Real Estate in Steamboat

Strong economic data gave long-term rates a tough time this week, the 10-year T-note rising as high as 5.14 percent and mortgages threatening a lurch to 7 percent, but stabilizing in response to Fed Chair Ben Bernanke’s we-may-pause remarks to Congress.

The long-term-rate lid has been clamped down by bond market expectations for an economic slowdown, and trust in inflation vigilance at the Fed. Both expectations had less foundation at the end of this week than at the beginning.

The economy is accelerating — roaring, really. First-quarter GDP raced to a 4.8 percent gain on big spending by both consumers and businesses, its internal inflation indicator right at the 2 percent cliff-edge.

Housing was supposed to have faltered badly by now, leading a slowdown. Instead of falling, March sales of existing homes were steady; sales of new homes were supposed to flatten and instead surged 13 percent. Consumer confidence has sailed to a four-year high, consistent with a better and better market for jobs, ignoring three-buck gasoline. Orders for durable goods were supposed to rise by 1.6 percent in March and instead screamed to a 6.1 percent gain, plus a half-again revision for February.

That kind of growth has combined with $70-plus oil to produce the worst inflation risk in 25 years.

The bond market, waking from a bad dream to discover that it is no dream, but real, reaches for its security blanket… and can’t find it.

Not lost in the laundry, but retired for good. The new blanket, Bernanke, reassured no one in the bond market with his testimony. Before he spoke, markets were pricing a June hike to 5.25 percent and preparing for higher. When Bernanke suggested a sit-still June meeting, short-term rates mechanically backed down, but bonds froze in evident skepticism. Only stock market loons were thrilled.

Bernanke is a brilliant economist, but has no track record in his new job. Until he builds confidence with results, his only tools are rhetoric and attitude. Instead, he gave us this pause line: “Even if risks are not entirely balanced, thecommittee may decide to take no action at one or more meetings in the interest of allowing more time to receive information.” Even if risks are tilted to inflation, we may need some time to think things over.

The conclusion of a tightening campaign is reason for celebration, but a premature halt, last seen 1977-78, is a nightmare. The Fed chairman is entitled to his own operating style, so long as he gets results, but despite his excellent credentials there has been one worry about the man: he is a lifelong academic. Academic decision-making knows no urgency; rumination in search of truth is an end in itself. He doesn’t present as a ditherer, or timid, but a go-stop-go plan shows uniquely academic hubris: given enough information, we can predict the future and fine-tune the economy.

Bernanke’s predecessor allowed the Crash of ’87 to interrupt (briefly) one of his four inflation-fighting campaigns; in no other did he pause or make the slightest suggestion that he might, “to receive information” or for any other reason. That man raised rates until the work was done, and cut them later to repair damage.

Bernanke says that inflation is a risk, but under control. He made no mention of the wild run-up in commodities, or the absence of risk premia. He has all of his chips on a soon-to-appear economic slowdown, the kind of bet placed only by someone with great faith in his life’s work: the construction of economic forecasting software. If he wins, he’s a hero and credible in the bond market.

If he pauses, and the economy fails to follow his model, and he then has to play catch-up, there will be hell to pay. Inflation and rates the least of it.

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

“Is it really possible to buy a house for nothing down?”

That is the question I was asked by a “twenty-something” young lady at a cocktail party I recently attended.

My reply was, “Absolutely, yes.” But then I quickly qualified that statement by adding she needs good income and good credit. Her husband, standing nearby, perked up at that point and suddenly became very interested in the conversation.

Purchase Bob Bruss reports online.

Then I regaled them with brief stories of how I bought my personal residence and several rental houses for nothing down. I hope I inspired them to move out of their expensive luxury city apartment and buy their first home.

As I left that conversation, my parting words were, “Your first home won’t be your ultimate dream home. But it will be a start toward eventually buying your perfect home.”

Personally, the first “nothing down” residence I bought was a modest two-bedroom house, which, looking back, I would now classify as a “major fixer-upper.” It was far from perfect, but it was a start.

WHAT DOES “NOTHING DOWN” MEAN?

The simple definition is “zero cash from your pocket to buy your home.” However, that definition does not mean the home seller won’t receive cash from the sale. In fact, the seller often receives 100 percent cash in a nothing-down home purchase.

If you have good income and good credit, mortgage lenders are thrilled to loan you 100 percent of your home’s purchase price. But it won’t be cheap!

Lenders usually charge a slightly above-market interest rate for zero-down-payment mortgages. In addition, they require PMI (private mortgage insurance), which requires a monthly premium to protect the lender’s top 20 percent, or riskiest part, of the mortgage. PMI premiums are not inexpensive, so be prepared.

If you are a bit short of cash, the nation’s largest secondary mortgage market home loan lenders, Fannie Mae and Freddie Mac, will even loan up to 103 percent of your home’s purchase price to help pay the closing costs.

Just to be sure you can qualify for a 100 percent home loan, it’s smart to shop for a mortgage before you shop for a house or condo. Then you can receive a written pre-approval from an actual mortgage lender (not just pre-qualification, which means nothing) so you will know your maximum mortgage amount.

WHY SMART HOME BUYERS PURCHASE FOR LITTLE OR NO CASH. There are two major reasons for buying a house or condo for little or no cash:

1.) YOU DON’T HAVE THE DOWN PAYMENT CASH.

Just because you are “cash challenged” is no reason not to buy a house or condo. Even if you have lots of cash, why tie it up in your residence? There are many ways to buy a home for zero cash.

2.) YOU ARE A VERY SMART HOME BUYER WHO UNDERSTANDS LEVERAGE BENEFITS.

The second major reason for buying a home with little or no cash is to maximize your leverage benefits.

To illustrate, suppose you buy a $300,000 house for $300,000 cash and that house appreciates in market value at the historic nationwide average rate of 5 percent annually. In 12 months, it will be worth $315,000, or a 5 percent yield on your investment.

Instead, suppose you obtained a $300,000 zero-down-payment mortgage and the house rose 5 percent in market value in the next 12 months. Yes, you had to pay monthly mortgage payments, roughly the equivalent of rent. But now you “earned” $15,000 on zero investment for an infinite yield.

CREATIVE WAYS TO BUY FOR ZERO CASH DOWN PAYMENT.

Presuming you want to buy your next house or condo for little or no cash, there are many ways to do so. The most obvious is to obtain a 100 percent or greater new mortgage. But this method requires good income and good credit, and it can be expensive.

Instead, suppose you don’t need 100 percent financing, but you don’t want to tie up a bundle of down-payment cash. The first step is to get pre-approved with a mortgage lender for the maximum mortgage you can obtain. Be sure this approval is in writing from the actual lender, not a worthless “pre-qualification letter” from a mortgage broker.

The second step is to use that written lender’s mortgage pre-approval to buy the home you want. If you keep the mortgage balance below 80 percent of the home purchase price, you have many alternatives:

One is the 80-10-10 plan where you obtain an 80 percent first mortgage, a 10 percent second mortgage, and pay a 10 percent cash down payment.

Another is 80-15-5 where you pay only 5 percent cash down payment and either the seller carries back a 15 percent second mortgage or the lender arranges a 15 percent second mortgage home equity loan. Either way, you receive maximum leverage benefits, buy your home for practically nothing down, and avoid costly PMI premiums.

FINANCE FIRST, THEN BUY YOUR HOME FOR LITTLE OR NO CASH.

After pre-arranging your home mortgage, and getting a written pre-approval letter or certificate from the actual lender, it’s time to start shopping for a house or condo. However, in the back of your mind, be sure to consider how much home you can afford.

Armed with the confidence of a written pre-approval letter from a mortgage lender, you can decide what zero- or low-down-payment choice you prefer. When you see the home you want to buy, this is no time for the “paralysis of analysis.”

With the help of your experienced buyer’s agent, make your purchase offer before another buyer steals your home. However, be sure your purchase offer contains two key contingency clauses for 1) a satisfactory appraisal of the home, as required by your mortgage approval letter, and 2) a professional home inspection.

Unless you got carried away and offered too much for the house or condo, the appraisal contingency should not be a problem. However, the home inspection is vital. Be sure to accompany your inspector to be certain there are no latent or surprise home defects discovered.

If your inspector discovers a serious undisclosed home defect, then you can either negotiate for a “repair credit” toward your purchase price or cancel the sale and obtain a refund of your earnest money deposit if the seller refuses to be reasonable. More details are in my special report, “Secrets of Buying Your Home or Investment Property for Nothing Down,” 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.

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

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Copyright 2006 Inman News

Thanks to the old stereotype of the architect hunched over a drafting board, T-square in hand, many people still think that an architect’s main purpose is to draw “blueprints” (nowadays more properly called working drawings).

The trouble with this romantic notion is that it suggests that architects are paid to draw, when in fact, they’re paid to think.

In truth, producing working drawings is a tedious but relatively incidental aspect of the architect’s charge. It’s roughly analogous to taking a novel that’s been written in shorthand and typing it into a computer. The essential creative work–if it’s been done properly–is all but finished, and only the mechanics of formatting remain.

Alas, this preliminary thinking, which is the real kernel of the design process, takes a lot of time and effort and yet may not yield much of a tangible product until much later. Considering this dearth of physical results, it’s gratifying that many people nevertheless perceive why spending 15 percent or so of their building budget on architecture might be a worthwhile investment.

Still, there are also lots of perfectly intelligent people who are mystified, annoyed or even angered that a few sheets of drawings should take months to complete, cost them many thousands of dollars, and further delay them from getting their project under construction. These people quite reasonably reckon that all that money spent on mere paper could buy them a bigger Jacuzzi or a fancier front door.

I can only counter such reasoning by pointing out that architects provide a service, not a commodity. To say that your architectural investment only buys you a few sheets of paper is like saying that the cost of a Harvard education only gets you a lousy little diploma.

There are plenty of familiar arguments for hiring a licensed architect, most of them having to do with the technical side of the process. For one thing, the high level of detail found in a good set of working drawings–far from scaring off contractors as some people fear–actually makes the bidding and construction process easier and more accurate. For another, an experienced architect can help circumvent building-code booby traps that can make for nasty (and costly) surprises during construction. These services alone can save thousands of dollars in lost time and change orders. Hence, that seemingly extravagant 15 percent fee can repay itself quite rapidly.

Beyond these cut-and-dry reasons for hiring a professional, however, there’s one more–perhaps the only one that architects care passionately about—and that is the pursuit of good design for its own sake. Obviously, there are cheaper ways to get plans drawn than by hiring an architect, and no doubt there are times when a design that’s merely “good enough” would probably suffice. But from this architect’s perspective, at least, there can’t be much magic in this kind of undertaking. After all, humanity’s rise over the millennia has come, not from doing things well enough, but from doing them as well as we possibly could.

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Copyright 2006 Arrol Gellner

Your home is your castle, and the last thing you need is for your son’s stereo or your daughter’s phone to sound like an army of knights crashing through on their way to battle. Noise comes from sound waves, which are vibrations in the air that are generated by any physical action. If you can break, interrupt, alter or otherwise change the flow of those waves, you can change the amount of transmitted noise.

WALL CONSTRUCTION A MAJOR KEY TO QUIET

If you are building or remodeling, you have a lot of opportunities to impact noise transmission that are not available to you after the house is complete. Perhaps the most important consideration is the interior walls. The typical wall is simply a sandwich of drywall sheets over wood studs. Since drywall is a solid, relatively thin material, it does little to break the sound waves, and the air that is trapped in the wall cavities between the sheets does nothing to stop sound transmission.

One obvious solution is to install insulation in the walls between rooms, which will absorb some of those sound waves and greatly deaden the noise transmission. While any insulation is better then none, your best bet is to specify sound-deadening insulation instead of the more common thermal insulation, typically found in attics and exterior walls. Heavier and denser, this type of insulation is specifically designed for this application.

You can make a big impact with how the drywall is installed as well. The majority of drywall is installed by attaching it directly to the studs on each side of the wall, so the sound waves from one room will resonate directly through the drywall-stud-drywall composite right into the adjacent room. Installing double layers of drywall with staggered seams on each side of the wall will help to some degree, providing additional thickness and therefore additional mass to help deaden sound waves. Special sound-deadening sheets can be used as the first layer, directly under the outer drywall layer, or you can use one or two layers of 5/8-inch drywall instead of the standard 1/2-inch.

To better stop this transmission of sound, you need to break up as much of the direct connection between the drywall and the stud as possible. Perhaps the most effective way of accomplishing this is to install resilient channels, also commonly called “hat channels,” prior to installing the drywall. The U-shaped metal channels are attached horizontally across the faces of the studs, and then the drywall is attached to the metal channels instead of the studs. The staggering of the connection points and the sound-absorbing properties of the channel’s design makes a tremendous difference in how much sound transmission occurs between the walls.

Sound deadening insulation is a little more expensive then thermal insulation, but is not a major expense in the overall construction of home and will pay big dividends in peace and quiet without affecting the overall size of the wall. Double drywall layers and resilient channels are also relatively inexpensive in the overall scheme of the things, but remember that they create thicker walls, which will necessitate larger door jambs and other adjustments.

WATCH THOSE WINDOWS AND DOORS

Create an opening in a wall, and you create a pathway for more noise. For that reason, when you’re thinking about how to quiet things down, you want to pay particular attention to your windows and doors. Wood and vinyl frame windows have more sound deadening properties then metal frames, which are more prone to vibration and sound transmission. Also, the thicker the air space between the panes of glass and the better the insulation around operable windows, the better the window will perform from an acoustical as well as a thermal standpoint.

Solid-core doors are also considerably better at blocking noise then hollow-core doors, so you might want to consider upgrading to solid-core interior doors for any room where sound is an issue. Even with solid-core doors, sound can make its way around the door as well. Therefore, keep the door as closely fit to the floor as possible, use resilient materials to seal between the door frame and the wall studs prior to installing the door casing, and consider some type of weatherstripping between the door and the door stops, even on interior doors.

QUIET DOWN THE PIPES

If you have a two-story home, specify cast-iron waste lines for all upper-floor plumbing. This dense, slightly rough material is much better at deadening the sound of rushing water than the more common ABS plastic waste lines, which are smooth inside.

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

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Copyright 2006 Inman News

Question: I have lived in my apartment now for four years. I have recently gone through a financial problem and have been paying my rent late with the late-payment fee for the past couple of months. Yesterday my manager said that the owners wanted to serve us with a legal notice because of us paying rent late. My boyfriend has finally got another job so we will be able to pay rent on time. How they can do this when they have been accepting the late rent paid along with the late fee?

Tenants’ attorney Kellman replies:

Landlords are allowed to demand that rent be paid on time. They may also make agreements to accept the rent late. These late-payment agreements may be by written contract or they may be implied by law simply by the conduct of the parties. For example, if you have a pattern of paying late for a period of time without objection by the landlord, the law may imply an agreement to pay late. In other words, the landlord may waive the right to demand timely payment of rent when he/she has led you to believe and rely on the idea that rent can be paid late. If an eviction proceeding is initiated for a late rent payment, a judge may rule that it is unfair to blame you for that late payment based on your express or implied agreement. In your case, however, you may receive a legal notice to terminate your tenancy. In most jurisdictions, the landlord does not need to state a reason for the eviction. There are some jurisdictions where, under certain conditions, the notice must state a cause. In general, a legal notice would be illegal if it is retaliatory in nature even in a no-cause-eviction jurisdiction. In your case, such a legal notice may be retaliatory since you would be getting evicted for standing on your rights to follow a late-payment plan. Of course, the best way to proceed when you need to pay the rent late is to have a clear written agreement to avoid such problems.

Question: I am a new landlord of a single-family home. The lease states that the tenant shall pay for the first $25 of any charge for repairs by a service person but a friend told me this is not legal. I have this clause in my lease so that the tenant will know they will be responsible if they damage anything in the house. Please let me know if this charge is appropriate.

Landlords’ attorney Smith replies:

Landlords are required to maintain their residential rentals in a habitable condition. This duty continues throughout the tenancy. Generally landlords may not — by lease or other agreement — shift this responsibility to the tenant. I am not aware of any jurisdiction in which this right can be waived and a provision or a clause in the lease giving up or modifying the right to habitability is enforceable. As a result, the landlord may not ask the tenant to pay the first $25 — or any other amount — of essential habitability repairs. I recommend this clause be deleted from the residential lease. On the other hand, tenants do need to be reminded that when they are at fault for damage to the rental, they can be held accountable for the entire cost of the repair. Examples of this are toys dropped into the toilet or grease fires on the stove. Tenant damage constitutes a violation of the lease and can be the subject of legal proceedings, including eviction. Finally, it should be remembered that the law of habitability applies to residential rentals only and to the most important, basic requirements of the apartment — heat, water, electrical, and so forth. It does not apply to purely aesthetic or cosmetic items in the rental. You should set up a system whereby tenants promptly notify you in writing of any needed repairs, and then keep a written record of work done. If the tenant is at fault — carelessly or intentionally damaging the rental — he or she has violated the lease agreement, is responsible for the repair costs, and could be subject to eviction.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of “Property Management for Dummies” and co-author of “Real Estate Investing for Dummies,” and San Diego attorneys Steven R. Kellman, director of the Tenant’s Legal Center, and Ted Smith, principal in a firm representing landlords.”

E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com.

Questions should be brief and cannot be answered individually.

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Copyright 2006 Inman News

DEAR BOB: My wife and I bought our first home in March 2004. We sold it in January 2005 due to the birth of our wonderful twins. When we sold it, we used our profit to buy a larger home with double the square footage and almost double the price. Can we apply for an exception on the sale of our home pertaining to Internal Revenue Code 121 due to the multiple births although we don’t meet the 24-out-of-60-month occupancy test? –Kyle G.

DEAR KYLE: Congratulations to you and your wife on the birth of twins. Uncle Sam is so thrilled he will reward you with a partial IRC 121 principal residence sale tax exemption based on the number of months of ownership and occupancy.

Purchase Bob Bruss reports online.

The Internal Revenue Service calls your situation an officially approved “unforeseen circumstance,” entitling you to a partial $500,000 home-sale tax exemption.

Because you occupied your principal residence for 10 months, you qualify for an exemption of 10/24ths of the $500,000 exemption available to a married couple filing a joint tax return. That should be enough to shelter all your capital gains from taxation.

The fact you used the sale proceeds to buy a larger home, however, is irrelevant. All that matters is you had an “unforeseen circumstance” entitling you to a partial IRC 121 tax exemption. For more details, please consult your tax adviser.

CAN LANDLORD DEDUCT PRIVATE MORTGAGE INSURANCE?

DEAR BOB: I am paying private mortgage insurance (PMI) premiums on my rental income property. I was told I can deduct my PMI premiums on my tax returns. If this is true, where should I put this deduction on my tax returns? –Claude R.

DEAR CLAUDE: You are correct. The PMI fee is an “ordinary and necessary” operating expense for your rental property. However, PMI is not tax deductible for personal residence owners.

There is no right or wrong place to list on your Schedule E the PMI fees you paid. The blank space for other expenses seems the ideal place to claim this significant tax deduction. For more details, please consult your tax adviser.

The new Robert Bruss special report, “Pros and Cons of Fast and Slow House Flipping for Big Profits,” 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

John Strebel’s purchase offer to buy the home of Jon and Laurie Steel for $420,000 was accepted by the sellers. Unknown to Strebel, the house was encumbered with Internal Revenue Service tax liens and court judgments exceeding its sales price.

Real estate agent Haya Smith, acting as a dual agent for the buyer and sellers, was aware of the liens but failed to disclose them to buyer Strebel. Meanwhile, Strebel made preparations to sell his former residence, contingent on the purchase of the Steel house.

Purchase Bob Bruss reports online.

When Strebel told agent Smith his home sale was ready to close, she assured him his home purchase was “on track.” In reliance on his agent’s statement, he closed the sale of his former residence.

Unfortunately, the Steels were unable to resolve their IRS tax lien and judgment disputes. The sellers eventually told Strebel they could not deliver marketable title because of the tax liens.

Strebel then placed the proceeds from his home sale into an account earning 4 percent interest while he searched for another suitable home. More than two years later, he concluded that due to rising prices he was unable to find an equivalent replacement home as he had been priced out of the rapidly rising local market.

Home buyer Strebel then sued Smith and her brokerage, Frank Howard Allen Realtors, for fraud, negligence, breach of fiduciary duty, and unfair business practices. He also alleged emotional distress damages and economic damages.

If you were the judge, would you rule home buyer Strebel is entitled to damages for the lost market value appreciation of his former residence and for emotional distress damages?

The judge ruled Strebel is entitled to damages for the lost increased market value of his former residence, due to the dual agent’s failure to reveal the tax liens, but he is not entitled to emotional distress or economic damages.

Dual agent Haya Smith, who represented both the sellers and the buyer, should have disclosed to buyer Strebel the house was over-encumbered by IRS tax liens and judgment liens, the judge began.

Because Strebel’s sale of his former residence was contingent on purchase of the Steel home, when dual agent Haya Smith lied to him by informing him his purchase was “on track,” she and her brokerage, Frank Howard Allen Realtors, became liable for resulting damages.

“Contrary to defendants’ assertion, there is nothing inequitable about the recovery of appreciation damages in this case. The fact that Strebel received what was the fair market value for his house at the time he sold it did not eliminate financial loss from the premature sale of the property,” the judge emphasized.

Therefore, real estate agent Haya Smith and her supervising brokerage, Frank Howard Allen Realtors, are liable to John Strebel for $202,273 damages, the judge ruled.

Based on the 2006 California Court of Appeals decision in Strebel v. Brenlar Investments Inc. (dba Frank Howard Allen, Realtors), 37 Cal.Rptr.3d 699.

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

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Copyright 2006 Inman News

DEAR BOB: I am a single mom struggling to make ends meet. Fortunately, I bought my home in 1999 for $315,000. Today, it is worth close to $700,000. I am considering selling and moving to a smaller home in a less-expensive neighborhood, hoping to eliminate the mortgage payments. But I was recently dismayed to learn that because I am single I can only exclude $250,000 profit from capital gains taxes, while my friends who have husbands can exclude $500,000. Is there any way around this limitation? Can I add my son to the title when he turns 18? Would it be wiser to sell my home without making costly cosmetic upgrades such as new carpet and paint? –Cathy J.

DEAR CATHY: Sorry, without a spouse around the house, there is no easy way to increase your Internal Revenue Code 121 principal residence sale exemption from $250,000 to $500,000.

Purchase Bob Bruss reports online.

But your son need not be 18 to add his name to your title. Minors can hold title; they just cannot convey title.

However, for him to qualify for an additional $250,000 home sale tax exemption, he must own and occupy the home as his principal residence at least 24 of the 60 months before its sale. If you add him to your title now, please be sure you don’t plan to sell the house before he becomes 18 when he can convey title.

If he is now 16 or 17 years old, and if he will be 18 or older when you plan to sell the home, you could add him to the title now so he can qualify in 24 months for the extra $250,000 principal residence sale tax exemption. Your tax adviser or real estate attorney can give you more details.

As for fixing up your home before sale with new carpet and fresh paint, those are two of the most inexpensive and profitable cosmetic improvements you can make. Although I advise against making major renovations before sale, such as kitchen remodeling, which usually doesn’t add much net market value, cosmetic improvements usually pay off handsomely.

WHAT PROOF DOES HOME SELLER NEED OF PRIMARY RESIDENCE?

DEAR BOB: What proof do I need to show a property was my primary residence for three of the last five years so I can take advantage of the $250,000 capital gain exemption when I want to sell it? –Rick H.

DEAR RICK: Just in case the Internal Revenue Service audits your tax return for the year of your principal residence sale, you should be prepared to prove you owned and occupied it at least 24 of the 60 months before its sale (not three of the last five years).

Excellent evidence includes paid utility bills in your name, voter registration, auto license registration, nearby employment, local bank accounts, driver’s license at the residence address, filing income tax returns from that address, and other indications of principal residence occupancy. For more details, please consult your tax adviser.

SHOULD HOME SELLERS VACATE BEFORE SELLING?

DEAR BOB: My husband insists our home will only sell if we vacate it. This would necessitate having two mortgages until our old home sells. What do Realtors advise? I think our house will show well. –Susan I.

DEAR SUSAN: Your listing agent can best answer this question. He or she can objectively advise if your home will sell for top dollar with your furnishings remaining, or if you should move all your “stuff” out.

If you have lots of old-fashioned furniture, or if the house looks cluttered, it is best to move out before putting your home on the market for sale. Or if the house has smells, such as from cooking, smoking, or pets, it’s best to move out and correct the problems before listing your home for sale.

A vacant house without furniture often makes the rooms look bigger, especially if they are freshly painted and have new wall-to-wall carpets or sparkling hardwood floors.

Your listing agent can advise if your home will sell easiest by having it professionally “staged” after you move out. Home buyers are notorious for their lack of imagination. Spending a few hundred, or even a few thousand, dollars on “staging” your home for sale can be a very profitable expense.

The new Robert Bruss special report, “Pros and Cons of Fast and Slow House Flipping for Big Profits,” 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

Q: I have brick stairs with a landing leading to my entry door in my San Francisco home. The brick and mortar is original (about 1928), and during the recent rains, I have noticed that the wood beneath the stairs gets wet.

I have power-washed the bricks and mortar and the edge of the stairs where the mortar and the stucco meet. How can I make repairs or will I need to replace the stairs in the next several years?

A: With any luck you’ve caught the problem in time, and with some attentive preventative maintenance, you can avoid replacing your brick stairway.

We think it’s likely the source of the seepage is failing mortar joints between the bricks. It’s less likely that the seam where the brick meets the stucco is the source of the leak.

In any case you would be wise to address both areas.

Brick stairs like yours are constructed by first building a wooden ramp as a form for the staircase. Treads and risers are then built from the bottom to the top of the staircase. The tread is the part of the stair you place your foot on, the riser the vertical portion.

As each step is completed, the mason backfills the open space between the wood ramp, the tread, and the riser with mortar. This creates a solid step. The wood you see is actually the base of the stairs.

If this wooden base is subject to constant moisture, in time it will fail. Most important, since there is probably no reinforcing steel in the staircase, the stairs will eventually fail without the wood support structure.

We’d recommend that the first thing you do is determine the condition of the wood under the stairs. If the wood is solid, that’s great. If not, we recommend that you remove and replace the fungus-damaged wood and add some bracing for additional support. If you suspect termites, we suggest you contact a licensed pest control operator to treat the area.

Next, check the condition of the mortar. Try to remove some of the mortar from one of the joints with a stiff paint scraper. If the mortar comes out easily, you have to repoint all the joints. If the joints seem solid, the source of the leaks is probably the seam between the treads and risers.

To point a joint, start by scraping about 3/4 inch of mortar out of each joint. Brush the joint thoroughly with a wire brush to remove any loose mortar. Pay particular attention to the seam where each tread meets a riser and the joint where the top tread meets the landing.

Mix a small batch of mortar to a consistency a little thicker than toothpaste. Wet each joint with water (a spray bottle works well) and press the mortar mixture into the joint. We use packaged mortar mix and enrich it with Portland Cement.

Let the mortar dry for 10 minutes or so and scrape off the excess. If the joints have been tooled, you can use a masonry tool made especially for tooling joints to produce the concave surface. But we’ve found that a piece of 1/2-inch pipe works just as well.

Let the mortar dry for a couple of hours and rinse off any cement film that may remain. If any residue remains on the brick, remove it with a solution of muriatic acid. Be careful. It’s very caustic. Make sure to read the manufacturer’s instructions and wear rubber gloves and eye protection; acid will burn.

Finally, inspect the side of the stairs where the brick meets the stucco. We doubt that this is the source of your problem, but if you see a crack, caulk it with a good latex caulk and paint it.

Remember, the devil is in the details. Repointing brick and caulking meticulously may extend the life of your stairs by decades and save you the thousands of dollars it would cost to have them rebuilt.

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

Copyright 2006 Bill and Kevin Burnett

DEAR BOB: I am an avid reader, but have never seen you write about an even exchange of properties. My son and I both own rental houses. Both houses are of equal value, paid for, with no mortgage on either one. No cash will be involved in the transaction. I want to exchange my house for his rental house so my wife and I can then move into it; it is a one-floor house, whereas our current home has two stories. For health reasons, I need to live in a one-story house. If we make this trade, will there be any Internal Revenue Service complications? –Justin D.

DEAR JUSTIN: There is no problem with an even exchange of one rental house or another rental house such as you contemplate under Internal Revenue Code 1031. However, because you are “related parties,” if either of you sells the property acquired in the tax-deferred exchange within 24 months after acquisition, your sale profit will be taxed back to the original owner.

Purchase Bob Bruss reports online.

Also, you should continue renting the house you acquire in the trade for at least six to 12 months, thus showing rental investment intent. After that, you can convert it into your personal residence by moving in. For full details, please consult your tax adviser.

CAN HUSBAND GET WIFE’S NAME OFF THE HOME TITLE?

DEAR BOB: My wife and I bought our home about two years ago. On the mortgage papers, I am the only person on the hook, but both our names are on the title. We are living together normally, but I was thinking I would like the house title to be in my name alone. I didn’t talk to my wife about this. How can I change the title to have my name alone on the house? –Guy G.

DEAR GUY: You can’t. To remove your wife’s name from the home’s recorded title, she will have to sign a quitclaim deed to you. If you want to keep peace at home, I suggest you drop that idea.

BETTER REASONS NOT TO PRE-PAY LOW-RATE HOME MORTGAGE

DEAR BOB: A few weeks ago you had a letter from a couple who asked if they should pay off their 5.5 percent interest-rate mortgage with a lump sum of cash they received. I agree with your advice not to pay off that desirable mortgage, but for different reasons. You are correct that, presuming they have taxable income, their after-tax interest rate is only about 3.5 percent. However, they will have taxable interest or other income from their cash sitting in a bank or mutual fund. More important, if they pay off the mortgage but unexpectedly need cash, they can borrow on their home equity. But that isn’t always easy, especially for retirees living on a limited income or if they are in poor health when the money is needed. However, you neglected the priceless “psychic benefit” of not having to make a mortgage payment each month. –Bennett W.

DEAR BENNETT: Thank you for agreeing with me not to prepay a low interest rate mortgage, but for different reasons.

The new Robert Bruss special report, “Pros and Cons of Fast and Slow House Flipping for Big Profits,” 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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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2006 Inman News