Real Estate in Steamboat

If you are just starting your real estate investment career, and want to learn all the benefits realty investments offer, first read “Real Estate Investor’s Checklist” by longtime investor Robert Irwin. Rather than being a dull book about real estate investments (there are lots of those), this is a lively checklist of important topics every realty investor should consider before investing or deciding what type of investment property is best.

When I first began reading this unusual book, I thought to myself, “This seems like a dumb format.” But after reading several chapters, I realized what a brilliant idea it is to have boldface questions, followed by brief answer explanations of a paragraph or two. If a topic doesn’t interest you, just skip ahead to the next topic in which you are interested.

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This new book should be read with an open mind because it begins slowly with routine topics, such as how realty investors earn their profits, getting started, and evaluating the local real estate market. Although the book seems aimed at investors in single-family rental houses, Irwin doesn’t hesitate to lightly tackle other investment types such as apartments and commercial buildings.

The author asks many routine investor questions about important subjects, like the neighborhood, property condition, and potential for a profitable rental.

The one chapter that is either the book’s best or worst is “Do You Know the Property’s True Value?” Irwin, a longtime, very experienced real estate investor, places heavy emphasis on the “gross income multiplier” to determine a property’s value. He surely knows the major pitfalls of this method, namely its failure to consider a rental property’s expenses, yet he doesn’t warn why gross income multipliers should be used for nothing more than pre-qualifying a property or discarding it from further consideration.

But an especially valuable chapter, which even experienced investors might overlook, explains the importance of transaction costs when purchasing investment property. The author emphasizes expenses such as mortgage loan costs, title insurance, and attorney or escrow fees.

Irwin also highlights the property seller’s typical sales costs, especially the real estate agent’s sales commission, unnecessary broker’s transaction fee (which Irwin labels a “garbage fee”), and other incidental expenses.

As an experienced real estate negotiator, the author explains how buyers and sellers should think about cutting their transaction costs, especially by attempting to shift these expenses to the other party.

Locating the best investment properties receives heavy emphasis. Irwin even explains how to profit from the foreclosure market, especially for houses, by purchasing before or after the foreclosure auction sale.

However, the book is not without a weak chapter. Although Irwin surely knows the tax benefits of investing in real estate, especially Starker delayed tax-deferred exchanges, and how to maximize investment tax deductions, the tax chapter contains several errors that, if relied upon, could harm investors.

For example, he says an investor must complete a Starker exchange within 120 days (the tax law allows up to 180 days). Also, he says a residence acquired in a tax-deferred exchange must be occupied by the owner as a principal residence for five years before it can qualify for the $250,000 or $500,000 sale tax exemption of Internal Revenue Code 121. The correct information is, although property acquired in an exchange must be owned five years before qualifying, owner-occupancy is only required for 24 of the 60 months before sale.

Chapter topics include: “How Will You Make Your Profit?” “What Do You Need to Get Started?” “Did You Evaluate the Market Before Entering?” “Will the Property Make a Suitable Rental?” “What is the Condition of the Property?” “Do You Know the Property’s True Value?” “Where Do You Find Good Investment Homes and Properties?” “Do You Have a Good Agent?” “Do You Know What is Involved in Being a Landlord?” “Have You Lined Up Your Financing?” and “Flip Versus Serial Investing.”

As the title implies, this is a very complete checklist of important questions to be answered by prospective real estate investors. The provocative questions should raise “red flags” in the reader’s mind about possibly overlooked pre-investment considerations. Despite its slight defects, such as the tax chapter, on my scale of one to 10, this excellent real estate investment book rates a solid 10.

“Real Estate Investor’s Checklist,” by Robert Irwin (McGraw-Hill, New York), 2006, $18.95, 182 pages; available in stock or by special order at local bookstores, public libraries, and www.amazon.com.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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Copyright 2006 Inman News

DEAR BOB: I had a contract to sell my home. I gave the buyer seven days to bring me an acceptable mortgage letter from a bank, but he presented a letter from a mortgage broker indicating final approval of his loan was subject to “underwriting.” His bank returned his $1,000 deposit check for insufficient funds. Can I legally terminate his contract? –Jorge S.

DEAR JORGE: From your description, it sounds like your buyer is in breach of the sales contract. That letter from a mortgage broker indicating his mortgage approval is subject to “underwriting” is worthless.

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Today’s smart home buyers get pre-approved in writing by an actual lender before shopping for a home. If your buyer had done that, and shown you the lender’s approval letter or certificate, you could feel confident he will obtain a mortgage.

Although mortgage brokers can obtain such pre-approvals for their borrowers, because they are not the actual lenders, mortgage brokers can only issue pre-qualification letters, which are non-binding on actual lenders.

Especially because your buyer’s $1,000 deposit check bounced, if I were in your shoes, I would feel confident canceling that sale for breach of contract. For full details, please consult a local real estate attorney.

ANOTHER DISADVANTAGE OF GIFTING A PROPERTY BEFORE DEATH

DEAR BOB: In a recent article, you answered a widow’s question about gifting her property to her daughter and son-in-law. But one tax consequence you failed to mention, which snares many people, is the fact that by gifting real estate before death to a child, the child loses the opportunity to receive a stepped-up basis to market value upon the donor’s death –Tim F.

DEAR TIM: Shame on me. How could I have forgotten that major benefit of inheriting real estate instead of receiving it as a gift before death?

A big disadvantage of a property gift is the donee takes over the donor’s adjusted cost basis. In the situation you describe, the mother presumably had a very low cost basis if she owned the property for many years. The gift donee takes over that low basis.

However, when real estate or other assets are inherited, the heir receives title by inheritance with a new stepped-up basis of market value on the date of the decedent’s death. For more details, please consult your tax adviser.

MUST HOMEOWNER FORM A CORPORATION TO RENT A HOUSE?

DEAR BOB: Do I need to form a corporation to rent my single-family house as an investment property? My son says “yes.” –Christina K.

DEAR CHRISTINA: I’m sure your son is a fine young man, but he is mistaken on this issue. Landlords do not need to form a corporation before they can rent their property to tenants.

Millions of property owners rent real estate to which they hold title in their own names without forming a corporation. Perhaps your son was thinking that forming a corporation to hold title to the rental house would limit your liability.

But forming a corporation is not necessary. Nor is it a good idea, especially because holding title in a corporate name forfeits your rental property income tax benefits.

However, before renting that house to tenants, please consult your insurance agent to be certain you have adequate liability insurance. You need a rental property owner’s insurance policy, not a homeowner’s insurance policy. With adequate liability insurance, you can rest easy and forget about all the drawbacks of owning corporate real estate. For more details, please consult a local real estate or tax attorney.

The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar With or Without a Real Estate Agent,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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Copyright 2006 Inman News

Dear Barry,

We recently sold our home and made full disclosure of every defect we could think of. The buyers hired a home inspector, and we repaired all of the defects listed in the inspection report. We wanted the buyers to be satisfied with the home and felt that we had dealt fairly and honestly with them. But after the sale, they remodeled the interior, and that’s when an unknown problem was revealed. When they stripped the wallpaper in the master bathroom, the entire back side of the paper was covered with mold. They are now making angry accusations, and we’re expecting to be sued. How can we be accountable for disclosing a condition that we were unaware of? –Sandy

Dear Sandy,

The discovery of unknown defects is a common, but unfortunate, occurrence when remodeling projects take place. The removal of wall coverings, and particularly of drywall, may reveal faulty wiring, leaky plumbing, substandard framing, or major termite damage. When findings of this kind occur after the purchase of a home, two questions are commonly asked: “Why wasn’t this disclosed?” and “Did the sellers know about this problem?” All too often, the second question is given little consideration, and it is unfairly assumed that the sellers deliberately concealed a known defect. What is needed in these situations is a reasonable dose of good common sense.

In your situation, mold was growing on the backside of the bathroom wallpaper, and until the wallpaper was removed, the mold was not apparent to anyone. You didn’t see it while you lived there, the buyers and agents apparently did not notice it on their final walkthrough inspection, and the home inspector didn’t see it in the course of the property inspection. It is reasonable to assume, therefore, that it was not visibly discernible. Its existence was apparently unknowable. And as unpleasant as the discovery of mold may be, the lack of prior disclosure does not appear to be the deliberate fault of anyone. It was simply an unfortunate and unavoidable outcome; one that calls for an equitable response from reasonable people.

Bathroom wallpaper is typically vinyl-coated to resist moisture damage caused by steam. However, the vinyl coating resists water penetration on two sides, not just one. While it keeps air moisture in the bathroom from penetrating the outer surface, it also keeps moisture that may be present within the wall from evaporating. Instead, any moisture that may have gotten into the wall will condense on the backside of the vinyl coating, where it encounters the preferred food source for mold–the paper backing. When this occurs, you have the perfect environment for mold growth: paper, trapped moisture, and darkness. Unfortunately, while the mold continues to grow in this concealed area, the vinyl coating prevents any telltale signs from emerging on the surface. This is why the mold problem in the home you sold was not discovered until the paper was removed.

Hopefully, the new owners of the home will realize that this was a no-fault situation, rather than pursuing needless conflict. And since it is a pre-existing condition, perhaps it would be fair for buyers and sellers to share the cost of remediation.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

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Copyright 2006 Barry Stone

If you postponed buying a home during recent years, or found yourself unable to buy due to fierce competition from other buyers, now could be the window of opportunity you’ve been waiting for. Interest rates, although gradually rising, are still low. And, generally, the inventory of homes for sale is increasing.

The first step is to find out how much you can afford to pay by talking with a mortgage broker or lender. Knowing your price range will help you to determine whether you can afford to buy a single-family residence or a condominium. Condos tend to be less expensive. Your price range will also dictate the neighborhoods in which you’ll be able to buy.

HOUSE HUNTING TIP: It’s wise to get pre-approved for the mortgage you’ll need to complete the purchase. In order to get pre-approved, you’ll need to complete a loan application and have your credit checked. This takes time so if you aren’t already hooked up with a mortgage person, interview several before you go through the pre-approval process.

Ask each person you interview to explain your mortgage options. There are countless mortgage products available, but some are riskier than others. Find a mortgage broker or loan agent who will take the time to explain the pros and cons of the various mortgage options in words you understand.

Pre-approval can make a big difference in your negotiations with the seller. Recently, an Oakland Hills, Calif., seller received two outstanding offers. One was accompanied by a pre-approval letter that included underwriting approval from the lender and verification of the buyers’ funds for the down payment and closing costs. The second offer was presented with a letter from the buyers’ mortgage broker that didn’t include underwriting approval and was subject to verification of the buyers’ funds needed to close. The sellers accepted the first offer.

The next step is to find a good real estate agent. This doesn’t necessarily mean the agent who sells the most property. Your agent should be ethical, professional, trustworthy and diligent, and should specialize in the area where you want to live. Other key attributes are good negotiation skills and a willingness to commit time and attention to your needs.

It’s helpful to prepare a wish list of all the features you’d ideally like in a home. Share this list with your agent and get feedback on how realistic it is. Buying a home will inevitably involve compromise. Fine-tune the list after you have incorporated your agent’s input. Determine which items on the list are must-haves and which ones you can do without.

Now you’re ready to start your search. How long this will take depends on what you’re looking for and whether it’s readily available.    

In areas where there is a glut of listings on the market, you’ll have an easier time finding a home and there will be more opportunity to negotiate on the price and terms.

In low-inventory markets, you may find yourself in competition. However, unlike last year, it appears that multiple offers in today’s market aren’t necessarily boosting the price considerably over the asking price.

Where inventories are skimpy, you’ll have more success if you relax your search parameters and broaden your horizons. For instance, you might look in more than one area or be more flexible on the architectural style you’re willing to accept.

Don’t overlook listings that have been on the market for a while. The sellers might be open to negotiating. And keep an eye open for price reductions. Most buyers concentrate on listings that are new on the market.

THE CLOSING: A better deal might be made on a listing that isn’t drawing a lot of attention.

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.

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Copyright 2006 Dian Hymer

Q: “I bought a house two years ago that is now worth $340,000, with a mortgage of $240,000. I am being told that my $100,000 of equity is “dead,” just sitting there doing nothing for me. How can I make my equity work for me? I don’t want to do anything stupid.”

A: “Dead home equity,” with its implication of opportunity foregone, is a meaningless concept. Home equity is equal to property value less all liens on the house, which in your case comes to $100,000. Calling equity “dead” is a distortion of the English language. The fact is that the more equity you have, the better off you are. If you have a car with no car loan, you have dead equity in your car, but no car owner should feel guilty about that. Owning an asset free and clear is an objective to be sought, whether it is a car or a house.

Proponents of the dead-equity idea want to sell you the loans that would deplete your equity, and the investments they claim would more than recover it. There are circumstances where this might make sense. For example, if an investment opportunity comes along in which you have great confidence because it is a project you will be personally involved in, and it requires money you don’t have, consider borrowing against your home equity. It is a calculated risk that may be worth taking, especially by a younger person who will have an opportunity to recover if the project doesn’t pan out. I recommend it less often for seniors.

If you anticipate financial problems in the future that will cut your income and with it your ability to make mortgage and other payments, you want to keep your home equity readily available. Think of it as a reserve account you can tap if you need to. It doesn’t take long to open a home equity line of credit (HELOC) that you can use to keep current on your obligations.

WARNING: Don’t try to do this after you become delinquent, then it will be too late.

What I recommend against is allowing yourself to be persuaded by a third party who wants to sell you both the loan that will deplete your equity, and the investments that will make your fortune. The people who sell these deals make most of their commissions on the transactions, while you take the risks down the road.

I might reconsider if I could find one who would align his/her financial interest completely with mine. This would require a) that he/she provide the mortgage loan at the wholesale price (no broker markup), and remit the full sale commission on the investment to me, and b) He/she would make his/her money as I do, sharing the difference between the income earned on the investment and the interest payment on my mortgage, including a loss if the spread became negative.

Why Do Employers Check Credit?

Q: “Why do employers do a credit check when hiring employees? I don’t think it’s fair because I can’t repair my credit until I get a better-paying job, and I can’t get a better-paying job because of my bad credit.”

A: Employers who check the credit of job applicants believe that applicants who meet their credit obligations are most likely to be conscientious employees who meet their obligations to their employers. In this view, most people are consistent in their behavior across the different aspects of their lives. They are dependable or not dependable, seldom are they dependable about one thing and undependable about another.

Of course, this is unfair because some people have credit problems as a result of circumstances completely beyond their control. But who ever said that life was fair? It is not so unfair, however, as to brand a person forever. You can rebuild your credit, and there are employers who will listen to an explanation of why the low credit score in their case is not indicative of poor character. To make your explanation convincing, however, avoid creating an impression that you feel the system is persecuting you.

Dumb-Question-of-the-Year Award for 2005

Q: “I purchased my home for $480,000 and it is now worth $600,000. Is there any way of cashing out this additional $120,000 of equity and applying it to the loan balance?”

A: You can borrow the $120,000, which will increase your loan balance by that amount, and then use it to pay down the balance by the same amount. Of course, that will leave the balance right where it was, and you will be poorer by the amount of the closing costs on your new loan.

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com.

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Copyright 2006 Jack Guttentag

DEAR BOB: My daughter and another teacher co-own a townhouse. The other teacher is leaving to get married. My wife and I are going to buy her out so our daughter can avoid selling and trying to purchase again in an expensive area. To remove the other teacher’s name from the deed and mortgage (preferably leaving only our daughter’s name or substituting our names for the departing teacher) do we need an attorney? Or can we sign something in a government office to get her name off the deed? –Dan W.

DEAR DAN: The departing co-owner’s name will always remain on the mortgage obligation until the loan is either paid off or refinanced. If you contact the lender, the lender might demand a stiff assumption fee, or even demand payment in full because of the title transfer. If I were in your shoes, I would not contact the lender.

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To remove the departing co-owner’s name from the title, when she receives your payment for her equity share, she should sign a quitclaim deed to you and your wife. I suggest you handle the transaction at a local title insurance or real estate attorney’s office because you should obtain an owner’s title insurance policy. The title insurer or attorney will then record the quitclaim deed.

The reason you need an owner’s title insurance policy for the half interest you are acquiring is you don’t want to get stuck with the departing co-owner’s liens (if any), perhaps for unpaid income taxes or judgments, etc., which might have attached to her half of the property. An owner’s title policy is your best protection. For more details, please consult a local real estate attorney.

PROS AND CONS OF SELLING AN “AS IS” HOUSE

DEAR BOB: I have decided to sell my home so I can afford to move to a very nice, nearby assisted-living residence. My two-bedroom home, built in 1938, has become a bit run-down. However, it is in a very good neighborhood where most homes have been remodeled or completely rebuilt. My real estate agent suggests I spend about $50,000 to renovate the kitchen and bathrooms before listing my house on the market for sale. My son says I should just have the house painted inside and outside. He and his pals have offered to do the painting in a weekend or two. I can afford the $50,000 renovation cost, but then I read your article about selling “as is” and wonder if that’s the way to go? –Anne C.

DEAR ANNE: Listen to your smart son. There is no sense spending $50,000 to renovate an older house just before sale. Your buyers will either like your charming older house the way it is and be thankful for a reasonable price in a desirable neighborhood, or they will want to remodel to their taste after purchase.

Save your $50,000 and the inconvenience of renovation, which might not even return the $50,000 in the form of a higher sales price.

Let your son and his pals paint your house inside and outside. Also, check the landscaping to be sure it is attractive. Perhaps plant some spring flowers to make the front yard especially inviting.

When you sell your home “as is,” that means the seller must disclose all known defects (such as a leaking roof) but the seller won’t pay for any repairs. However, if an obvious defect can be repaired at minimal expense, such as a dripping faucet, get it fixed.

In addition to the real estate agent you already consulted, after the house is painted and ready to sell, I suggest you interview at least two more agents.

The reason is you need to compare their evaluations, especially their CMAs (comparative market analysis). These forms will show you recent sales prices of comparable nearby homes, asking prices of neighborhood homes currently listed for sale (your competition), and even the asking prices of recently expired similar home listings. Then you can correctly set your asking price.

HAPPY ENDING TO VETERAN’S RENTAL STORY

DEAR BOB: I read your recent item about the Iraq War veteran in a wheelchair who wanted to rent an apartment but it had four steps and he needed an access ramp. You correctly informed the landlord he does not have to pay for the ramp. But the Americans with Disabilities Act (ADA) requires allowing the tenant to install the ramp at his expense. However, you and your readers might not be aware of the Home Improvement and Structural Alterations (HISA) program available to veterans through most Department of Veteran Affairs Medical Centers. Information is available in VHA Handbook 1173.14 and on the Internet at www.va.gov/vhapublications. If the veteran is eligible for VA Medical care, he should qualify for financial assistance with the ramp. –Ivan R.

DEAR IVAN: Thank you for your valuable information and to the dozens of other readers who e-mailed and mailed suggestions. Fortunately, the landlord and the veteran’s mother reached an agreement.

The four steps have been removed, and there is now a ramp with a nice railing to the public sidewalk so the wheelchair veteran can take the nearby bus to a local college.

But there’s more. I received a nice e-mail from a resident of the apartment building who reports one of the residents, an older woman, is teaching the “quite charming” veteran how to cook, and another “young female resident” takes him shopping on Saturdays in her sport utility vehicle. I’m just reporting the facts. Is this reality TV material?

CONFUSION ABOUT MEDIATION AND ARBITRATION

DEAR BOB: In a recent article, you said it is not wise to sign a binding arbitration clause in a real estate sales contract. But I am confused how a person can agree in the contract to mediation of disputes, as you suggest, but not agree to binding arbitration if a dispute later arises. What alternative do you suggest to expensive court action? –Richard F.

DEAR RICHARD: A buyer or seller cannot be required in a real estate contract to agree in advance to binding arbitration, giving up their constitutional right to a jury trial, right to appeal, and court rules of evidence, without initialing or signing an arbitration clause in the sales agreement.

But many printed real estate sales contracts include mediation of disputes clauses, which do not require signing by the parties. However, mediation does not forfeit any legal rights, as does binding arbitration. If a party does not want to mediate disputes, which might arise, he can just cross out the printed mediation contract clause.

As I have often said, agreeing in a real estate contract to mediate future disputes is a good idea. It often saves costs, compared to court litigation, and mediation usually succeeds or fails within a day or two.

However, I recommend realty buyers and sellers not forfeit their legal rights by agreeing in advance to binding arbitration of future conflicts that might arise. If a dispute later arises, such as a home buyer discovers a serious defect that the seller allegedly failed to disclose, after the buyer sues the seller and mediation doesn’t work, then the parties can agree to binding arbitration rather than a court trial.

DOES STEPPED-UP BASIS RULE APPLY TO LIVING TRUSTS?

DEAR BOB: You often emphasize the advantages for a couple holding title to their home in a revocable living trust. I know when a couple owns title to the home jointly, after a spouse dies, the survivor gets a stepped-up basis to market value. Does the same rule apply when title is held in a living trust? –Philip H.

DEAR PHILIP: Holding title to your real estate (and other assets) in your revocable living trust has no effect on the tax aspects after an owner dies. The same stepped-up basis rules apply to living trusts as to other title holding methods.

When a husband and wife hold title to the home and other real estate in their living trust, after a spouse dies and the living trust provides the survivor receives the asset, in common-law states, the survivor then receives a new stepped-up basis to market value for the inherited half of the property.

The survivor’s basis for the other half of the property remains as before (half of the purchase price plus half the cost of capital improvements added during ownership). The property’s market value when the living trust was created is irrelevant.

However, in community property states, the surviving spouse receives a new stepped-up basis to market value on the entire property. I know that’s not fair, but I didn’t write the tax laws. For more details, please consult your tax adviser.

The new Robert Bruss special report, “How to Sell Your House or Condo for Top Dollar With or Without a Real Estate Agent,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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Copyright 2006 Inman News

The 10-year Treasury note has held below 4.75 percent, in turn holding mortgages below 6.5 percent, both despite certain knowledge that the Federal Reserve will raise its overnight rate on Tuesday to 4.75 percent and very likely signal intentions for one or more hikes ahead.

After next week, the Fed will not meet again until May 10. If the economy does not tank in the meantime, and markets follow the mechanical pattern of the last two Fed hikes, then in April the 10-year note will move toward 5 percent and mortgage rates will rise above 6.5 percent.

The economy is a long ways from the tank, but the newest data are nowhere near as strong as the stock market boomers would have it. Orders for durable goods, a key barometer for business investment and confidence, were flat in February (ex-aircraft). The first gain in sales of existing homes in six months had help from warm weather, but new-home sales dived 10.5 percent anyway. Mortgage purchase applications fell again, down 26 percent from last June; the economy-lubricating refinances down 47 percent.

Federal Reserve Chairman Ben Bernanke this week gave his first big speech. His writings before he sat down in the chair were fluid prose, rich with imagery and explanations useful for civilian readers. This first speech was anything but that; this one was in the style of a top-gun professor to an unruly crew of Ph.D. candidates whom the professor thought needed to be taken down a peg.

Former Fed Chair Alan Greenspan wrote and spoke in a kind of genetic code, pages and pages of ACTCAGTTTACTCGACT…, 95 percent of it filler, only one short sequence the active gene. Bernanke’s address on Monday night did not have a single phrase of filler, nor the slightest obfuscation. He spoke on the yield curve and “Greenspan’s conundrum,” the first-time-ever stability of long-term rates during sustained Fed tightening. 

His blunt message: I’ve got several hundred economists here at the Fed, and I’ve asked them the same conundrum questions that you’re asking and more that you haven’t thought of; we’re on top of it, you need not bother about it, and for the moment the flat yield curve doesn’t mean a thing. But, if you insist, I’ll tell you specifically why you shouldn’t worry.

Like this. Two general forces may be holding down long-term rates: special factors and macroeconomic ones. The special effects: relatively stable inflation and low overall economic volatility (a strong maybe), or intervention by foreign governments (nope), or new bond-buying pressure from pension funds (uh-uh), or a shortage of long bonds (a weak maybe). It’s a good thing that none of these forces amount to much, or he says the Fed would have to tighten against them.

The macroeconomic forces: previous flat curves accurately predicted slowdowns (not this time: prior ones were at much higher rate levels); or the economy may face new drags from energy costs and slower growth in house prices (could be, not now).

There. An inside look at the Fed’s analytic horsepower. Confounding three generations of bond traders, at this moment the yield curve is not useful as a guide to anything, if only because the Fed says so and isn’t paying attention itself. Bernanke’s apt conclusion: “First, determine your position frequently. Second, use as many guides or landmarks as are available.”

So, what other guides or landmarks is Bernanke watching? Properly, he isn’t saying, but it’s easy to guess. The Fed is stuck with traditional and low-precision stuff: job market overheating or cooling, signs of excess or unwinding financial leverage, systemic credit quality, and plain, old consumer spending. And housing.

Note: Merrill’s index of bond-market volatility has reached an all-time low, trending down since 2003. Volatility in markets always reverts to mean, and tends to do so explosively, punishing the complacent; the last low was in 1998, just before the LTCM blow-up marked the advent of several exciting years.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

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Copyright 2006 Lou Barnes

Ever slip on a lightweight windbreaker on a blustery, rainy day and feel warmer? A windbreaker doesn’t add much in the way of insulation and it only keeps out some of the rain, but really cuts down on how much wind works its way through all the little gaps in your clothes, so you end up feeling a lot more comfortable.

Such is the concept behind house wraps, of which Tyvek is probably the most widely recognized brand. Technically called a weather-resistive barrier, or WRB, house wraps are designed to cut down substantially on the amount of cold air and drafts that can leak into your home through gaps in the exterior finish. The material wraps around the entire exterior of the home, under the siding, and can be applied directly to plywood or oriented strand board (OSB) sheathing, over foam insulation boards, or directly to the studs.

An important distinction between today’s house wraps and older wrap materials, such as felt paper, is that modern house wraps are not completely waterproof. While they will stop the bulk of “solid” water from passing through them–for example, a driving rainstorm while the house is still in the framing stage–they are designed to allow moisture vapor to pass through them. With today’s tighter house construction, where moisture can become trapped in wall cavities with the potential for mold and structural damage, this water vapor transmission ability is an important feature.

JUST ROLL IT ON

House wraps are relatively easy to install, although it is a two-person job. They come in large rolls–up to 10 feet wide and 150 feet long–and are specifically designed to cover the walls with a minimal number of seams. What seams there are in the installation are covered with tape for further seal against air infiltration.

Installation begins at one corner of the structure. Wrap approximately 6 to 12 inches around the corner, adjusting the starting point so that the vertical fastening guide marks are aligned over a stud. Adjust the roll up and down so that the bottom edge of the wrap material covers the space where the bottom sill plate of the wall meets the top edge of the foundation. Fasten the edge of the roll in place at this point.

Unroll and fasten the wrap material around the house, like wrapping a big gift box. The material is unrolled right over window and door openings and around corners without cutting. The wrap should overlap both of the top plates. On tall walls or second stories, the wrap on the upper wall should overlap the lower wall at least 6 inches.

House wrap materials are best fastened by using nails with large heads or with plastic washer heads, or with 1-inch wide staples. Staples with narrow crowns, such as those from a conventional staple gun, are liable to tear through the material in windy conditions. For metal studs, use screws with washers.

At each window and door opening, make a cut through the wrap material in the shape of an inverted letter “Y,” then cut again along the underside of the header, creating three flaps. Fold the flaps into the building, wrapping them around the sides and bottom of the rough wall opening, then staple the wrap material to the inside of the framing. Finish the installation by installing side and bottom flashing material over the top of the wrap, and installing a top flashing under the wrap above the window.

For maximum protection against air infiltration, all seams in the wrap material should be taped. This includes horizontal overlap joints between the upper and lower floors, and vertical joints where the seams occur.

House wraps can also be installed over framing while the wall is still lying down. Start at one corner as outlined above, and allow at least 6 inches overlap at the corners and top, and a sufficient amount at the bottom to overlap the lower plate and floor framing and extend to over the top of the foundation when the wall is stood. Stand each wall and secure them in place, then overlap the house wrap material and seal with tape.

House wraps such as Tyvek, Typar, Celotex, and other brands are readily available at lumberyards and home centers in a variety of sizes, along with fasteners, tape, and header flashing material. Complete installation instructions are typically provided with each roll. 

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.

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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2006 Inman News

Spring is traditionally the best time of year to sell your house or condominium. The reason is that March through June is the peak home sales season when the largest numbers of prospective buyers are in the market place.

But 2006 started out differently. For some unexplained reason, the numbers of houses and condos listed for sale in most communities took a sudden jump in January and February, far earlier than usual. Maybe these home sellers just wanted to get a head start on what promises to be an excellent sales season with mortgage interest rates still very affordable for buyers.

Purchase Bob Bruss reports online.

HOW TO SELL YOUR HOME FOR TOP DOLLAR. If you are thinking about selling your house or condo, this is the best time of year to do so. However, a successful home sale requires preparation and planning.

The first step is to get your residence into near “model home” condition. That means cleaning, repairing and painting. But don’t go overboard with renovations. Let your buyers remodel to their taste. Most home improvements rarely bring in as much in additional sales price as they cost.

However, modest-cost cosmetic improvements usually pay off. Profitable examples include fresh paint inside and outside (paint is the most profitable dollar-for-dollar improvement you can make), new light fixtures, new floor coverings (if needed) such as wall-to-wall carpets, and outdoor landscaping spruce-up.

THE BEST WAYS TO DETERMINE YOUR HOME’S MARKET VALUE. Home sales prices depend on recent sales prices of nearby comparable residences within the last few months. A good place to start is on the Internet to determine your home’s approximate market value.

A brand-new Internet Web site that provides free “guesstimates” of home values is www.Zillow.com. When I checked my home, I was amazed to see an aerial photo of my house, including the lot boundaries. The Zillow estimate of my home’s market value was remarkably accurate. However, this remarkable new Web site doesn’t yet cover the entire nation.

Other free Internet home-value-estimate Web sites include www.HomeGain.com, www.HouseValues.com, www.OurHomesPrice.com, www.Domania.com and www.PriceAHomeOneline.com. These Web sites will often refer you to a local realty agent.

After you have had fun with the Internet estimates of your home’s market value, if you are a serious home seller, the best way to obtain a more accurate market value estimate is to interview at least three successful local real estate sales agents.

Even if you are thinking about selling your home alone (known as “for sale by owner” or “fizzbo”) the agents you interview won’t mind giving you their listing presentations. The reason is they know most “for sale by owners” give up and list with a professional agent within 30 to 60 days.

KEY QUESTIONS TO ASK EACH LISTING AGENT YOU INTERVIEW. The reason it is so important to interview at least three local agents is to compare their sales abilities and their CMAs (comparative market analysis) of your home’s market value.

Each interview, including the agent’s inspection of your home, should take about an hour. These will be the three most profitable hours you ever spend.

The reason is each agent should prepare a written CMA showing the agent’s estimate of your home’s market value. The CMA will include recent sales prices of comparable nearby homes, the asking prices of neighborhood homes now listed for sale (your competition), a list of recently expired nearby listings which didn’t sell, and the agent’s estimate of your home’s market value.

In addition to receiving each interviewed agent’s CMA, here is a list of key questions to ask each agent (the best agents anticipate these questions as part of their listing presentations):

1.) What are the names, addresses, and phones of your five most recent home sales listings?

Before you decide to list with one of the agents interviewed, be sure to phone those recent sellers to ask, “Were you in any way unhappy with your listing agent?” and, “Would you list another home for sale with the same agent?”

2.) How long have you been selling homes in this area? Do you sell real estate full-time? What professional courses and designations have you completed?

Some agents will resent these questions, realizing you are a well-educated home seller. But the best agents will have anticipated these important questions.

Occasionally, you will find a successful part-time agent who comes highly recommended by recent home sellers. Or you might encounter a promising new licensee who has lots of time to devote to selling your home listing.

3.) What is your minimum listing term? The best answer is 90 days so you won’t tie up your home for a long time with a lazy or ineffective agent. However, some agents insist on 180-day listings.

They usually justify such a long term by saying, “The average number of days on the market for homes in this area is 150 days (or whatever).” But your reply should be, “I don’t want just an average agent. I want an outstanding agent who has confidence in his or her ability to get my home sold within three months for top dollar.”

If the agent you think is best still insists on a six-month listing, after checking his or her references, an acceptable alternative is a 180-day listing with an unconditional cancellation clause after 90 days written into the listing contract. Then, just in case you chose a “bad agent” you won’t be stuck more than 90 days.

4.) What is your marketing plan for my home? The best agents will have anticipated this question by providing a written marketing plan as part of their listing presentation.

Each written marketing plan should include at a minimum a) a weekday open house tour for all MLS (multiple listing service) member local agents, b) Internet promotion on the agent’s personal Web site and at www.Realtor.com (where 70 percent of today’s home buyers begin their search), c) weekend open houses once or twice a month, d) newspaper ads at least once every week, e) brochures (ask to see samples of the agent’s past brochures for other listings), and e) depending on the sales price, advertising in additional publications.

5.) How many listings do you have now? What are their addresses? Do you have an office assistant? What percentage of your listings didn’t sell last year? What day of the week do you take off and who covers for you when you are gone? Are you planning any vacations during the next three months?

If the agent you are considering has too many listings, he or she might not be able to devote enough time to your home sale. Watch out for “numbers agents” who take many listings, have several assistants, but sell a low percentage of their listings. However, consider it a bonus if two agents work as a “team” to handle a large percentage of their listings.

Having an office assistant is another bonus to free the agent’s time for sales while the assistant handles the details such as arranging inspections, appraisals, and sales closings.

6.) What sales commission do you charge for a home like mine?

You should be aware, according to a recent survey by Real Trends, the average home sales commission is 5.1 percent. However, many agents try to get the traditional 6 percent sales commission, especially for homes priced below $500,000.

If the listing commission is competitive, this is not the time to cut the agent’s commission and incentive to get your home sold. Presuming the agent’s references and success record are satisfactory, a sales commission up to 6 percent is acceptable.

However, if the listing agent produces a low purchase offer, that is the time to say, “Well, since you didn’t produce a purchase offer at your recommended asking price, if you will lower your sales commission, maybe I can accept this low purchase offer.”

The most important part of the sales commission is the portion that will go to the buyer’s agent. To illustrate, if your home sale listing offers only a 2 percent commission to the buyer’s agent, but other local listings offer a 3 percent commission, agents representing buyers are likely to show those homes before yours.

In addition to the sales commission, at the time of listing be sure to ask if there are any additional fees for you or your buyer. Some brokerages try to charge “transaction” or “administration” fees in addition to the sales commission.

SUMMARY: Spring is the best time of year to sell your house or condo to earn top dollar. But before listing your home for sale with the best agent for your situation, be sure to interview at least three successful local agents before selecting the best agent.

(For more information on Bob Bruss publications, visit his Real Estate Center).

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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2006 Inman News

We’ve all heard about the “to die for” kitchen that impresses your friends and relatives. What about the “to die for” garage door? The very idea may make you fall out of your chair laughing, but the offerings of garage door companies have radically changed in the last 10 years, moving from the ho hum to the quite fabulous.

Garage doors now run the gamut from stark contemporary — the entire door is tempered glass set in aluminum frames — to French country. The most popular of the new doors is the carriage house look. It’s compatible with almost any traditional style of house. Even better, when it’s closed, it appears to be a pair of carriage house doors that swing out, not a big blank area on the front of your house. A wider, 16-by-7-foot door — the standard size for a two-car garage — appears to be two pairs of carriage house doors. You can also customize a carriage house door to a remarkable degree by adding varying sizes and shapes of windows, trim pieces, bucks (from the street they look like huge Xs), half bucks (they look like huge Vs) and period-style hardware. The hardware options include straps (part of the hinges on the old doors), handles, and clavos (studs that held the pieces of wood together on the old doors).

All this comes at some cost, especially compared to your basic, Brand X, white steel door with raised panels that many home builders still use. For a new house, the Brand X installed price for a two-car-sized door can be as low as $300, while the upscale carriage house door in a two-car size can run anywhere from $600 to $30,000. The huge price difference depends on the material used — wood or steel — and the degree to which you customize it.

The most expensive, custom-made, $7,000 to $30,000, two-car-sized carriage house doors should look good enough to eat — and they do. At this price level, you are not limited to the carriage house look — the manufacturers will execute any design you present with any wood that is commercially available, including mahogany, cherry and walnut. You can add almost any feature you want, including windows with leaded or beveled glass. Designer Doors uses hand-forged hardware on its custom doors and offers unusual features such as a wicket, an operable entry door built into a garage door, a handy arrangement when the front of a row house is too narrow for separate front and garage doors. Designer Doors can also fabricate matching front and garage doors, a great way to create an aesthetically cohesive front elevation.

Still high end, but not in the stratosphere, semi-custom, wood carriage house doors in the two-car size run about $4,000 to $5,000, installed. They are not quite as fabulous as the custom doors, but you still get a gorgeous door with a deep, rich color that grabs you from 50 feet away, and you can customize it with bucks, hardware and many different window choices.

You might decide, however, that a painted carriage house look is more compatible with the façade of your house. For this you want a door made with paint-grade wood or medium density overlay, an exterior grade, weather resistant hardboard that looks like masonite (in the garage door industry, this material is called MDO). With either material you’ll get a crisp shadow line that reveals design subtleties from 50 feet. The installed cost for the two-car size is about $3,500 to $4,500. For homeowners who want environmentally benign products, Jeld-Wen’s MDO door and trim and buckboards are made with 100 percent recycled cellulose fibers. For this reason it is offered by California-based Pardee Homes, a production home-building firm that offers cost-effective, green building choices.

There is a downside to the wood and MDO garage doors, however. They require regular maintenance. To prevent the warping and cracking that can occur when these materials are exposed to the elements, the front, back and sides of the doors must be repainted or restained every three to five years. The sun’s ultraviolet rays will also damage these doors. If you install one on a west or a south-facing wall, you may have to restain or repaint as often as every year or every other year, unless you have an overhang that will completely shade the door. Elaborating on the sensitivity of the wood and MDO doors, Dave DeYoung of Ann Arbor, Mich., who has been installing garage doors for more than 30 years, said that they can even be affected by a dryer venting moisture into a garage and snow that comes in on your car and melts inside.

If you want a carriage house garage door without the maintenance hassles, there is an easy solution — a steel door with synthetic trim and buckboards laminated to the front. These produce a three-dimensional effect with good shadow lines. From the street, where most people will see it, the door looks just like wood. You can get the same customizing options and the doors and trim can be painted to match the colors of your house. This type of steel door is much more dent resistant than the Brand X type because the panels are foam injected with polyurethane. During the manufacturing process, it chemically bonds with the steel to make the door panels stronger. The polyurethane has the added benefit of providing insulation. A two-car-sized door, installed, ranges from about $2,000 to $3,000, depending on the degree to which you customize the door. Pulte Homes is now using this type of door in some of its upper-end communities in Southern California.

Still too pricey? You can get a steel door with a carriage house look created entirely by way the steel is embossed. It is not as realistic as the doors with trim boards laminated to the front, but the installed cost is less — for the 16-by-7-foot size it’s about $900 to $1,500. With this type of steel door, the panels are also injected with the polyurethane foam insulation to make them dent resistant.

The least costly option for the carriage house door is an uninsulated, embossed steel door; the installed price is about $600. Because there is no insulation, the gauge of the steel becomes important. Somewhat counterintuitively, the lower the steel gauge number, the stronger the material. You need one with at least 24- or 25-gauge steel. Avoid ones that are “nominal 24 gauge” because the thickness of the steel is very uneven, and this will compromise both the appearance and performance of the door.

You might decide that two smaller, 8-by-7-foot-sized carriage house doors will look better on the front of your house than one larger one. The price for a smaller carriage house door is about half the price of the larger ones quoted above. But be forewarned: all five garage door installers that I interviewed agreed the two smaller doors arrangement is less convenient because with the small openings, you have less room to maneuver your car as you come and go.

Sources: There are numerous garage door companies in the United States. I looked at the doors offered by four companies that sell nationwide, Clopay (www.clopaydoor.com), Designer Doors (www.designerdoors.com), Wayne Dalton (www.wayne-dalton.com), Overhead (www.OverheadDoor.com), and Jeld-Wen (www.jeld-wen.com).

SIDEBAR:

Safety should always be a consideration when choosing a garage door. Most manufacturers now make steel doors with a “pinch resistant” feature that prevents your fingers from getting pinched when you close the door manually because of a power failure. Wood doors do not have this feature, but you will not have a problem if you have handles installed on both sides of your door.

Another important safety feature prevents the door from closing on an adult, child or pet. However, this is a function of the opener, not the door. By federal regulation, all garage openers must have an electric sensor near the base of the door that will cause the door to retract when it senses anything in the doorway.

Some openers, however, are noisier than others. If your garage will be below or next to a bedroom, an opener with a DC motor and a belt drive will be significantly quieter than the standard models with AC motors and chain drives. Some models with the DC motor also have a battery back up so that you can operate the door during a power failure. The difference in cost between the two types of openers is only about $50 to $75 — the quieter ones with the battery backup, installed are about $350 to $375.

Questions or queries? Katherine Salant can be contacted at www.katherinesalant.com.

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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2006 Katherine Salant