Question: My neighbors are ruining my life. I cannot get sleep. I have called the cops three or four times. I have written letters to the neighbor explaining my position, written the office. Nothing has been done. Now the neighbors are banging on my door at two to five on Saturday mornings, throwing stuff at my door. They've cursed at me, etc. Don't I have rights? I want out of my lease because nothing is being done!

Answer: Neighborhood noise is a difficult issue because people disagree as what's irritating and what's not. Enforcement is often uneven because police resources are limited and there are more important matters to pursue.

But if people are banging on your door, if that is the case, then the argument changes. Ask managers about installing a video system in public areas around your unit so you have evidence for a proper complaint to police.

Question: We are in a home with a construction defect and a poorly-managed homeowners association to boot. At any rate, the value of our home has dropped over $100,000. A handful of homeowner's have been short selling or foreclosing.

My wife and I want out ASAP because of the "state of building" and we cannot afford to take the loss, nor do I want to negatively impact my credit score. The first mortgage and the home equity line of credit are from the original closing.

Answer: Given your description of the property if you sell now you will have a significant loss. If you do not pay the mortgage your credit will be damaged.

How serious is the construction defect you allege? How poorly managed is the HOA? Is it possible that the value of your property has declined in whole or in part simply because condo values in your community are generally in decline? It's hard to imagine stable prices with like units being foreclosed or sold short.

The question to be asked is whether your situation is likely to get worse as a result of additional foreclosures and short sales. Speak with several local brokers to get some sense of the market and your potential options.

Question: The foreclosure market is giving investors another avenue of opportunities. Should I wait for good HUD homes or buy new investors homes? Does it mean that resales in the areas with many HUD foreclosures are bad?

Answer: None of the above.

A wide variety of properties are being foreclosed, not just those insured under the FHA program. For this reason if you only look at HUD properties you will miss much of the foreclosure marketplace. Government loans -- FHA, VA and Rural Housing Service -- were only 2.8 percent of all originations in the second half of 2006 according to the Mortgage Bankers Association. To evaluate local markets you must look at a variety of factors because FHA foreclosures are most-likely only a tiny percentage of the local properties being lost.

Before going further, check with the local economic development office for your community and look at the trends for jobs, population, roads and housing. Then speak with local brokers who are active in neighborhood markets.

Question: When purchasing a house for cash, besides the cost of the house, what other costs are involved? Property insurance can be bought separately, but what about property taxes? Are they paid at the time of purchase or can they be paid separately? Also, the purchaser pays taxes from the month of purchase and the seller is responsible for taxes until the date of closing, correct? Is there any other cost for which the buyer is held responsible?

Answer: In general terms, a cash purchase has several costs.

First, there is the purchase price of the property. This is the money you have agreed to pay to the seller to acquire the home.

Second, there are also transaction costs. These can include such expenses as state and local taxes, attorney fees, title insurance, etc.

You are correct that certain costs will be adjusted at closing. For instance, a seller may owe money for taxes not paid to date -- this may happen because the taxes are not actually due until some point in the future. Or, the seller may have paid taxes in advance and thus will be owed a credit at closing.

Who actually pays what at closing is a by-product of the sale agreement. For instances, the parties may agree to split transfer taxes but in a slow market the seller might agree to pay the entire cost.

For specifics, speak with your broker and the closing agent, the party conducting settlement.

Question: In determining the adjusted basis of a property, do I consider the original costs that I paid or the amount for which I refinanced the property?

Answer: Refinancing is not an issue when figuring your sale profit. In basic terms you want to look at your sale price and then subtract your purchase price, closing costs when you purchased, the value of any capital improvements for which you have receipts and the closing costs you paid when you sold.

If the property is a rental then you also need to consider depreciation taken to date.

For specifics, speak with a tax professional and see IRS Publication 523, Selling Your Home.

Question: We have a 1,900 square foot home with a partially-finished basement with 1,000 square feet. We refinanced in 2006. Right now we only have $5,000 in home equity. We are out of room, and want to add on. How can we add on to our home with NO equity, is there a loan out there we can get that will help us to add on with no equity?

Answer: There are lenders who will provide mortgage financing that exceeds the value of the property, however, such loans cannot be recommended because of cost and borrower risk.

By any chance, when you refinanced in 2006 did you effectively get 100-percent financing? Did you get cash out of the property at that time?

Does that $5,000 represent your equity after marketing and closing costs if you had to sell?

Would it be a better choice not to refinance but to instead buy a larger property? Is this financially feasible? For specifics, speak with lenders and local brokers.

Question: My home is valued at $125,000. I'm considering selling it, but before I do I want to improve it. I have a deck off my dining room and want to turn it into a sunroom. I'm leaving the deck, as it has been there for over 20 years and is still in great condition. But I am laying down a tile floor over the deck. Do I need a permit to do this? And will the sunroom be considered a solid part of the home even though it is on a deck?

Answer: I see a "sunroom" as an enclosed and covered area, so you need to check with your local government to see if either electric or building permits will be needed for your project.

Also, the construction suitable for a deck may not support the heavier weight of a sunroom. You need to have a licensed engineer or architect look at your plan before going further.

However, it may not be worthwhile converting the deck to a sunroom. If the property is now worth $125,000 then how much more will it be worth after the addition of a sunroom? Please speak with local brokers before starting your project.

Question: I'm presently on active duty in Norfolk. My lease ends in January and I will not renew.

I return to the reserves and unemployment in February, but perhaps do not want to stay in Norfolk. Since my lease ends in January and my military status will change in February, what can I do about my one-month housing gap?

Answer: Speak with your current landlord. Most probably they will allow you to stay over on a month-to-month basis. Your base housing office can provide assistance if required.

Question: I put down $22,000 on a new condo and put my house on the market for $524,000. I got a buyer, but when the appraisal came back it was for only $490,000. The appraiser was not able to get an appraisal for a house/model like mine in my development because none had sold yet. The appraiser found a house with similar square footage.

Now, I have a problem because I will not have enough money to pay the closing costs on the new condo. Can I get my down payment back from the builder? The new condo is in a hot market area and I know the builder will be able to sell it. There's a clause in my contract with the house buyer that if the appraisal came back lower, I do not have to accept her offer. So, I have no problem with the house buyer. The problem is with my down payment to the builder for the new condo. Help!

Answer: You have two separate transactions.

First, there is the sale of your current home. If you're reading of the agreement is correct, you can end the sale to your buyer without penalty because of the low appraisal.

Second, there is the condo purchase. You have a $22,000 deposit. If it is true that the condos are in demand, then the builder might be willing to return your deposit if he can readily sell the unit for a higher price.

These situations suggest several looming problems, however.

The builder is not obligated to end your purchase, thus if the house does not sell and the builder wants the condo purchase to go through you could be stuck with two mortgage payments or the loss of your condo deposit.

If you have to buy the condo then it will be your job to either sell the condo or the house. However, when you buy the condo there will be closing costs and there will be other expenses when you sell. In effect, to break even on the condo you likely will have to sell at a significantly-higher price.

If it was me, I would keep the house and try to cancel the condo purchase without penalty. If the builder wants a concession for ad costs and such it might be worthwhile to accept such a settlement because the expense of keeping the condo could be far greater.

Please have an attorney review your real estate agreements to see if there are other options available to you -- and to assure that your interpretation of the agreements is correct.

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Published: July 27, 2007

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