint and several liability -- that just means that if the mortgage is ever not paid, each of you individually would be held responsible by the mortgage lender. For your purposes, that means that if your best friend and her husband ever failed to pay their half, you and your husband's credit would be impacted, and your share of ownership in the home would be threatened -- if the lender forecloses, it will foreclose on the entire property, even if you have paid your share. The second mortgage option is a fractional ownership loan, also known as a TIC loan. Each couple would qualify for and commit to a mortgage separate from the other couple, and each mortgage would be secured only by that couple's share of ownership in the property. So, if you defaulted on your mortgage and the bank foreclosed on your share (Heaven forbid), your friend and her boyfriend would keep their share, so long as they kept their separate mortgage current. I wish it were as simple as just taking a fractional loan. But fractional loans also have major pros and cons -- some of which may be deal-breakers for one or more of the parties involved:
Action Plan
Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook," and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Tara-Nicholle Nelson
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Do 1980s ceilings contain asbestos?
Doctor's strict advice to home buyers not shared by all Bill and Kevin Burnett Inman News Q: Could you advise about "popcorn" ceilings and whether they have asbestos in them? How do you get rid of them and is it expensive? We are thinking of buying a 1987 house that has these ceilings throughout. Our doctor recommended getting the material tested before stepping into the house. Could you advise us about this matter? A: Blown-on textured ceilings, aka "popcorn," may contain asbestos depending on when they were installed. In the late 1970s the use of asbestos in building products was banned because of the health risks. The 1987 vintage home you have your eye on probably doesn't contain asbestos. But the only way to tell for sure is to have the ceiling tested. For more information on asbestos, check out the Environmental Protection Agency Web site, www.epa.gov/asbestos. We don't agree with your doctor. You can set foot in the house and you can safely live in it. Even if the ceiling contains asbestos, it very probably isn't a threat to your health. According to the EPA, "Asbestos is made up of microscopic bundles of fibers that may become airborne when asbestos-containing materials are damaged or disturbed. When these fibers get into the air they may be inhaled into the lungs and cause significant health problems." Unless the ceiling is crumbling to dust, there is no health hazard. You're best served by leaving it alone. Asbestos is present in many building materials of the past. A homeowner might find it in roofing and siding shingles made of asbestos cement, insulation (in houses built between 1930 and 1950), vinyl flooring, heating duct insulation in older homes and in textured paint and patching compounds used on wall and ceiling joints (use of which was banned in 1977). Test it by submitting samples to a laboratory for analysis. The cost is minimal. Laboratories are listed in the Yellow Pages under "Asbestos - Consulting and Testing." Obtain the samples by wetting a small piece of the ceiling and scraping it into a plastic bag. Ask the lab how much you need to provide. Take the sample from a closet or another out-the-way place. If the test shows the ceiling that does not contain asbestos, there are two ways to get rid of the popcorn look: Cover it up or scrape it off. A third option, if you want to forgo the hassle of scraping or covering, is to paint it. Painting will make it look fresh and eliminate the need for testing because any asbestos in the ceiling will be sealed in by the paint. The disadvantage is that you will retain the popcorn look. If you paint, we recommend using an airless sprayer because the popcorn "kernels" tend to get caught in the roller. If the asbestos test is positive, removal is not a do-it-yourself project. We recommend that you hire a licensed and certified asbestos abatement contractor to remove the popcorn. Be prepared for significant mess and expense. Inhaled in large amounts, asbestos can cause serious health problems, including lung cancer, mesothelioma (a cancer of the lining of the chest and the abdominal cavity) and asbestosis (scarring of the lungs with fibrous tissue). In past columns we've advocated drywalling over popcorn ceilings. Covering is a simple way to get rid of the "look" without messing with asbestos removal. The job is affordable, especially if you do the work yourself. The cost of materials is only about 25 cents a square foot. Covering the ceilings with drywall will encapsulate any asbestos that might be present. But be advised that the known presence of asbestos must be disclosed to a buyer should you sell the property. Recently, Bill and our brother Bryan contracted for scraping off "popcorn." Neither had to deal with asbestos. Bill hired Pacific Coast Drywall, a San Francisco Bay Area company. They will scrape the 'corn, repair any dings, texture the ceiling to match the walls, and paint if you want. Bryan, who lives in Idaho, used a local "moonlighter." Bryan paid $2 per square foot for scraping and texturing; Bill paid $2.75 per square foot for the same work. If you contract it out, expect to pay about $2.25 to $3 per square foot. Scraping is a straightforward process if the ceiling hasn't been painted. It can be a do-it-yourself project. But it's seriously messy. If the ceiling has been painted, removal will require chemical agents to penetrate the paint. That job is better left to the pros. To scrape an unpainted, non-asbestos-containing ceiling, follow these steps: 1. Cover the floor with drop cloths and the walls with plastic sheeting. 2. Mix liquid detergent and water at a ratio of 1 cup of liquid detergent to 5 gallons of water. 3. Using a tank sprayer, spray the popcorn. Allow 20 minutes for the solution to saturate the popcorn. 4. Once saturated, scrape the texture off with a 4- to 6-inch drywall knife. 5. Fold up the debris in the drop cloths, patch any dings on the ceiling, texture and paint. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Bill and Kevin Burnett
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Sellers hate stigma that comes with re-listing
How long until days on market resets? Ilyce Glink Inman News Q: We live in Baltimore and are trying to sell our house. My agent tells me that my listing has to be withdrawn from the local multiple listing service (MLS) for at least six months, otherwise the number of days on market will carry forward from my old listing to a new listing. Our house has been on the market for nine months and we're trying to find a way not to show that in the MLS. A: It's a rough time to be a home seller. Unfortunately, there are more people trying to sell their homes than folks who want to buy them. That means there's a lot of "excess inventory" (unsold houses, if you're looking to get around the jargon) that has to be sold before the current housing market turns around. Sellers are desperate to show their homes off in as good a light as possible. One sticking point is that today's MLSs track how long a home has been for sale. And, as this reader points out, there is some concern that the technology employed by MLS systems will continue to monitor a property, even if it has been pulled off the market. So does a Baltimore house listed in the local MLS have to be off the market for six months in order to get a new number? Nope. According to Jonathan Hill, vice president of business development for Metropolitan Regional Information Systems (MRIS), which is the MLS that includes Baltimore, the reader's agent is providing incorrect information. "At MRIS, if a new listing for a particular property is added 91 days after any previous listing was withdrawn or expired, it will be considered a "new" listing. The history of days any previous listing was on the market will not attach to this new listing," Hill wrote in an e-mail. A spokesperson for the National Association of Realtors, a trade association that acts as a hub for state and local Realtor associations, says that each MLS develops its own rules regarding how long a property is tracked after it is pulled off the market. In some markets, you'll have to wait a month, in others several months. You can double-check the accuracy of your agent's information on this point by chatting with the managing broker in the office or by calling the local MLS directly. (Of course, the information the broker may have been giving the reader who wrote to me may have been somewhat cryptic. The broker may know that it might take only three months to relist the home and receive a new listing number but may have been advising a six-month cooling-off period with the hope that the local real estate market might pick up.) Freshening up a listing by withdrawing it and relisting it several months later is a trick that has been used for a long time. It is particularly popular when properties have languished from one year into the next, since the numbers assigned within an MLS system correlate to the year, and sometimes the date, the property is listed. In other words, if you listed your property in 2007, and you don't want a 2007 listing number, you can pull the property off the market and relist it with a 2008 number. But whether the listing is old or new probably won't make as much of a difference as the condition, price and how the local neighborhood economy is functioning. Baltimore, like Miami, Phoenix, Washington, D.C., Las Vegas and virtually the entire state of Michigan, among other metro areas, has too many sellers and not enough buyers. Relisting your home might entice some people to take another look, but it doesn't mean that the house will sell any faster. It won't, for example, fix the fact that there are a bunch of identical houses in your neighborhood or subdivision for sale, half of them foreclosures, with banks undercutting your price. If you hire a real estate agent who belongs to the MLS, you'll have to live by the MLSs rules regarding relisting your property no matter where you live. But if you're a seller, there are a few things you can do to try to help your situation: 1. Stage your house. If you haven't already hired a pro to come in and help you stage your house, you might want to. Staging is the art of taking what you have and either moving it around or packing it away to show off each room's best feature. You're creating a scene (like a theatrical production) where you are showing the buyer what you want him or her to see about your house. The results can be dramatic. I filmed a rather "blah" townhouse for a staging video this past winter in Chicago. The agent was not excited at all about the project, and the homeowners didn't really know what to do. With an investment of about $650, plus furniture rental, the stager transformed the house. When the agent came back, she was stunned. She immediately put up new photos on the Web, held an open house, and the property had five offers on that day. The homeowners accepted a very good offer two days later. If you want to see some of these staging videos, check out www.expertrealestatetips.net. 2. Reevaluate your price. Even if your house is staged perfectly, you won't be able to compete if six similar houses on the block are priced 20 or 30 percent below your list price. Banks have begun to cut their prices in order to get thousands of foreclosed homes off their books. While you may believe your home is worth more (and at one time I'm sure you were right), you may have to cut your price in order to sell soon. If you don't feel like competing on price, then consider taking your property off the market until next year. 3. Make better use of the Internet. More than 85 percent of buyers start their search for a home on the Web. Although the property is listed in the local MLS, and your agent may have uploaded that information to national real estate portals like Trulia.com and Realtor.com, there are plenty of online opportunities for you to market your home. Consider creating a Web site for your house using the address as the URL. Upload as many gorgeous photos of the property as possible, and perhaps even a video of yourself describing why you have loved living in this house. You can upload the video to YouTube, which will allow you to e-mail it to everyone you know. This is called viral marketing. By sending this to everyone you know, they might know someone who is interested in your neighborhood. As my mother -- a longtime agent in Chicago -- likes to say, "It only takes one buyer." With the Internet, you're marketing to the world. 4. Offer something extra. Want to generate some heat inside your own MLS? Offer to buy down the buyer's mortgage. Offer a bonus to the agent who brings the successful buyer to your door. Raise the commission you're paying and give the buyer's agent a bigger share (rather than an equal share). Forget about giving away cars, your old outdoor furniture or a trip to Disneyland. Today, currency is king, and I'd rather see you use your money in a productive way. If you and your agent are already doing these things and you still haven't sold, then you may just have to postpone your plans to move until the market in your neighborhood turns around. But, I wouldn't give it up without a good fight. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink
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Flooded crawlspace demands action
Property likely needs French drains, sump pump or foundation vents Barry Stone Inman News Dear Barry, I recently discovered about 3 to 4 inches of standing water under my house. I pumped out the water and removed the plastic sheets that covered the ground so the soil can dry out. Once the ground is dry, should I spread lime over the surface to help prevent mold? And should I also reinstall the plastic sheets? --Steve Dear Steve, Mold prevention is not necessary unless you have moisture on cellulose materials. Wet soil will not support mold growth. Therefore, lime is not needed on the ground surface under your home. The purpose of the plastic membrane is to prevent ground moisture from evaporating and causing humidity and condensation in the crawlspace. If faulty ground drainage causes flooding above the plastic, then the plastic serves no useful purpose and does not need to be replaced. The primary concern in this case is the drainage problem. To solve this, you should have the property evaluated by a geotechnical engineer (drainage specialist) to determine the water source and the best means of preventing future water intrusion. The engineer might recommend French drains around your home, a sump pump under or around the building, and possibly both. Once this is done, replacement of the plastic membrane may be advisable, but additional foundation vents might also be needed to minimize humidity and condensation. Dear Barry, The exhaust fan in my bathroom ceiling is connected to a metal duct in the attic. This duct terminates next to a screened vent at the eaves. Should this vent duct terminate on the outside of the building, or is it OK to terminate on the inside of the attic vent? What does the building code require? --Cindy Dear Cindy, According to the International Residential Code, a bathroom should be vented to the exterior either by an openable window or by means of "a mechanical ventilation system....exhausted directly to the outside." At first glance, one would assume that "exhausted directly to the outside" requires a vent shaft terminating at the exterior of the building. But building codes are interpreted by the agencies that enforce them. And many newly constructed homes have bathroom vent ducts that terminate at screened openings in attics. It would appear, therefore, that some building officials are opting for that interpretation of the code. To determine the specific legal outlook for bathroom ventilation in your area, consult your local building department. Dear Barry, Is it a bad idea to vent an electric clothes dryer into an unfinished basement or crawlspace to help keep the floor a little warmer? With fuel costs so high, why waste the warm air from the dryer? --Chris Dear Chris, This question has been a recurrent issue in this column. To summarize past articles, there are three reasons not to vent a clothes dryer into your basement or crawlspace: 1) Increased humidity can promote the growth of mold and fungus in your home. 2) Dryer lint can accumulate and is regarded as a fire hazard. 3) Venting a clothes dryer into a building is a code violation, because of reasons #1 and #2. To write to Barry Stone, please visit him on the Web at www.housedetective.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Barry Stone
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Synthetic stucco gets bad rap
Is $140,000 replacement cost worth the trouble? Ilyce Glink Inman News Q: We have a synthetic stucco house (it has an EIFS exterior). We have it inspected annually by a synthetic stucco inspector and we maintain it very well. Yet we know the stigma surrounding synthetic stucco homes. We were just told that it would probably cost $140,000 to replace the synthetic stucco with hardcoat stucco because of the size of our house. Are there other sidings that would be less expensive? I don't know if our neighborhood allows vinyl or if it would look good in place of the synthetic stucco. A: While the EIFS Industry Members Association, a nonprofit trade organization for EIFS (Exterior Insulation and Finish Systems) manufacturers, maintains that today's synthetic stucco is new and improved and has been shown in a new study that it's as good as any other sort of exterior cladding, you're right that there is still a stigma surrounding synthetic stucco. Buyers worry that the synthetic stucco, which is a polymer-based product, has been poorly installed, which can lead to serious water infiltration and mold problems later. But should you spend all that money to replace your synthetic stucco? That's a dollars and sense question, so let's walk through the issue. First, you may be able to replace your synthetic stucco with brick or a synthetic stone product for about the same price or a little less. Vinyl siding might cost less, as would prestained wood. You should check out what kind of exterior siding is permitted in your neighborhood (if you're in a homeowners association, sometimes house exteriors are regulated) and then start to price it out. The real question you have to answer is this: What will you get for your $140,000 when you sell the house? In your neighborhood, will someone pay more for a brick house that needs only to be retuckpointed every 10 to 15 years or a vinyl-sided house that needs minimal care? Will spending the money mean you'll sell more easily because you've eliminated the issue? Are you even planning to sell your home in the near future? On the other hand, can you save $140,000 by keeping the synthetic stucco, maintaining it in good condition, while spending $5,000 to $10,000 to spruce up the exterior and interior of your home? If your neighborhood is desirable, but someone has the choice of buying a home without synthetic stucco, you'll be at a competitive disadvantage, whether or not your home has ever had a moisture infiltration problem. If your neighborhood is undesirable for other reasons, or if most of the homes are for sale, it may not make a difference, and you could be throwing your money away. You might be better off dropping the price by $80,000 to $100,000 and moving on. You should have a conversation with two or three top agents who actively work in your area. Pick their brains for ideas on whether this kind of investment is something that could be recouped or, if not, would allow you to at least sell your home quickly. Remember to keep good records of the maintenance you have given to your synthetic stucco just in case a buyer wants to check how often you inspected the stucco and what repairs you made to it. With diligent maintenance, your synthetic stucco can remain in good condition and you can probably make better use of your money. Finally, if you have to sell your home in this market and find out that the synthetic stucco of your home is preventing the sale, you will have the option to replace it or negotiate a lower price for the home allowing the buyer to replace the stucco at a later time. Q: My fiancée and I recently purchased a home in the New York City metropolitan area. It's an 1880s brownstone. It was completely renovated about four years ago. Because the home is a bit unique for the area and can be converted to a single-family building, we agreed to work with the seller's agent to complete the sale. We used your first-time-buyer book and felt that we were asking all the right questions and did a thorough inspection. We closed at the end of May and we've been in the home for less than three weeks. Yesterday, we had a thunderstorm in the late afternoon. We were away for dinner during the storm, and when we returned, we discovered water coming in the ground-floor level over about one-third of the area, which is all living space, including the living room, kitchen and a half-bath. The storm was not that bad, and now we're worried that we've got a serious drainage problem on the property. The seller's disclosure mentioned that there had been standing water in the backyard and we asked if water had ever gotten in the house. They said that it had not, but we suspect that this problem has happened before. What should we do? We think we've just purchased a home that has a serious and expensive problem. A: Your current situation sounds troubling, and has clearly marred the purchase experience. How unfortunate. Please call your real estate attorney and consult with him or her about what your contract says, what New York's seller disclosure laws require, and what your sellers stated on their signed seller disclosure statement. While it seems unlikely that water has never gotten into the house before, it's also possible this is the first time. You need to do a little investigating. You should call the home inspector who helped you with the purchase and seek his or her advice. In addition to your home inspector, you might want to talk to a plumber to see if there are any drains around the home that are clogged and need to be cleaned out. What you are trying to do is find out where the water is coming from. If you find that out, then you can see what it will cost to fix the issue. Some homeowners never realize when they buy a home that failure to perform routine maintenance can cause severe problems. Some homeowners don't clean their gutters and downspouts. When they get clogged, the water pours down the side of the house and enters the home through open windows and bottoms of doors or even through cracks in the foundation. A simple cleaning of those gutters and downspouts fixes the problem. I'm not saying that the cause of your problem is your fault, but you need to make sure you know what caused the water problem. If your problem isn't anything that you could have prevented through maintenance and find out that your sellers lied to you, your attorney will then advise you of your options where the sellers have failed to disclose a material defect with the property. If your attorney recommends that you sue the sellers, make sure you understand the costs involved in following through with litigation. In the course of suing the sellers you're going to have to prove that they knew or should have known about the defect. Proving it will mean finding the contractors who fixed the problem previously or getting a neighbor to confirm that there has been an ongoing problem for years. At any time during this process and once you have found out what the problem is, you'll have to find contractors who can come in and give you an assessment of what's wrong with the property and how much it will cost to fix it. Construction isn't cheap in New York City, but it could be that you simply need an extra drain in the garden to tie into the city sewers. It may also be a city problem in that a sewer is clogged and needs to be repaired. Until you know what the problem is and how much it will cost to fix it, you don't know what you're dealing with, and can't make a smart decision about any legal options you have. So, get moving and start talking. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink
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Is buying a home to live in a good investment?
Despite benefits, price appreciation not guaranteed in today's market Dian Hymer Inman News Anecdotal evidence suggests that in some markets investors are buying foreclosure properties at bargain prices. These properties are located in areas that appear to have good growth potential, and they generate enough rental income to at least offset the holding and maintenance costs. The deal needs to make sense financially regardless of whether there is a big run up in appreciation. The plan is to hold the property for the long term. There was a time not long ago when investors bought condos and houses even if they didn't produce enough cash flow to cover the carrying costs. Prices were rising so quickly, they could afford a little negative cash flow. The holding period was short and the appreciation payoff was big. According to Standard & Poor's/Case-Shiller 20-city home-price index, prices increased almost 75 percent between February 2000 and February 2008. In most housing markets, it's not possible to count on appreciation now. The market could be bottoming out in some places, according to some economists. Or prices could move lower before leveling off. It could be years before significant appreciation is again part of the housing picture. With this in mind, is buying a home to live in still a good investment? Just as the lenders are moving back to basics in terms of qualifying borrowers for mortgages, home buyers should examine the fundamentals of home ownership to determine if they are good candidates. HOUSE HUNTING TIP: The equity in your personal residence shouldn't be used to pay for vacations, education, new cars and credit-card debt. Many homeowners who participated in serial refinancing when rates were low and money was easy found they had no equity left when the credit crunch hit in August 2007. A good portion of these repeat refinancers now owe more than the current value of their home. Along the same lines, it's risky to look at your home as a retirement account. It's not a good idea to rob your pension plans in order to purchase a home. This money should be kept for retirement. Some financial advisors suggest that you don't consider the equity in your home as part of your financial portfolio. After all, you will always need to live somewhere. Most people will always need to budget part of their net worth for housing. Buying a residence hoping for appreciation to increase your net worth is dicey. You may earn appreciation. Nationally, home prices have tended to rise over the long term. But, this doesn't mean that your home will appreciate during the time period you own it. However, there are plenty of good reasons to buy your own home, if you can afford it. The government subsidizes the cost of home ownership by permitting taxpayers who itemize deductions to write off some or all of the mortgage interest and property taxes they pay. Restrictions do apply. So, check with your tax advisor before making a purchase. Owning your own home gives you a sense of security. You can choose the community in which you live. You're not at the mercy of a landlord who might issue an eviction notice. If you buy with a fixed-rate mortgage, you know how much you'll be paying over time. Rents, in most places, are subject to increases. It doesn't make sense to spend money fixing up someone else's house so that it feels like yours. And, most landlords will have a say in what you can and can't do -- even down to paint colors. THE CLOSING: But, if you own it, you can redecorate to your taste and possibly add value by doing so. Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Dian Hymer
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Interest-only loans often sold on false promises
Costs and risks higher than comparable fixed-rate loans Jack Guttentag Inman News One of the fairy tales borrowers frequently hear is that a loan carrying an interest-only (IO) option is priced better than the same loan without the option. It is a fairy tale because the IO allows the borrower to avoid paying down the loan balance, which makes it riskier to the investor, and greater risk should mean a higher price. At the wholesale level, where prices are extremely competitive because they are directed to mortgage brokers, the IO version of a loan always carries a higher price than the same loan without the IO option. This is also true at retail Internet shopping sites, such as those of the Upfront Mortgage Lenders (UMLs) listed on my site. Sometimes the price difference is small, sometimes it is large -- but I have never seen IOs priced lower. Yet in the bazaar-segment of the retail market, where borrowers deal one-on-one with mortgage brokers and loans officers (collectively "loan providers"), anything can happen. A trusting borrower without knowledge of competitive prices, dealing with a sales-hungry loan provider, could be told that the IO was priced better. The purpose of the fairy tale would be to move the deal forward. Here is an example: "I read your postings on interest-only loans but it didn't seem to apply to my situation. My broker gave me the option of a 30-year fixed-rate mortgage at 6.125 percent, or an interest-only (first 10 years) with a fixed 30-year rate of 5.875 percent. My plan was to take the interest-only but make the larger payment that I would have had on the amortizing loan. This should save me money…" I don't have any facts other than those in the letter above, and can only speculate about the source of the misinformation. All those cited below I have run into at one time or another. Perhaps the most plausible explanation is that the 6.125 percent rate was simply concocted out of thin air to make the 5.875 percent rate on the IO look good. A borrower who gets all his information from a loan provider is vulnerable to such chicanery. A second possibility is that the IO is on an adjustable-rate mortgage (ARM), rather than a fixed-rate mortgage (FRM) as the borrower was led to believe. ARMs typically are priced lower. A third possibility is that both rates are correct but the loan provider left out other loan charges, including points. As an illustration, I just went to an online site and priced a 6.125 percent 30-year FRM against a 5.875 percent IO version of the same loan. Both loans were there, but the second cost 2.3 points more than the first. A final possibility is that the loan provider was "lowballing" the IO rate and had no capacity to deliver the 5.875 percent quote. The market changes every day and loan providers can't be held to quotes until they are locked. Between the quote day and the lock day, they can choose from a wide selection of explanations as to why the rate is higher, including a general change in the market and a re-evaluation of the borrower's credit. The upshot is that borrowers cannot be confident that loan providers are giving them reliable information about price differences between different loan options. Many loan providers will, but some will exploit the borrower's ignorance for their own benefit. A Reverse Mortgage Can Help an Elderly Homeowner Avoid Foreclosure Few things irritate me as much as hearing about the foreclosure of an elderly homeowner who had substantial equity in his house. This shouldn't happen. Elderly homeowners who can no longer afford their mortgage payments and taxes but have substantial equity in their house can pay off the mortgage with the proceeds of a reverse mortgage. Of course, they can also repay the mortgage by selling the house, but then they have to move out. The virtue of the reverse mortgage is that they can pay off the mortgage and stay in the house, and perhaps even have a little more spending money, depending on their age and how much equity they have. For example, a married couple both 80 with a house worth $550,000 and a mortgage of $170,000 could pay off the mortgage and get an additional credit line of about $75,000 to use as they please. The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Jack Guttentag
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Condo foreclosed but HOA fees keep coming
Who's responsible for unpaid assessments? Benny Kass Inman News DEAR BENNY: Recently my condominium unit was foreclosed upon, but the association has now sued me for unpaid condominium assessments. Am I still responsible for this debt? --William DEAR WILLIAM: Unfortunately you are, but only until the foreclosure sale took place. Once a new owner took title to your unit -- whether it was a successful bidder at the foreclosure auction or the bank itself -- that new owner is obligated to start paying the association dues. But unless you have other assets, in my opinion, the association is wasting its time -- and its members' money -- going after you. DEAR BENNY: Can the money we deposited with the builder be returned to us if we back out, even though we signed the purchase contract? --Shirley DEAR SHIRLEY: To my knowledge, there is no "cooling off" period in real estate. Once you sign a contract to buy property, it is legally binding on you -- and on the seller. Why do you want out of the contract? Have you just changed your mind? If so, I seriously doubt that the seller will give you back your deposit. Several years ago, when real estate sales were active, builders were willing to cancel sales contracts, knowing that they could resell quickly -- and possibly at a higher price. But in today's market where sales are sluggish, sellers are unwilling to allow the buyer to cancel the contract. You should consult a local real estate attorney. Perhaps there are provisions in your sales contract that will allow you to cancel. For example, did you have a contingency for financing? If so, and if you applied for a mortgage loan and were turned down, that may be grounds to cancel the contract. Perhaps the sales contract does not comply with local or state law. A good attorney should be able to assist you. But the bottom line is that you signed a contract and are bound to honor its terms and conditions. People should give serious thought as to whether they really want the house in question before they sign a sales contract. A reader recently wrote me as follows. He said: "I ... take issue ... where you stated that 'If I am representing a seller, I want the seller to give my real estate agent (or the settlement agent) a minimum of 5 percent of the purchase price.' I understand that this number is just that, merely a number and can change with each given situation. But your article reaches a lot of different communities via the Internet and this number is not only excessively high, it's very unrealistic to believe that the typical purchaser has that kind of money to tie up for 4-6 weeks." I respectfully disagree and stand by my statement, especially in today's market situation where the 100 percent, interest-only loan is hard to obtain. If the buyer is getting a 95 percent loan, he will need the 5 percent at settlement. If he does not have it when the contract is entered into, what guarantee does the seller have that the moneys will be available at settlement? More importantly, when the buyer makes application for a loan, the lender will want to make absolutely sure that the buyer has this 5 percent. It is acceptable to advise the lender that this amount is being held by the real estate broker (or settlement attorney) as the earnest money deposit. And finally, as you just read in my response to Shirley, more and more buyers are getting cold feet -- we call it "buyer's remorse." If the buyer defaults, the deposit can be retained by the seller -- and often a portion will go to the real estate agents. If the deposit is very low, that does not give sellers any real comfort, and I am as concerned about the rights of home sellers as I am about home buyers. DEAR BENNY: My neighbor claims that I have a dead tree, and he fears it will damage his property. His attorney and insurance company notified me of his concern for possible damage to his property. I have checked my trees and do not see anything to merit his claim. What are the legalities within these parameters? --Marilynn DEAR MARILYNN: A letter from an attorney and from an insurance company is not proof that your tree is dead. You have been put on notice, and you should immediately contact an arborist in your area to get a formal, written report as to the condition of your tree. If the report indicates that the tree is healthy, send a copy to the attorney and to the insurance company, and that should be the end of the matter. On the other hand, if the tree is dead -- or diseased -- ask the arborist for advice as to what you have to do, and follow that advice. While tree law differs in the various States, the general rule is that if your tree is a danger to a neighbor, and you aware of this -- or have been put on notice -- should the tree fall and cause damage or injury to person or property, you will be responsible. DEAR BENNY: We just sold our rental (single residential unit) house using the 1031 exchange (Starker) to buy a condo in another state. We did this, as you know, to defer tax on the capital gains on the house we sold. We are now in the process of closing escrow on the condo we are buying. We intended to make this condo as our second residence (not primary) in the future. How many years minimum must this condo be used as an investment property (such as being a rental) before we can we use it as our second home without having to pay tax on the capital gains or any tax penalty? Also, if we decide to not rent the condo after closing of escrow and use it as our second home instead, how can we opt out of the 1031 exchange that we have availed of? Is it enough to just pay the tax on the capital gain in 2009 when we file our 2008 income tax? --J.M. DEAR J.M.: This has been a confusing area of law for a long time, but just recently the IRS clarified the area of vacation and second homes. On March 10, 2008, the IRS issued Revenue Procedure 2008-16, which makes it clear that in order for your 1031 exchange to be valid, you have to rent out the property for at least two full years, and at a fair rental rate. In answer to your question about how you go about cancelling the exchange, the IRS explained as follows: If a taxpayer files a federal income tax return and reports a transaction as an exchange under §1031, based on the expectation that a dwelling unit will meet the qualifying use standards ... and subsequently determines that the dwelling unit does not meet (those) standards, the taxpayer, if necessary, should file an amended return and not report the transaction as an exchange. In your case, since you did not yet file a tax return for 2008 (the year in which you sold the first property), next year when you file your return, just treat the sale as a capital gain and pay the applicable tax. DEAR BENNY: We have owned a cabin in New York state since 1979. We are residents of Florida. We want to sell the cabin and build a new cabin on another lot. We have never rented the cabin; we have never lived there. We use it for vacation purposes only. Is the capital gains tax break this coming year good for this type of long-term capital gains? If so, this would be the year to sell? If not, do you have any advice? Will that capital gains break be good only for this coming year? Our gain on the cabin (after subtracting the basis) will be about $70,000. --Janis DEAR JANIS: If you sell, you will have to pay the full capital gains tax. Unless you are in a low-income tax rate, the current federal tax is 15 percent of your gain -- plus whatever tax the state of New York may impose. There is a very significant tax break for homeowners who sell their house. If you are married and file a joint tax return, you can exclude up to $500,000 of your profit. (If you are single or file a separate tax return, the exclusion is limited to $250,000). But in order to qualify, you have to have owned and lived in the house for two out of the five years before the property is sold. In your case, while you have owned the cabin for more than two years, you did not actually live there, and thus I suspect that you will have to pay the tax. Is this a good time to sell? Sorry, I really can't answer that question. Every location -- and every house -- is different, and you have to ask professionals in your area that question. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Benny L. Kass
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Some remodels endure endless inspections
What building officials look for during site visits Paul Bianchina Inman News If you're thinking of doing some improvements on your home, especially extensive ones, chances are you'll need a building permit. So you head down to your local building department, fill out an application and provide whatever information they require, and a short time later you have your permit. Once you have your permit, it's important to understand how the inspection process works, and what you need to do to be ready for it. Knowing when different inspections are required and what the inspectors are going to be looking for will help everything go much more smoothly. When you receive your permits, you will also be given information about how to call for the inspections. Some cities utilize an automated call-in system, some do it online, some have live technicians that take the requests, and some offer all three. However it's done, be aware that most jurisdictions require that you request an inspection with at least one day's notice, sometimes more. DIFFERENT PROJECTS, DIFFERENT INSPECTIONS As you will see from your permit card when you pick it up, there are a wide variety of different inspections, many of which may not be required for your particular project. Many building departments will tell you specifically which inspections you'll need to request, but if they don't, be sure that you ask when you pick up the permits. Here are some of the more common inspections, as well as when they occur and what the inspector will be looking for. Footing Inspection: This is typically the first of the inspections, and occurs after the grading has been done and the forms have been laid for the foundation, or at least for the footings. The inspector is looking to see that the footings are the proper size and depth, that any reinforcing steel is in place, and that the location of the foundation does not violate any setbacks. Underfloor Inspection: This occurs after the foundation has been poured and the floor framing is in place, but before the subfloor is installed. This gives the inspector the opportunity to look at the floor framing, as well as any plumbing or mechanical systems that might be in place under the floor. The inspector will be looking at the size and spacing of the framing; that proper materials have been used wherever the wood meets either the concrete or the soil; and that plumbing and mechanical systems are properly sized, installed and supported. Rough Inspections: These inspections occur after the rough framing has been completed and all the rough wiring, plumbing and mechanical components have been installed, but before any finished wall and ceiling covering is installed. These are typically the most extensive and complicated of all the inspections, since there is a lot to review and it will all be covered and inaccessible in the future. The rough framing inspection includes an inspection of all the structural components. The inspectors will be checking that the proper size and type of lumber was used, and that the spacing is correct; that hangers and steel connections are the correct type and are installed with the proper type and quantity of fasteners; that flashings and other weatherproofing measures are in place; and that the roof, windows, exterior doors and other components are in place to make the building weather-tight. Rough electrical inspections include checking the size and installation of all the wires; the service panel; grounding; installation and location of boxes; installation of can lights; and whether the wires are properly routed and protected. Rough plumbing inspections look at the size and type of pipe that was used; proper slope for drain pipes; vent pipe sizes and locations; size and location of water lines; and that everything is secure and well supported. Rough mechanical inspections include the size, location, and installation of all ducts and vents; installation of furnaces and ventilation fans; and the proper ducting of fans to the outside of the building. Insulation Inspection: This inspection occurs after the wall insulation has been installed and checks to see that it is complete and of the proper R-value. Drywall Inspection: Some cities include a drywall inspection, which occurs after the drywall has been installed but before it is taped. The inspectors are checking to see that the proper number and type of fasteners have been used to secure the drywall to walls and ceilings. Final Inspections: When everything is done, the inspectors will make their final inspections of all systems to ensure that everything has been completed correctly. They will test different systems, check for compliance with manufacturer's specifications, and ensure that everything is operating properly and the house is safe for occupancy. Remember that this is just a brief overview of the inspection process, and that the actual number, timing and details of the inspections can vary widely. Be sure to talk with your building department to get the specific details of the inspections for your particular project, and to get any of your questions answered before you begin. Remodeling and repair questions? E-mail Paul at paulbianchina@inman.com.
*** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Inman News
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Living room partition's a deal-breaker
Can buyer back out of purchase after learning bedroom's true identity? Ilyce Glink Co-written by Samuel J. Tamkin Inman News Q: I signed a contract to buy a condo in New York City in "as is" condition. Although the old floor plan provided to me indicates that it is a one-bedroom, when I looked at the unit, there is a partition dividing the living room, which essentially adds a room to the unit. This additional room is the main reason I signed the contract to buy this unit. However, the closing is now being delayed because the condo board will not approve the sale unless the seller tears down the partition. I no longer want to purchase this condo if it does not have this extra room. In your experience, do you feel that the seller has misrepresented the condition of the unit and that I may terminate this contract and recover my deposit? What remedies would you suggest? A: While you are buying the condominium in New York in its "as is" condition that does not mean that you have to accept the condo in the condition as changed by the seller. Your contract might provide that you agreed to take the condo in the condition it was in as of the contract date. If the condo burned down or is materially changed, that risk is or should be assumed by the seller. In your case, you probably have a good argument that the change in the condo is material enough that you are not required to close on the condo purchase. When it comes to the misrepresentation claim, you might have a harder time. Did the seller lie to you? Presumably, you viewed the condo prior to making your offer to purchase. You might have even had a professional inspection of the condo. If you saw the condo and you knew what you were getting, the seller probably did not misrepresent any information to you. That partition in the living room created an additional space. Most municipalities have ordinances relating to making improvements within a dwelling unit. If your seller constructed the partition without the required permits, your seller might have violated various ordinances in making those improvements. If the partition created an additional bedroom in a building that is not zoned for that particular type of unit, the seller might have also violated zoning laws. And if the seller was required to obtain permission from the condominium association to make any improvements in the unit and failed to get those improvements approved, the seller got caught. The real question is whether the seller knew that he needed permits from the municipality and permission from the condominium association to make this change. If the seller knew that, the seller may have had a duty to disclose the lack of permits under your local seller disclosure laws. Most states have enacted seller disclosure laws. These laws provide that the seller of residential property must disclose to a buyer material defects or other hidden problems with the property being sold. If a seller fails to make these required disclosures accurately, in some states the buyer can terminate the contract and sue the seller for the damages that the buyer has sustained including attorneys' fees. You should talk to your real estate attorney to determine whether you have the right to claim that the seller is in default under the contract for failing to deliver the condominium in the condition required under the contract and that the seller should have disclosed these problems relating to the partition under your state's seller disclosure law. At that point, you and your attorney can discuss what your options are to recover damages from the seller or come to some settlement that would satisfy you. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink and Samuel J. Tamkin
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Why can't mom have live-in assistant?
Rent it Right Janet Portman Inman News Q: We're landlords with a somewhat off-beat question. My mother is about to enter a continuing-care residential community, which requires her to be able to "live independently." She is independent now, and will have no problems taking care of herself in her apartment, but she has a medical condition that will eventually require her to hire a personal assistant to help with dressing, eating and bathing. I know from my own business that if I had a disabled tenant who needed a live-in personal assistant, I'd have to let that helper live with my tenant unless it resulted in unsafe overcrowding. But in my mother's case, the center is telling her that if she becomes disabled, she'll have to leave her apartment and move into their assisted-living quarters. Why wouldn't the center be required to make the same accommodation that I have to make? Aren't seniors' housing properties subject to the same fair-housing rules as I am? --Rex and Nicole D. A: Your question may seem off-beat to you, but it's timely for very many Americans. The numbers of baby boomers (people born between 1946 and 1964) are growing steadily -- in 2000, people 65 and older comprised 12.4 percent of the population; by 2010, they will make up 13.2 percent; by 2020 the figure will hit 16.5 percent; and by 2030 it will rise to 20 percent. The housing rights of these elders will be vitally important to them and their families. The number of continuing-care retirement communities is growing with the aging population. These communities typically offer levels of care, from independent living like the setup your mother is contemplating (which can look and operate just like a regular apartment), to assisted living (usually smaller units with group dining), and skilled nursing accommodations (smaller units with attached bathrooms). The communities are attractive because they offer recreation and social activities, as well as progressive access to medical care. When people apply for admission, the centers evaluate their financial and medical status, and therein lies the ubiquitous requirement that, at least initially, a person be able to live independently -- that is, without assistance. Typically, the contracts provide that when the resident can no longer live independently, he or she must move to the next level. You're asking whether a resident who doesn't want to move to assisted living -- but instead would like to keep her apartment and bring in help -- can insist on staying and invoke the fair-housing laws as she could if she lived in a regular apartment complex. When most of us think of the federal fair-housing laws, we think of apartments and single-family rentals. But the Fair Housing Act (and the subsequent Fair Housing Amendments Act, which added protections for people with disabilities) applies to any accommodation in which the occupant intends to stay for more than a brief period. Even so, courts have held that a variety of temporary living situations come within the law, such as migrant worker camps, long-term rooming and boarding homes, children's homes, summer bungalows, and homeless shelters. Measured against this standard, your mother's community clearly comes within the scope of the fair-housing laws. As you suspect, the question for the community is the same one you face as a regular landlord: When a tenant or prospect asks you to vary your policies or rules to accommodate a disability, you must do so unless it would pose an unreasonable burden to your business. So the question becomes -- would having a personal assistant in your mother's apartment constitute an undue burden for the community? The facility may advance any one of several arguments. Let's look at the first likely reply -- that having a live-in aide will unduly burden the ability of the community to run its business. As long as your mother will be finding and paying for her aide, and your mother's unit can safely accommodate two people (there's no overcrowding problem), it's hard to see how this argument will fly. The community may advance another reason, tied to its business model and bottom line: It wants to move people like your mother into the next level of care so that it can keep these units occupied and rent the apartment just vacated to someone new. Economic impact can certainly constitute an undue burden; it's hard to tell how a judge would rule on this type of argument. Another argument you may encounter poses even more difficult issues. Your state's licensing laws for continuing-care facilities may set minimum staffing levels based on the ambulatory abilities of the residents, and may forbid housing residents who need assistance that the facility is not licensed to offer. The idea is to make sure either that residents are sufficiently ambulatory that they can escape an emergency on their own, or that the facility has adequate staff to help them. Given such laws, continuing-care facilities have defended their right to ask about residents' impairments and to insist that residents be able to live independently for the staff-less housing they want. Courts have generally not ruled in favor of the continuing-care facilities on this score, and have struck down such laws as calling for discrimination under fair-housing laws (in one case, the legislature stepped in and changed the law). This is a hard call -- after all, regulating assisted-living facilities is driven by a desire to avoid the same types of abuses that have historically plagued nursing homes. Although minimum standards are necessary, this doesn't mean that a continuing-care facility can categorically refuse a disabled tenant's accommodation request that would, if granted, give that resident the protection that the standards were designed to ensure. At least one state has thought carefully about the problem of involuntary transfers and has reached a sensible decision. Since 1964 in Maine, a resident must agree in writing to be transferred to a care unit or a bed within the skilled nursing facility unless the center, after consultation with staff, doctors, therapists, the resident's family and any other representative, concludes either that the resident poses a health or safety danger to other residents, or that a change in the resident's health status or abilities requires a move to a higher level of care. To keep everyone honest, a written decision to transfer or change a resident's accommodations must describe why the resident's healthcare needs can't be met at the resident's present location, and residents may appeal any determination to the state's Department of Health and Human Services. (Me. Rev. Stat. Ann. tit. 24-A § 6228) Signing your mother up for a continuing-care facility that has "independent living" as a firm requirement for its apartments may pose a bit of a risk. Because this is such a serious decision, you may want to seek the advice of an experienced elder law attorney, who may know (or will find out) how courts in your state have dealt with this issue. If it hasn't been resolved, you may be in for a fight. Q: I would appreciate it if you would be kind enough to provide the exact definition of an apartment manager and what their duties entail. --Liz B. A: Unlike some terms we encounter in everyday living, such as "employee" or even "tenant," the term "apartment manager" has no legal definition (you won't find it defined in a law or a court case). Instead, it's a term that the residential rental industry -- owners and management companies -- define for themselves. Trade organizations such as the Institute of Real Estate Management have their own understandings of the term, but when it comes down to it, the term can mean whatever the owner decides he wants it to mean. The essential thing in any rental situation, for the owner, the manager, and the tenants, is for everyone to be clear on what that job includes (and doesn't include). It's common for a manager to live on the premises, but she doesn't have to (although some states, such as California, require on-site managers when the multitenant building is a certain size). Managers typically handle day-to-day issues, such as collecting rent, handling repair requests, supervising employees, and showing rentals to prospects. Some managers negotiate and sign leases, but again, state law may require that these tasks be done only by an owner or a licensed real estate broker. The owner can also designate the manager to accept legal notices and papers (this makes the manager the "designated agent for service of process.") If you think "manager" is a loose concept, the same goes for "landlord," which is sometimes legally defined, but not always. In some states, "landlord" and "owner" (the person or legal entity on the property deed) are synonymous, but in others, it's not clear. The landlord may be the same as the on-site manager, for example. It's even possible to have all three: Imagine a partnership (the owner) that owns an apartment building in a different state, and hires a management company to run the business (the landlord, who accepts legal notices and demands), which then hires a property manager to live on-site and handle daily issues. Some property owners take advantage of all of this vagueness by pretending to be only managers, in order to deflect tenant questions and complaints. "Sorry, I'm just the manager, it's up to the landlord" is a response often heard when tenants want to get something done and the person they're dealing with (who is really both owner and manager) claims to have no authority. Forward-looking states prevent this kind of nonsense by requiring the lease or rental agreement to list a person, whether owner, landlord or manager, to handle those issues. In these states, no matter what the person calls himself, he's responsible for handling tenant questions and complaints. Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Janet Portman
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