Question: I was wondering if there's any insurance program that would protect me if the price of my house goes down. If so, who offers one and at what price? I don't want to buy a house and then have to sell at a substantial loss, and an insurance policy would protect me from major losses.

Answer: I know of no such insurance policy for residential homes, but the search for less risk is not unreasonable.

On Wall Street, brokerages and private bankers seek to offset risk by hedging their bets with exotic securities and derivatives, effectively types of insurance policies designed to ward off big losses. Looking at recent headlines you can see that a lot of hedges have not worked and some have lead to massive problems. There is an argument to be made that in some cases big institutions would have been better off without hedges.

The dull reality is that every investment represents risk, and every decision not to invest represents the risk that you may be missing out on potential profits.

Heads you have risk, tails you have risk.

Question: Our HOA has 23 patio homes that share common ground (pool, drainage pond, entry ways, and street maintenance) with a condo development across the street. We pay the condo association a monthly fee for the common ground we share. Right now there are several condos up for sale and many more that are turning into rental properties. Their president tells us that they have at least 12 owners who owe thousands of dollars in unpaid association dues and the condo is finding it harder and harder to meet expenses. What happens if the condo association is unable to collect dues and can't pay its bills for insurance, electric, water, lawn service, etc.

Answer: With a condominium an owner has a deeded interest in his or her unit as well as access to common areas owned by the condominium regime.

Each condominium unit can be separately financed and thus each unit can be foreclosed without foreclosing the entire condo project.

If a condo association cannot pay its bills then services will slow or stop and it may be sued by vendors for unpaid charges. If the condo association has a mortgage secured by a pool, health club, parking area or whatever then if payments are not made the lender can foreclose on the common elements.

The bottom line: Individual unit owners must pay their dues or they can devalue all units. If a condo association cannot pay its bills then common services will fall or decline, the quality of life will tumble, common facilities will close and the value of all units will drop.

The condo association will likely foreclose on those unit owners who are not paying fees and then seek to re-sell or rent the units. Unit foreclosures are not something anyone would like to see, but ultimately that's what will happen if the fees are not paid.

As to rentals, it is vastly better to have rentals then to have vacancies. With rentals unit owners are getting money and hopefully can make their condo payments. With vacancies owners are getting nothing.

Question: Can you answer a question regarding a reverse mortgage? If the home has depreciated in value and is worth less than what is owed, what is done? Is the home put up for sale still and sold at a lesser price than what is owed? Is the balance forgiven by the bank or does the estate pay the balance?

Answer: The most common reverse mortgage -- the home equity conversion mortgage (HECM) insured by the FHA -- is non-recourse financing. This means that the debt can never be greater than the value of the property. If the property sells for less than the loan balance the lender cannot go after the borrowers, their estate or heirs.

With an FHA-backed reverse mortgage HUD will pay the lender in the event of a loss. For further information, see my blog, BestReverseMortgage.com.

Question: If an owner of two condo units -- which are side by side in a building of 79 units -- decides he wants to combine the two units into one, does this generally improve the value of the building and other condo units?

Answer: There's no universal answer that works for all properties in all locations, but to get some sense of what might happen try this: What is the price per square foot of the smallest unit? What about the largest unit? If the price per square foot is going up as unit sizes increase that could bode well for a combined unit.

In addition, make a point of speaking with local real estate brokers who handle units at your condo before you buy, build or combine. They should have a good sense of local property values and can provide comps to support their view.

Question: I am one of the recent job cut victims; however, over many hard years I managed to save some money, a couple of hundred thousand dollars. I do not own a house. So, do you think it's a good idea to buy a house with big chunk of down payment?

Answer: You first should be congratulated for saving. That said, it's first a good idea to divide up the money so that it rests in several accounts which are each fully insured by the federal government.

The money that you have must be handled with great care. Essentially you are in the position of someone who suddenly inherits a lot of money -- it's tempting to spend but prudence is necessary.

Buying a home with a lot down -- and then not finding a new job and failing to make your payments -- could lead to foreclosure and bankruptcy.

Most probably you are best served by not doing anything until you have found new and long-term employment. Also, it would be wise to learn more about real estate, so take the basic real estate licensure class in your jurisdiction. This will tell you a lot and also allow you to get a real estate license and perhaps a new career.

Question: What happens if a seller wants to go ahead and move into a lease-option agreement, but wants to hold off acceptance until her lawyer reviews it?

Answer: Around the country sale agreements have become increasingly complex. Lease option agreements raise even more issues so the seller is right to have the paperwork reviewed by an attorney prior to acceptance.

For instance, who is responsible for insuring the property? Paying taxes? Must any of the rental money be retained in an escrow account -- speak with lenders for more information. What happens if the tenant/buyer damages the property -- and then decides not to buy? Is the property located in a community with rent control? When is the condition of the property deemed acceptable? How big is the deposit? Etc.

Question: My husband and I found a house we really like that was originally for sale six months ago for $499,000. The property was bought two years ago for $490,000, the price has now been lowered to $489,000 and listed as a short sale.

They haven't received any offers on the property, there is a lot of work to be done and I don't feel it's worth near the amount their asking, especially in the current real estate market. Before I would ever make a offer, I would also like to get the house inspected to see how much more work needs to be done.

My question -- what is exactly a short sale? How much typically (10-20%) can you expect the lender to take off the purchase price? How can I find out exactly what the bank/broker/owner would accept as an reasonable offer as I don't want to offend them, but want to get the lowest price as possible for this house.

Answer: Let's take 'em one at a time.

First, a short sale is a home that is being sold for less than the value of the mortgage. This cannot happen unless the lender agrees and often lenders will not agree.

Second, the size of the discount will depend on your local market. There is no set amount or percentage. What you can universally expect is that the lender will try to limit the discount as much as possible.

Third, don't worry about "offending" the owner, the broker or the lender. Buying a home is not a high school dance, everyone involved is an adult. Alternatively, treat all parties to the transaction respectfully and try to understand their interests and motivations.

Your goal as a buyer is to acquire the property with the best possible price and terms. If the other side is unhappy with your offer they will ignore it, decline or make a counter-offer. However, if they can't do better they may well accept your offer, whether they like it or you.

Your offer should certainly be dependent on a professional property inspection satisfactory to you by an inspector of you choice.

You are best served by working with an experienced buyer broker before going further with this transaction.

Question: What would a bailout of Freddie Mac and Fannie Mae mean for me, Joe Homeowner?

Answer: The consequences of a bailout would be enormous. First, if there was a bailout it would suggest that a bailout was necessary. As this is written there is simply no evidence that such a rescue is required or justified. What people are worried about are projected losses and projections can be wrong -- just ask the smart people on Wall Street who sold Enron shares to the public.

Second, a bailout would substantially impact the economics of the federal government and likely lead to higher mortgage rates, less value for the dollar and lower home values nationwide.

Third, essentially the mortgage system would be nationalized, hardly a good result for a free-market economy.

Question: How long does a typical homeowner own their home for in the United States?

Answer: There are various numbers bouncing around, but they change with economic conditions because it's easier to sell and finance a home when interest rates are low and the job base is growing. Also, people tend to move less often as they age.

Investors commonly compare mortgages rates to 10-year Treasury bonds. The reason? Most loans last about ten years because homes are commonly sold or refinanced every decade or so.

Question: How old is the typical first time buyer?

Answer: According to a 2007 study by the National Association of Realtors, "the typical first-time buyer is 31-years-old, 15 years younger than the typical repeat buyer. More than one in 10 first-time buyers are under the age of 25. The typical repeat buyer is 46 years old; half of repeat buyers are between 35 and 54 years old. Among all groups of buyers, unmarried couples tend to be the youngest at 30 years old and also the youngest among first-time buyers."

Question: Do single men or women typically buy earlier?

Answer: Single women. According to a 2007 study by NAR, a typical single male buys a first home by age 31, a typical single woman buys at age 30. Among couples, a typical married couple first buys at age 30 while an unmarried couple gets a deed at age 28.

Some Words Of Thanks: During the past five years this column has received tens of thousands of inquiries. The nature of the questions has changed over time as public interests have evolved, so the column has been a good reflection of ongoing real estate trends and public concerns.

I want to thank all of those who have been kind enough to write, whether to raise a question, criticize or suggest alternative ideas. I have learned a great deal from our readers and the feedback has been terrific.

I also want to thank Ed Armenta and Robert Jennings at RealtyTimes.com for their work supporting the column and handling questions. They have been just wonderful, and it has been a great pleasure to work with people who are so able, so professional and so caring about the readers we serve.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: July 25, 2008

Use of this article without permission is a violation of federal copyright laws.

Have a real estate question for Realty Times? Wondering about buying, selling, financing, refinancing or renting? Here's where you can send your question to Peter G. Miller, OurBroker®, a nationally-known columnist, author and reporter. Peter G. Miller has written six books -- including The Common-Sense Mortgage -- a guide with hundreds of thousands of copies in print. Miller was the original creator and host of America Online's Real Estate Center and joined Realty Times in 1998. Send your questions to . Because of the volume of mail received, individual questions cannot be answered privately and not all questions can be used. Published letters may be edited for space and style and all letters become the property of Realty Times upon receipt.