Question (CO): I was a Buyers' Agent in a recent transaction. The Buyers intended to move halfway across the country and wanted to keep costs minimized. Our sales contracts (Colorado) contain a section involving "other prorations. Water and sewer charges; interest on any continuing loan, and ... ." In this space I asked the Buyers if they wanted "propane" to be inserted, since there was a tank on the property. They said "no" and so I typed in "none other."

The Sellers countered the offer we presented but made no mention of the propane. However, our settlement statements showed an amount in excess of $400 for prorated propane charges. I disputed this with the closing company as it was not an agreed item in the sales contract. The listing agent argued repeatedly with me that the Buyer must pay for it -- although it was not negotiated in the contract.

Ultimately, half was paid each by the listing agent and me. Still, I feel that neither I nor the Buyers should have had any responsibility for that charge since the Seller did not counter with the proration. Please tell me if it is correct for the Seller/Listing Agent to assume and demand the Buyers pay for something at closing that is not negotiated in the contract? Even something common in this area, such as propane.

Answer: Okay, we assume you are referring to Colorado Division of Real Estate’s Promulgated CBS1-07-04 Contract to Buy & Sell Real Estate (Residential), and that the "Other Prorations" paragraph you referenced in your email to us is on line 441 (441 e. Other Prorations. Water and sewer charges; interest on any continuing loan, and ... ).

If our assumption is correct, the answer to your question lies within the contract itself. By inserting "none other" in the blank following the word "and" we read that section to mean that there are no other prorations, save and except "water and sewer charges and interest on any continuing loan" to which the parties have contractually agreed. When the buyer was charged in excess of $400 in prorated propane charges (we have no idea if that represented the total propane charges or if it represented an actual proration of the total), the question becomes "did the seller have informed consent to paying for the total propane bill that would have been received by the buyer? In other words, was the seller specifically aware that he or she was going to be stuck with paying for that portion of propane used by the Buyer?"

Unfortunately, we cannot provide a simple answer to your question. Normally, absent any language that requires a party to pay for a charge that would normally be prorated, we agree with you that line 443 of the contract, "f. Final Settlement. Unless otherwise agreed in writing, these prorations shall be final" should have been self-explanatory and would speak to the responsibility of each party’s reading and understanding the contract into which they entered.

In addition, if there was a section that either party did not understand or otherwise did not have "informed consent" regarding the contents, both parties are cautioned in bolded letters at the very beginning of the contract, as to the following: "THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING."

Our thought is that you learned a valuable lesson in that buyers and sellers, the agents that represent them, and the closing company involved in the transaction do not always follow what a particular party believes a written contract means. When in doubt, recommend that your client disclose in the body of the contract (if no other place is appropriate then we’d suggest line 521 24. ADDITIONAL PROVISIONS.), what a particular provision means so that there can be no misunderstanding and therefore no claim later that the other party did not have informed consent.

Question (GA): I bought a Home Owners warranty for my home which is 10 years old through a home warranty company (we bought this house last year) but now for the renewal they are hiking the cost up to $500. I found another company on the Internet but I am a bit reluctant to give them my credit card number over the phone. The company is National Home Protection. Do you know anything about this company or any other company that I can use in Georgia?

Answer: Homeowner Warranty Companies (also referred to as "Residential Service Companies" by some states) are essentially a type of insurance company. By purchasing such a policy, the homeowner is insuring against major repairs and/or replacements of covered items. Features of such an insurance policy are "policy-specific" subject to the state’s insurance statutes and regulations within which the policy is sold.

In order to determine how a particular policy is going to fit your specific wants and needs, you must read the terms of each particular insurance policy you are considering. Sometimes the terms are written in "jargon" known and understood only by the people who sell the policy, so it is important to make sure you understand what those terms mean as to what is and is not covered and the specific exceptions to the coverage.

For example (this is a strictly hypothetical example), if a particular policy insures against the failure of an Air Conditioning Unit’s compressor due to a high-temperature cutoff switch’s failure, but because a neighbor’s dog happened to relieve itself on the switch it was not covered and therefore the entire compressor had to be replaced at the expense of the homeowner, then that particular insurance policy failed to protect that homeowner from incurring the cost of a major repair.

In addition to reading the policy and the "fine print" areas, another way to check out a company is through the Better Business Bureau, and in your case it would be the Atlanta (and surrounding areas) Better Business Bureau. Submit the Home Warranty Company’s name and see if there have been complaints filed against it with the BBB, and what the resolution of the complaint was. An insurance company, including without limitation a Home Warranty Company, should, in our opinion, provide what the consumer wants and needs at a price and upon terms the consumer can afford and is willing to pay. You can often find out about any company doing business in a particular area of the country, as to how willing it is to join the BBB and how responsible it is to meeting the customer service promises that the business makes.

To find out more about which companies are licensed to do business as Home Warranty providers in Georgia, we suggest you select your favorite search engine and enter into the search bar, "Home Warranty companies+Georgia." We used www.Google.com and got 1,260,000 sites returned in 0.14 seconds. Among those sites was www.NationalHomeProtection.com.

Question (HI): I am about to take out a First Mortgage Loan. I would like to know what the appropriate 'vehicle' for encumbering the property is (e.g. lien). I want to make sure the lender doesn't somehow take over the ownership of my property.

What should I expect as far as the 'configuration' of the lien? Thank you so much and Aloha.

Answer: Hawaii is a lien theory State, so the owner grants a lien to encumber the property. Ownership does not pass to the lender (which is the rule in title theory States) unless there is a foreclosure. While reading the document, it should be apparent that only a lien interest is being created. Title passes by deed, so the document you sign should be a mortgage or deed of trust.

If you have any questions, the assistance of an attorney who specializes in real estate matters should be a small investment considering the potential risk involved, and don't be ashamed to ask about the fees before a visit.

Don’t mention it and Aloha back "atcha."

Question (PA): In the 90's my husband and I purchased a house from my father-in-law. The house was appraised at 75k. In 2004 we took out a home-equity stated value loan for 14k.

In 2006 we wanted to refinance and put both loans together. We had an appraisal done and it came in and 65k. Can you please tell me what happened from 1990 to the present time? We made a lot of improvements over those years so it is shocking to find out that we depreciated. We will never be able to consolidate both loans, or pay off existing bills! Thank you for any advice you may be able to give me.

Answer: The best way to get an accurate picture of what happened to residential market values between 1990 and 2006 is to hire an appraiser and give him or her that assignment. The next best way is to ask what a Realtor would charge you to provide a comparison of market values of comparable homes in 1990 and in 2006, and to give you an opinion as to what may have caused the decline, if there has indeed been a county-wide decline.

One website, the Rural Policy Research Institute, shows U.S. Census figures that indicate that Schuylkill County (we believe your zip code indicates you live in Ashland, Schuylkill County, PA) had a population decrease between 1990 and 2000, and also between 2000 – 2005. We can only speculate at this point (a local Realtor or Appraiser should be able to pull exact numbers for you), but whenever population densities indicate out-migration from an area as they did in Schuylkill County during that time period, then the area demand for residential properties lessens and the availability of residential properties (the supply) continues to increase due to natural factors augmented by people moving out of the area. Whenever the supply of something is greater than the demand for it, its economic value lessens or "depreciates."

Published: December 26, 2006

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