Question: We are about to buy our first home from a particular builder. All homes in the community (92 to be built) vary in price from $960,000 to $1.3 million. So far about 35 have been sold and the builder is offering options at half price.
Do you think it's reasonable to take the asking price, add all the options we want, and then reduce the total by 20 percent.
Answer: You have a builder with 92 lots and 35 sales. That may be a good result if the project just opened, or it may be terrible if the community has been selling for a few years. Depending on the builder and your local market, a 20-percent discount may be reasonable, too little or too high. Without knowing more about the market it's not possible to say.
The problem here is that "20 percent" is a nice round number. In some markets, a 20 percent discount would mean that you're grossly over-paying for a property, in others the builder can sell for more and will have no interest in your offer.
This is your first home purchase and you're looking at properties in the million-dollar range. A huge amount of money is at stake, therefore you need to retain an experienced buyer broker before going further.
Question: I purchased my home for $460,000 and rode the high wave for a few years with two refinances. The last appraisal was for $880,000 which allowed me to refinance for $660,000 for the first lien and $130,000 for a second lien.
My interest-only payments now are nearly $4,600 a month. Being a real estate broker in today's marketplace has left me in a very difficult situation.
I had nearly 100K in commissions fall out of escrow in the past year, which pulled the plug totally out of my ship. The trustee sale for my property is in a few weeks. The home may sell for $600,000 if I'm lucky. Many have told me I should short sale, I know it would be better than a foreclosure on my credit. I just need to know for sure that I will have no tax liability before I will go down the foreclosure path.
Answer: You need to thank Rep. Charles Rangel (D-NY). He's the author of H.R 3648 , the "Mortgage Forgiveness Debt Relief Act of 2007." Under this new legislation, if the mortgage on a personal residence is not fully repaid the short-fall is no longer regarded as taxable income. For specifics, please see a tax professional.
Regarding the idea that a short-sale is somehow better than a foreclosure for credit purposes, I'm not so sure. Both mean a mortgage was not fully repaid and in today's financial environment I do not see lenders clamoring to make new loans for borrowers who do not fully re-pay their debts.
Question: It's been more than three months since I've moved out of my apartment and I still haven't received my security deposit back. I call them at least three times a week to check on the status of the deposit and they tell me different reasons every time. Either it's landlord isn't in town, or they forgot to send it. They've even told me that they have already sent it. I think they're trying to take advantage of me because I'm 19 and they think I'll just forget about it. What can I do?
Answer: In many states, if not most, landlords are required to keep tenant deposits in an escrow (trust) account, separate and apart from the landlord's money. As well, most states have a statutory requirement which says the money must be returned within so many days after the lease is terminated, less any reductions for damages.
For instance, a 2005 review of North Carolina rules by Elizabeth Martin of Hatch, Little & Bunn and Bill Rowe with the NC Justice Center explains that "after the tenant moves out for any reason (including eviction), the landlord must give the tenant a written account of any items deducted from the deposit and refund the remainder to the tenant. The landlord has thirty (30) days from the time the tenant moves out to give this accounting and refund."
Please contact a community housing organization, legal clinic or attorney for the specifics in your jurisdiction. Ask about your right, if any, to collect damages from the owner.
Question: Can one co-owner of a property get a home equity loan without another owner? The co-owner -- my wife -- is trying to borrow and is the only one on the mortgage, but home is jointly owned by her and me.
Answer: In the usual case the lender will want all parties on the title to co-sign the loan.
Imagine that you were the lender. You want to make sure that if the loan is not paid you can foreclose on the property. The easiest and most obvious way to get that assurance is to have all owners co-sign for the loan.
Now imagine that you're a co-owner. Would you want another owner to borrow against the equity of the property without (potentially) a benefit to you?
Question: My son bought a house with a co-owner. Unfortunately, he did not get anything in writing between the two of them. The mortgage and deed are both in my son's name. The co-owner has paid approximately one-third of the mortgage for the last year, but now has decided he wants out because he is over extended with other real estate ventures.
Does the co-owner have any recourse if my son sells the house? My son is in for about $10,000 in improvements, which would means there would be no profit.
Answer: What co-owner? The mortgage and the deed are in your son's name. It's your son's income and credit which allowed the purchase of the property.
Why, exactly, did the other party pay anything to your son? Is the other party using some portion of the property? If yes, should not the other party be paying rent?
By any chance, does the other party have similar arrangements with other property owners?
Your son should not sell the property or pay a dime to anyone without first speaking to an attorney. At the very least, your son will want a release of liability should he elect to pay anything.
Question: A real estate agent in Michigan told me selling my home as income property would be easier than just selling as a residential home, especially if I was able to find a tenant -- thus, the buyer would have the rental income. Is this true?
Answer: There are areas which have suffered terribly because of job losses, population declines and significant numbers of foreclosures. In such communities it is very difficult to sell real estate because so much inventory is on the market.
What the salesperson may be suggesting is that in a tough market if your property is rented it would then be attractive to an investor. Given the context of a slow local market this approach may well have value.
In the general case, however, it's usually best to sell a residential property that's not rented because then the new owner is not bound by the terms of an existing lease.
Question: I hear all the time about home inspections gone bad. Are home inspectors required to pass an exam in order to practice?
Answer: What you don't hear about is that the overwhelming majority of home inspections work well. At this time, more than 30 states license home inspectors. Laws and requirements differ, however, so always ask home inspectors if they are licensed in your jurisdiction and how many inspections they have personally performed in the past five years.
Question: I've been talking to a lender about my options when I buy my house this spring. What exactly is an ARM?
Answer: An "ARM" is an adjustable-rate mortgage. The interest rate can move up or down during the loan term -- which also means monthly payments can rise and fall. Most ARMs have an initial "teaser" period with a low fixed rate and then rates which move with the marketplace. Because rates can move significantly higher with an ARM, it makes sense to also consider fixed-rate financing and payments which remain steady for the life of the loan.
Question: I heard from a friend recently that the seller normally pays the closing costs and both agents' commissions. Is this true?
Answer: Closing costs are typically a negotiable matter, though in some areas it is traditional for sellers to pay settlement expenses. Real estate fees are normally paid from the commission negotiated by the listing broker.
The reason brokerage fees are paid by sellers is that in a real estate transaction the buyer gets title to a property and the seller gets the money, thus the seller is the one with the cash to pay brokerage costs
Question: I've been trying to figure out what upgrades to make to the mechanics of my house. Can you explain what a tankless water heater is and what benefits it might have?
Answer: Instead of storing hot water, a tankless water heater warms water directly as it flows within the plumbing system. This approach can save energy.
A tankless water heater is not a good choice for all homes. You must consider the property's electrical capacity, wiring, the type of piping, its age and other factors. Speak with professionals to see if a tankless water system is right for your property.
Question: I live in the Midwest -- where we're actually having a winter this year! What sort of home maintenance do you recommend for this time of year?
Answer: You want to examine the house to assure that it has good insulation, that doors and windows are properly caulked and sealed and that exterior water pipes are shut off to prevent freezing. For older homes, you may want to consider new windows and doors.
Incidentally, when you make improvements that increase energy efficiency you may be entitled to certain tax credits. Ask a tax professional for details.
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