Real Estate in Steamboat

Dear Barry,

I’m confused about foundation vents after reading your article emphasizing their importance. New studies, posted on the Internet at www.advancedenergy.org, state that foundation vents allow moist air to enter the crawlspace, causing condensation, fungus infection of the wood floor structure, and mold growth on sub-area surfaces. You say foundation vents prevent these conditions. They say the vents cause them. Who’s right? –Kevin

Dear Kevin,

Having reviewed that Web site and the studies in question, I find that they conflict with common sense and the experiential knowledge of countless field professionals. Excess moisture in a crawlspace does not enter through vent openings. The primary water source is the soil itself. It is wetness due to ground water runoff, on or below the surface, from natural springs or over-watering of nearby landscaping. The way to prevent water intrusion into a crawlspace is by improving site drainage conditions to prevent wetness of the soil from migrating beneath the building.

When ground wetness occurs below a building, it does what water tends to do under normal atmospheric conditions: It evaporates. When evaporation takes place in an enclosed space (e.g. an un-vented crawlspace), the humidity of the air increases. The problem with humid air beneath a building is that it condenses on whatever cold surfaces are available (such as wood framing, subfloor, insulation, steel hardware, etc.). When these surfaces remain wet for prolonged periods, natural consequences transpire: Hardware begins to rust, fungus and mold begin to grow, and dry rot eventually happens. The common means by which these conditions and consequences are avoided and eliminated is basic ventilation. In most cases, this is achieved by means of passive airflow, with simple screened vent openings at opposing sides of the building. Wherever passive ventilation is not adequate, mechanical ventilation may be added.

Any home inspector, pest control operator, drainage contractor, or mold inspector can tell you that eliminating these vents promotes condensation on the exposed building surfaces, with consequential damage in many cases. We see it routinely, wherever vents are missing or have been blocked. When vents are provided on one side of a building but not on the other, we typically find condensation and damage on the un-vented side. When homeowners add subfloor insulation and inadvertently block the vents, condensation and fungus damage often occur.

Whoever conducted that contradictory study should get out of the office or laboratory and crawl under a few thousand homes.

Dear Barry,

I’m writing this in reference to a local real estate agent who routinely recommends her husband to do home inspections for her clients. How can an agent recommend family members? Isn’t this a conflict of interest? Is it even legal? –Robert

Dear Robert,

It is clearly unethical for an agent to recommend a spouse as a home inspector. Whether it is illegal is a question that would vary according to the laws of individual states. Of the two agents I know whose husbands are home inspectors, both recommend other inspectors, rather than engaging in this questionable practice.

If you need a home inspector, do your own research before hiring anyone. Look for someone who has many years of experience and who is known among the local agents as “very thorough.” Call a few real estate offices and ask who is the most qualified inspector in the area.

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 think Kendra Todd is just a pretty winner’s face you saw on Donald Trump’s “The Apprentice” television show, her new book “Risk and Grow Rich” will change your thinking. This 27-year-old tycoon is a very savvy real estate investor who shares her strategies for building wealth by accepting risk.

The book’s emphasis is on accepting risk, planning for it, and using risk to your advantage. Todd is obviously wise beyond her years. No wonder “The Donald” selected her as his apprentice to supervise development of his Palm Beach, Fla., property. However, the book is remarkably silent about the apprenticeship and the TV show, although Trump says on the book jacket, “Kendra Todd has done a great job as an Apprentice, so I’m not surprised that she has also written a terrific book.”

Purchase Bob Bruss reports online.

Todd understands the challenge and importance of taking risks to create wealth. Her specialty, along with co-author Charles Andrews, is helping investors acquire properties that are likely to appreciate in market value. The book includes several examples. Her concentration is on pre-construction condominiums, a high-risk investment.

Although Todd is a real estate investor, the book is mostly about how realty investors should tolerate risk. She explains there are smart risks that can produce positive results. “Think like a poker player,” she advises for evaluating risks and rewards.

“If you want to grow, you must risk” is a great summary of this book’s message. However, Todd shares how to carefully investigate real estate risk before proceeding. She suggests having plans and contingencies in place to anticipate unexpected problems.

Calculate, initiate and mitigate summarize Todd’s advice. By that, she means calculate the specific opportunity, take action, but be prepared to look for ways to benefit even if the realty investment doesn’t pay off as expected. Although Todd is a very positive person, she never forgets to create a “fall back” position to cut losses if all does not go well.

Throughout the book are “Kendra’s Rules of Risk,” such as, “risk is the father of reward” and, “if you wait until you feel 100 percent ready to move, you will never take the first steps.” Her other rules are equally profound, especially for a highly focused 27-year-old.

Particularly enjoyable are Todd’s bits of wisdom, such as, “The self-employed shall inherit the earth,” and “the more control you have over your financial destiny and the growth of your income, the better your odds of becoming wealthy.”

Although Todd is just at the start of her real estate investment career, her book focuses her thinking and shows readers how they can also benefit from her sage advice for what she calls “risk diving.”

Chapter topics include: “How Risk Became a Four-Letter Word”; “The 10 Biggest Myths About Risk”; “Risk and Reward”; “Mars, Venus, and Risk”; “‘Entrepreneur’ is Just Risk Misspelled”; “How to Become a Risk Diver”; “10 Steps for Turning Risk into Opportunity”; “Setting Yourself Up for Success”; and “Formula for Making Your First Million.”

Whether you are a beginner or an experienced real estate investor, this book offers sound advice from which every reader can benefit. The author can’t point to dozens of years of real estate success, but she organizes her techniques into a format from which every reader can improve their lives by taking reasonable risks. On my scale of one to 10, this excellent book rates a solid 10.

“Risk and Grow Rich,” by Kendra Todd with Charles Andrews (Harper Collins-Regan Books, New York), 2006, $24.95, 244 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: Due to a job promotion and transfer we must sell our house of 21 years. Our nice problem is the net profit will be about $625,000. My wife and I are aware $500,000 of that amount for a married couple will be tax-free, thanks to Internal Revenue Code 121. However, my insurance agent told me that if we buy a replacement principal residence of equal or greater cost, we could also avoid paying tax on the additional $125,000 capital gain. Is this true? –Cheryl R.

DEAR CHERYL: No. I hope your insurance agent knows more about insurance than he does about income taxes.

Purchase Bob Bruss reports online.

Since 1997, purchase of a replacement principal residence has nothing to do with avoiding capital gains tax on the sale of a former principal residence. Your insurance agent is nine years behind the times.

But the good news is the maximum federal long-term capital gains tax rate is only 15 percent, plus any applicable state tax. That is a small price to pay for enjoying your huge capital gain, which is tax-free except for $125,000. For more details, please consult your tax adviser.

HOW TO GET RID OF AN INEFFECTIVE HOME SALE LISTING AGENT

DEAR BOB: My husband and I are trying to sell our home. We stupidly chose a new Realtor who said she would list our house on a reduced sales commission. After almost two months, we have had only seven prospects inspect the house. Is there any way we can change Realtors? –Tracey P.

DEAR TRACEY: I suggest you contact the listing agent’s broker or office manager to discuss the transfer of your listing to an experienced, successful agent within the same brokerage who sells homes in your vicinity.

To get more buyers’ agents to show your home, you should adjust your sales commission upward to be competitive with other nearby listings.

After the listing transfer, your original listing agent will get a referral commission when the home sells and you will then have an experienced successful agent working hard to get your home sold. As the home sales market slows, primarily due to rising interest rates, you need the best available listing agent. This is no time to be cutting sales commissions or listing with an inexperienced new agent.

RECOMMENDED BOOK FOR FIXER-UPPERS

DEAR BOB: I am about to undertake my first fixer-upper house. I recall you recommended a “how to” book in the past. What is the title? – Frank C.

DEAR FRANK: A superb new book is “Find It, Fix It, Flip It,” by Michael Corbett. You will love this unique book, which is not only “how to” but also explains how to upgrade a run-down house into a beautiful swan. The book is available in stock or by special order at local bookstores, public libraries, and www.Amazon.com.

CAN A 1 PERCENT CONDO OWNER BE EVICTED?

DEAR BOB: Fourteen months ago I rented a condo. The new owner resides out of town with no intent to live in the condo. We met each other and got along well. Then he learned the condo homeowner’s association absolutely forbids rentals. So he deeded me a 1 percent ownership interest on the title so I can occupy as an owner. But I recently lost my job, am unable to collect unemployment, and am behind on the rent. Now the 99 percent owner has been threatening me, harassing me, and showing up to let himself into my unit without notice. He wants me out within a week. He is mean and relentless. What legal rights do I have? –Renee C.

DEAR RENEE: Your landlord must follow the unlawful detainer eviction procedures. They require giving you a Notice to Pay Rent or Quit. If you don’t pay the rent, he must then serve you with a court summons and complaint, which gives you time to file an answer with the court. After that, a court hearing will be scheduled.

Only after the landlord has obtained a court judgment ordering eviction can he have you physically removed by the local sheriff. Meanwhile, the landlord has no right to enter your condo unit without at least 24 hours advance written notice (except in an emergency). If necessary, you can obtain a court restraining order against the landlord. For details, please consult a local real estate attorney.

SAVE ALL RECEIPTS FOR HOME IMPROVEMENTS AND REPAIRS

DEAR BOB: I recently bought a house where I hope to live for the next 30 to 40 years. But I have had to do costly repairs and maintenance, such as replacing aging wiring, replacing the main sewer line, installing a bathroom door, roof maintenance, interior painting, carpeting, and landscaping. Which of these expenses should be capitalized and added to my cost basis and which are non-deductible repairs? –Lauren C.

DEAR LAUREN: Save all your receipts for home improvements and repairs. Your goal is to capitalize as many expenses as possible and add the upgrade costs to your adjusted-cost basis.

For now, just save the receipts. When you eventually sell the house in 30 or 40 years, that’s the time to categorize the expenses as improvements to be capitalized or repairs, which have no tax significance.

The general rule is if the expense extends the useful life of the property, or enhances its market value, it is a capital improvement. But other costs, such as painting, are repairs, which have no tax significance for your personal residence. More details are available from your tax adviser.

CHALLENGE PROPERTY TAX ASSESSMENT AS SOON AS POSSIBLE

DEAR BOB: In November 2005 I bought a brand-new house. But the county tax assessor recently sent me a letter than the assessed value will be approximately $25,000 higher than my purchase price. What should I do? –Paul C.

DEAR PAUL: You should pay a visit to the county tax assessor’s office to review the appraisal for higher than your home’s recent purchase price. Perhaps you got a bargain price because it was a builder’s closeout or for another reason. As a property owner, you are entitled to look at your home’s assessment file to determine if there was a mistake.

Unless there is a valid justification, after reviewing your file, you should consider filing an appeal with the assessor’s office to get your assessed value reduced based on recent sales prices of comparable houses like yours.

DOES CONVERTING RENTAL HOUSE TO PERSONAL RESIDENCE ELIMINATE DEPRECIATION RECAPTURE?

DEAR BOB: About five years ago, I converted a rental house (that had been depreciated down to land value) to my personal residence. If I sell it today, can I take the $250,000 principal residence sale tax exemption, or will I have to recapture all the depreciation I deducted when it was a rental? — Thomas S.

DEAR THOMAS: Presuming you did not acquire the house in an Internal Revenue Code 1031 tax-deferred exchange, and you owned and occupied it at least 24 of the 60 months before its sale, as a single principal residence seller you can qualify for up to $250,000 tax-free profits. A qualified married couple filing a joint tax return in the year of home sale can qualify for up to $500,000 tax-free capital gains.

However, the depreciation you deducted while the house was a rental will be recaptured (that means “taxed” to us ordinary folks) at the special 25 percent federal tax rate. Please consult your tax adviser for full details.

SHOULD INVESTOR PAY OFF 10 PERCENT LOAN WITH 7.3 PERCENT LOAN?

DEAR BOB: I have an investor loan of $25,000 at 10 percent fixed interest with a two-year balloon payment on a rental property. Would it be beneficial to pay this loan off with my 7.3 percent variable home equity loan secured by my principal residence? –Eric P.

DEAR ERIC: Gosh, let me check my calculator. That 7.3 percent interest sounds much lower than 10 percent interest, especially since that high-interest loan has a balloon payment due in just two years. If there is no prepayment penalty, get rid of it.

EX-GIRLFRIEND NOT NEEDED TO ESTABLISH HOME’S BASIS

DEAR BOB: Fifteen years ago, my girlfriend was under a deluge of bills. She signed a quick claim deed on our house to me and disappeared. I’ve paid off the mortgage but can’t locate her. The house has appreciated greatly in market value. I want to sell. How do I establish a cost basis? –Robert H.

DEAR ROBERT: As a general rule, your basis is the purchase price, plus closing costs that were not tax deductible at the time of home purchase, plus capital improvements added during ownership, minus any depreciation deducted for rental or business use of the property.

If your ex-girlfriend signed a quitclaim deed (not a quick claim deed) to you, and it was properly recorded, you don’t need to locate her because you hold marketable title. For more details, please consult your tax adviser or a local real estate attorney.

The new Robert Bruss special report, “How to Get the Best Appraisal of Your House or Condominium,” 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: Your Web site contains 36 articles on adjustable-rate mortgages (ARMs), which account for about 25 percent of the market, and zero articles on fixed-rate mortgages (FRMs), which account for the other 75 percent. Is this not a little unbalanced?

A: Ouch, you are right. My only excuse is that ARMs are more complicated and borrowers need more help with them, but that does not justify a score of 36 to nothing. This article is a small gesture of atonement.

An FRM is a mortgage that has no provision for changing the interest rate. Hence, the rate stated in the note is fixed for the entire term of the loan.

Usually, the term “FRM” also means that the payment is fixed for the life of the loan and pays it off over the term. This should be (but usually isn’t) called a “level-payment fully amortizing FRM” to distinguish it from other types of loans that have a fixed rate but not a fixed payment.

For example, one of the earliest types of fixed-rate mortgages was repaid with equal monthly payments of principal, plus interest. For example, if the loan was for $300,000 at 6 percent and the term was 300 months, then the payment in Month One would be $1,000 of principal plus $1,500 of interest for a total $2,500. Each month the total payment would decline because interest would be calculated on a lower balance. This was the standard type of mortgage in New Zealand for many years, despite the obvious disadvantage of high payments in the early years.

A fixed-rate mortgage can also have a rising payment. The version in the United States is called a “graduated payment mortgage,” or GPM. They appeared in the early ’80s and are still available from a few lenders.

The interest-only version of a fixed-rate mortgage also does not have fixed payments. Borrowers begin paying only the interest, which declines if they voluntarily pay any principal, until the end of the interest-only period. At that point, the payment jumps and it becomes a level-payment fully amortizing FRM.

By prevailing practice, the term “FRM” without any modifiers means a mortgage with a fixed rate and level payments that fully pay off the balance. For example, on a $300,000, 30-year, 6 percent FRM, the monthly payment is $1,799. If the borrower makes that payment every month for 30 years, the 360th payment will reduce the balance to zero.

Where does that $1,799 figure come from? It is calculated from an algebraic formula (those interested can find it on my Web site: Look in the “Table of Contents” under “Formulas”). The much easier way is use a financial calculator, such as an HP19B, or an online calculator such as my number 7a. Technophobes can buy a book of monthly payments at a bookstore.

On an FRM, the composition of the payment between principal and interest changes every month. At the beginning, it is mostly interest, but the principal portion gradually rises over time. In the example, the principal payment in Month One is $299; in Month 12 it is $316; and in Month 60 it is $401.

This feature, where borrowers make the same payment every month but the saving component of the payment increases every month, is powerful but underappreciated. Some borrowers don’t recognize that debt repayment is saving, while many of those who do think that they aren’t earning any return on it. I am frequently asked whether they would not do better putting their money in a bank account earning 3 percent than repaying their mortgage.

In fact, a principal payment of $100 on a 6 percent mortgage earns the same return as a $100 bank deposit that pays 6 percent. The deposit earns $6 a year in interest while the principal payment reduces interest payments by $6 a year. The effect on the borrower’s wealth is the same.

Of course, if you can earn 10 percent on your money, paying down a 6 percent mortgage is not the best choice. The recent popularity of interest-only loans and option ARMs that allow borrowers to pay less than the interest has been encouraged by the notion that borrowers can earn a return higher than the mortgage rate by investing their money elsewhere. In my view, however, most borrowers cannot earn a return above the mortgage rate without taking unacceptable risk.

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

This new, more balanced, housing market calls for a new set of operating instructions for home buyers. No longer do you bid over the asking price just to have a house. The days of overlooking severe defects just so you can get your offer accepted are gone. To be successful in today’s market, home buyers need to be prepared, plan carefully, embrace negotiation and exercise patience.

Foremost in most buyers’ minds is a desire to pay a fair price and not a penny more. This is a legitimate concern and makes it essential that you do your homework before you buy. To keep from overpaying, you need to research the local market carefully.

Find out how quickly listings are selling. Are they selling over the asking price, or are prices being discounted? This will vary from one area to the next and even from one price range to the next.

Ask your agent to prepare a market analysis on a property you’re interested in buying before you decide what to offer. Concentrate on the most recent sales, which will most closely reflect current market value.

In order to avoid overpaying, you also need to stay within your financial comfort zone. Getting pre-approved with a mortgage broker or lender to find out how much you can afford is an obvious first move.

However, with cheap money disappearing, it’s prudent to carefully analyze your financial situation now, and your reasonable expectations for the future before you commit to a specific type of mortgage. Interest rates might not come down again any time soon, so make sure that you’re comfortable with the size and kind of mortgage you use to make the purchase.

HOUSE HUNTING TIP: The rapid pace of home-price appreciation is taking a pause. This means that you can’t overpay and hope that a couple of month’s worth of appreciation will make up the difference. You also can’t count on appreciation to generate the cash to pay for curing deferred maintenance.

For this reason, it’s imperative that you don’t waive inspections. Last year, buyers often made offers without an inspection contingency in order to gain favor with the seller in a multiple-offer competition. Many of those buyers now have a sorry tale to tell. It’s not worth taking the risk. Make sure that your contract includes an inspection contingency, even if you find yourself in competition.

Although multiple offers are scant to nonexistent in some markets, they still play a part of the housing scene in areas like San Francisco and Los Angeles.

Don’t let the threat of multiple offers scare you off. Unlike like last year, today’s multiple offers don’t always send the price higher. If you like a house enough, give it a shot. Just stick to your price limit, and if it doesn’t work, move on.

If you’re the only buyer making an offer, don’t be surprised if the seller doesn’t accept your offer. This is where patience comes into play. Many sellers have not yet adjusted mentally to the realities of the 2006 home-sale market.

Standing firm on your price can be a viable negotiating strategy. Don’t walk away from a negotiation just because the seller gives you a counteroffer for a higher price. If you’re serious about the house, counter back–even if it’s at the same price you initially offered. If this is your best and final price, let the seller know.

THE CLOSING: In some cases, it may take the seller a while to come around. If there isn’t another home you like as much, and if the seller is motivated, time may work in your favor.

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: When a downspout was replaced on my home, a small amount of stucco was torn away from the building. The plumber duct-taped plastic sheeting to the area as temporary protection. I’d like to repair the stucco myself and wonder if the prepared stucco available in the hardware store will provide a good quality and durable repair, and whether any special preparation of the damaged area is required.

My home was built in 1939 and, as far as I know, its stucco is original.

A: This is a job you can easily do yourself, and we applaud your willingness to give it a try.

Depending on the size of the hole and the amount of loose stucco and wire lath that is visible, you’ll probably need to chip out a little more stucco. It’s important to remove all loose stucco from the hole. It’s also important to have enough wire lath exposed so that you can pull it away from the wall. Also, a ragged outline is best to hold the patch. No straight lines allowed. Cracks tend to form on straight lines.

If the hole is clear of debris and the lath, and underlying building paper is intact, you’re good to go. If the paper is damaged, simply insert a piece of building felt to cover the hole. Cut a horizontal slit in the paper and insert the new piece under it so that any water getting between the stucco and the paper will continue down the paper and not penetrate behind the paper. Caulk the paper in place with latex caulk for a better seal.

Pull the wire lath away from the wall enough so that you can nail the wire to the sheeting with a lathing nail. A lathing nail has a cardboard spacer allowing the wire lath to be held away from the wall.

Premixed stucco patch is fine to use for this small a job, but we like to enrich the mixture with a little Portland Cement. We’ve found it forms a better bond and allows the stucco to stick better. It also makes for a stronger mix.

Depending on the size of the patch you’ll need two or three coats. Don’t try to get by with one coat. It will be too thick and could crack. Once the lath is prepared (debris removed and wire nailed and held away from the wall), mix the stucco.

For a two-coat job, mix enough stucco to make a 3/8-inch layer in the patch area. Wet the surface with water. A spray bottle does the job. Then apply the stucco, making sure to leave it 3/8 inch below the finished surface. Pay attention to the edges of the patch. There’s a tendency to get a little thick there.

Special tools are not required. The idea is just to get the mixture into the hole. A 4-inch drywall knife or something similar works well for applying the stucco.

Score the surface in a crosshatch pattern. Usually a nail works for this.

Allow the first coat to dry for a day or so. Then repeat the process for the finish coat, making sure to level the patch with the existing wall.

If the patch is more than 6 inches square, it should be a three-coat job. Reduce the thickness of each coat proportionately. Since stucco is usually about 3/4-inch thick, each coat should be about 1/4-inch thick. Just repeat the process three times instead of two.

Your 1939 vintage house probably has many coats of paint on it. Because of this, the raw stucco will require more than a coat or two of paint. Stucco and block sealers are available at paint suppliers.

They are about the consistency of marshmallow cream and will allow you to approximate the look of your house’s 67-year-old finish. Apply a coat or two of the coating, let it dry and finally apply a finish coat of paint.

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Copyright 2006 Bill and Kevin Burnett

You can watch markets for a long time and not see a one-week reversal in psychology — and reality — as large as this. Mortgages are pulling back slowly from 6.75 percent, but the immediate threat of 7 percent has disappeared altogether.

One week ago, bond and stock markets were drowning in the depressing soup of an obvious inflation problem and a Fed too timid to do anything about it. Then it got worse: Tuesday’s CPI affirmed the fear, the core rate rising .3 percent for the second month in a row, way over the Fed’s 2 percent-annual ceiling.

Then things got weird. Investors dumped stocks and bonds by the bale after the CPI news, but late in the day, long-term bonds, the most inflation-sensitive products in the financial universe, began to rally. By late Tuesday, light had dawned that a CPI report this bad would force the Fed to react, and therefore the odds had risen for the bond market’s dream of Christmas, a Fed overshoot on the tight side. There’s nothing like a recession for increasing the value of bonds.

Then the Fed did react. Just jawbone, but it was first-class ‘bone. First the announcement that Donald Kohn had been named vice chair of the Fed.

Next, a rookie piped up. Fed rookies are prone to saying really silly things (upon appointment as Dallas Fed president last year, Richard Fisher offered an apparently official leak that the Fed’s rate hikes would soon end; he hasn’t been heard from since). Not this guy: new Richmond Fed President Jeffrey Lacker, a man to watch, said just what the markets needed to hear. Just the truth: “Inflation is at the borderline of acceptable, and perhaps even beyond. I have been disappointed by the last two rounds of inflation reports…and containing inflation has to be our primary focus. A pause [in rate hikes] is less likely.”

Why Fed Chair Ben Bernanke has been unable to find simple words like these is beyond everyone in the markets. He spoke after the CPI report, and looked not so much deer-in-the-headlights (he does have some personal substance) as bland, wandering and totally unable to communicate the heart of the matter. If he can’t talk, that’s OK; but don’t make things worse by trying. Give Lacker the mike.

OK, confidence restored, where the hell are we, really? Old hand William Poole, St. Louis Fed president, said that for all he knew about the Fed’s June 29 meeting, it might raise rates a quarter-point, jump them an inflation-pre-empting half-point, or cut its rate. He wasn’t kidding: bet on uncertainty and volatility here.

The Fed obviously believes the economy is about to slow. Bernanke may be helpless as a public leader, but he is a fine economist with the best intentions and fears that the Fed may already be too tight. The most senior Fed watcher, David Jones, said today that the Fed is substantially on the tight side of neutral.

The problem has been very strong real-time economic data, and oil at $70 stubbornly maintaining inflation pressure. At the end of this sea-change week, oil is still there, but other strong-economy and speculative indicators have reversed even more strongly than long-term rates and Fed confidence.

Stocks are down 200 points in two weeks, and shaky worldwide. Gold has collapsed from $728 to $655 in 10 days. Natural gas in the last 48 hours has traded under six bucks, down 60 percent from last winter. And, the Fed is not the only tightening central bank: the Bank of Japan is still maintaining a zero percent cost of money, but it is sucking cash out of the system at an amazing pace, the monetary base in Japan down 9 percent since January.

If the economy cools, quickly, then the pause-leaning Bernanke is a hero; if not, the Fed has to play catch-up and over-do us into recession. For the moment, either way the calculus favors a top in long-term rates.

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

Have you ever bought a bad “lemon car”? I have. Several, in fact. Fortunately, I was able to either get my money refunded or trade for a better car.

But getting out of the purchase of a “bad house” isn’t so easy. In fact, it might be impossible. That’s why home buyers need to know how to avoid purchasing a bad house.

Purchase Bob Bruss reports online.

NO HOUSE IS PERFECT. As even home builders will admit, no house is perfect. Hopefully, the imperfections are minimal. What one person considers a defect is often not important to another person.

For example, I own a second-home residence about a half-block from a spur railroad track, which is used two times each weekday with a slow freight train in each direction. The first train of the day comes through about 8:15 a.m. Its mellow whistle is a nice wake-up call, which I don’t mind. The return train comes by about 5 p.m.

While not a home defect, that quiet railroad track would be considered a serious detriment affecting nearby residence market values if many noisy high-speed trains came through every day.

However, most house defects or problems are not so obvious.

WHAT IS A “BAD HOUSE”? There is no legal definition of a bad house. But most states now have laws requiring house and condo sellers to disclose in writing all known defects that have a material effect on the home’s market value.

The majority of these printed disclosure forms require the seller to disclose defects “to the best of your knowledge.”

Smart home sellers, and their real estate agents, are usually quite honest about revealing obvious known defects. The reason is they don’t want to get involved in a lawsuit with the buyer after the sale closes. Full disclosure prevents such lawsuits.

The best realty agents now suggest their home sellers obtain a “pre-sale professional home inspection.” Then the seller will know what defects the buyer’s inspector is likely to discover.

As a home seller, I’ve found a pre-sale inspection gives me the opportunity to repair any problems or at least fully disclose them to the buyer. Another advantage is home buyers will often accept the seller’s professional inspection report (but as I buyer, I always insist on hiring my own professional home inspector).

MANY HOME SELLERS DON’T KNOW ABOUT THEIR HOME’S DEFECTS. If the home seller has not lived in the house recently, he or she might not know about its defects. For this reason, most states exempt probate and foreclosure sales from the disclosure rules. Or the seller might honestly not know about the home’s problems.

To illustrate, in the 28 years I’ve owned my current home, I have never visited its “crawlspace” beneath the house. And I have no plans to inspect that cold, dark area where, when I bought the house, the termite inspector reported there are the bones of several dead animals down there. Also, I haven’t visited my attic since the new “lifetime” roof was installed about 15 years ago. The roofer didn’t say if it was his or my lifetime.

WHY HOME BUYERS SHOULD INSIST ON A PROFESSIONAL INSPECTION CONTINGENCY CLAUSE. Just in case you decide to buy a house where the seller has not had a pre-sale professional inspection, and/or the seller is dishonest and “forgot” to disclose a serious home defect, all home buyers should insist on a contingency clause in their purchase offer for a professional home inspection.

Depending on the size of the house, such inspections cost around $350, sometimes more. After the seller accepts the buyer’s purchase offer, buyers and their realty agents should accompany their inspectors on the two- to three-hour inspection to discuss any unexpected problems discovered. My experience has been professional inspectors are very talkative and will reveal if a problem is serious or superficial.

If the professional inspection reveals a previously undisclosed serious problem, the buyer can then either a) cancel the purchase and obtain refund of the good faith deposit, or b) reopen negotiations with the seller for a repair credit.

Whether I am a home buyer or seller, I prefer to hire a professional inspector who belongs to the American Society of Home Inspectors (ASHI). Their membership and experience requirements are the toughest of the home inspection groups. To find a local ASHI inspector, go to www.ashi.org or call 1-800-743-ASHI.

WHAT IS AN “AS IS” HOME SALE? Many sellers of older homes decide to sell “as is.” That means the seller must disclose known defects in the property but will not pay for any repairs.

For example, if a house’s roof is 20 years old but isn’t leaking, it is nearing the end of its useful life. An “as is” home seller can refuse to contribute to the cost of a new roof and leave it up to the buyer to decide to purchase or not.

Another reason for selling a home “as is” occurs when the residence obviously needs renovation but the seller either doesn’t have the funds or doesn’t want the inconvenience. Also, it is often better to let the buyer remodel to the buyer’s standards rather than the seller wasting money on upgrades, which might not add to the home’s market value.

SUMMARY: The best way to avoid buying a “bad house” is to insist the seller provide a full written disclosure of known defects in the property. In addition, the buyer should insist the purchase offer contain a contingency clause making the purchase contingent on the buyer’s approval of a professional inspection report. More details are in my special report, “How to Avoid Buying a Bad House,” 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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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2006 Inman News

If you’re a homeowner, you’ve no doubt heard the term “curb appeal”–that somewhat subjective first impression that your home makes to a visitor seeing it for the first time. If you’re thinking of selling your home this spring or even if you just want to spruce things up so the neighbors will love you again, here are some tips to consider:

Take an overview: You’ve probably stepped over that cracked walkway a hundred times, and you don’t even notice the faded paint job anymore. But someone approaching your home for the first time certainly will, and it can be the difference between someone coming in for a closer look or just driving on by. So, step back and take a good look at your home through the eyes of prospective buyers. Put yourself in their shoes, and make a written list of those things that might raise some concerns for you if you were thinking of buying the house. If you don’t think you can be objective enough, then ask your real estate agent or even a friend or neighbor to do it for you. And while the front of the house is the primary focal point, don’t overlook the sides and rear of the house as well.

How’s that roof look? A bad roof can indicate a home that has suffered from a general lack of maintenance, and may point a finger at potential structural and even mold problems resulting from leaks. Roofs are expensive to replace, but depending on your market and your desire to reap top dollar from the sale, you may want to take a hard look at the economics of re-roofing. And if you’ve been considering just crediting the cost of new roof to the buyer in escrow, bear in mind that you’ll probably get more potential buyers and a higher sales price if you take care of the roof yourself before even putting the home on the market.

Paint is your new best friend: Few things help your home show better than a fresh coat of paint. If you’re handy with a brush and an airless sprayer, you just might want to undertake the project yourself. A long weekend and a few hundred dollars in paint can make a world of difference in how well the home shows and how quickly it sells. If you don’t want to paint the entire house–or if it doesn’t really need it–just painting the trim, exterior doors, garage door, or window shutters can make a big difference as well.

Make necessary repairs: They may seem like little things, but making sure that everything is in proper working order can make a huge difference in how people perceive your house and the care you have taken with it as a homeowner. Fix cracked concrete walkways, and reset loose bricks. Make sure exterior knobs and locks all work properly. Replace cracked or splintered trim boards and deck boards. Make sure fences are sturdy, and gates work as they should. Repair broken window screens. Put up some bright new house numbers. And don’t forget to squirt a little oil on those squeaky hinges.

A little landscaping goes a long way: You don’t need a complete makeover to make a big difference in how your yard looks, and once again, landscaping and yard maintenance say a lot about how you’ve cared for the house over the years. If you have a lawn, fertilize and water it regularly to green it up, and run an edger along sidewalks and driveway edges. Rake up leaves and pine needles. Repair sprinkler systems. Prune back those wild shrubs, and trim overhanging tree branches. Head down to the local nursery and pick up some bright flowers to create borders and accent areas that will add both color and a feeling of hominess to the yard.

Don’t forget the night view: A home that shows well at night really creates an impression. Replace any burned out light bulbs, and consider adding a timer or two to keep the lights on a little longer into the evening. Consider some low-voltage or solar lights to accent front walkways, and maybe provide up lighting to accent trees and larger shrubbery. Keep a light or two on in the front windows as well, to add to the feeling of coziness and comfort.

Clean up your act: Finally, spend some quality time with a broom, a pressure washer, and a bucket, and give every part of your home a good thorough cleaning. If you’re not going to paint, wash down the siding to remove dirt and stains and get it looking fresh and clean. Wash driveways, walkways, and patios. If you have a wood deck, consider a complete cleaning to restore the wood to a fresher look. Wash all the windows, inside and out, and wash the screens as well. Polish doorknobs and light fixtures. Stow all of your garden tools and kids’ toys away to remove clutter and potential tripping hazards. And take a trip–or five–to the local landfill and dump all that stuff that’s accumulated in and around the yard.

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

(This is Part 1 of a two-part series.)

Ask most home builders these days what they sell, and they’ll say a lifestyle. In most cases, this means a house on the outer fringes of suburbia with a yard for the kids and a garden for the folks. The house has plenty of room to pursue hobbies, entertain friends, bond with the family and get away from it all in a spacious master suite.

But is this lifestyle a sustainable one for the long haul? That is, in meeting our own needs in this fashion, are we compromising the needs of future generations? The needs of our children and our children’s children? In a word, yes.

If we continue to build more than a million such houses every year, the long-term effects will not be good, so say architects, builders, environmentalists, ecologists, engineers and developers in recent interviews. Dan Chiras, an Evergreen, Colo., environmentalist, teacher and home builder was quite specific.

“We cannot keeping spreading out across the country, gobbling up farmland at the rate of 3,500 acres a day to create roads and highways, single-family houses and suburban shopping centers. We need the productive farmland to feed our growing population–as many as 120 more million people may be living here by the year 2050. In the near term we need the forests to absorb the astronomical amounts of carbon dioxide that we are producing daily, and we need the pastureland to absorb rain and reduce flooding. All the paving, roofs, sidewalks and driveways that come with every subdivision create impervious surfaces that compromise nature’s ability to control flooding.”

Not only are we gobbling up land to create new communities, but we are also using vast resources to build the houses.

“For almost every new 2,300-square-foot house, we have clear cut an acre of forest somewhere,” Chiras explained. “To produce all the metals and minerals used in construction, we have dug a hole in the ground somewhere that is equal to the entire volume of the house.”

There is an even more critical reason to rethink the suburban lifestyle–the energy it consumes. Unbeknownst to most Americans, more than 40 percent of the planet-warming greenhouse gases that we collectively produce everyday are directly or indirectly tied to our buildings, and half of these are houses.

How are houses and global warming connected? Our houses, like our cars, are powered by fossil fuels. When burned, these produce carbon dioxide, as well as small amounts of other greenhouse gases such as methane. For heating, most of our furnaces run on natural gas or oil, and the carbon dioxide vents up the chimney. For cooling, lighting, and running the appliances and all the other “plug loads” that are central to our modern lifestyles, we depend on electricity. Nationwide, about half of this is generated at coal-burning plants, which are hugely polluting. Another 20 percent is generated at natural gas fired plants, which are also polluting, but not badly. 

The third piece of the suburban lifestyle that is untenable for the long term is the nearly universal dependence on automobiles, which also produce prodigious amounts of greenhouse gases. Fuel-efficient hybrid cars can reduce the emissions of individual cars, but if a growing population maintains the same level of car ownership we have now, we’ll have millions more cars on the road and the total amount of emissions will still be high. A totally electric car would produce no emissions, but, as Oakland, Calif., urban designer Richard Register pointed out, “If the electricity that charges the car’s batteries is generated in a coal-burning plant, we’re still on square one.”

So, what is a sustainable lifestyle for the long haul? As Almonte, Ontario, energy expert William H. Kemp succinctly put it, “A sustainable lifestyle uses less energy, less land and fewer resources. It’s living in an apartment in a city like New York or Boston and using public transit or walking to work, school and shopping areas.”

This may seem unthinkable, but life without a car because all one’s needs are within walking distance can be liberating, Kemp said.

“Not only do you save time–all those hours spent in commuting traffic–you also save money; about $7,000 a year.”

When the no-car lifestyle includes good mass transit, it can be especially liberating for parents because their children can become independent years before they are old enough to get a driver’s license.

More Americans have experienced the no-car lifestyle than you might think–many lived this way when they were in college (think back to your own student days when you lived on or near campus and walked everywhere).

Regardless of the advantages of urban living, however, most home buyers are as yet unconvinced. They still want the house and the car. But their lifestyle will be more sustainable if they are willing to accept higher density–for example, a row house on an urban infill site. Collectively, fewer resources are required to build the community because the developer can tie into existing road and utility networks. And, with party walls, the houses will consume less energy for heating and cooling. When the community is located on a mass transit line and it has shopping within walking distance, the household may not need to use a car on a daily basis.

Transforming the American Dream from the single-family house and yard to a more environmentally sustainable, energy-saving vision of row houses with small yards and larger, shared outdoor areas will not happen overnight. But the most critical piece of our sustainability dilemma, drastically reducing our energy consumption by as much as 50 percent below current levels, can be addressed immediately.

Land developers could take a leading role by adding community-wide energy savings to their usual concerns with land acquisition, land planning and infrastructure, said Jonathan Philips, a developer with the Cherokee Investment Partners firm based in Raleigh, N. C. For example, he said, “You don’t always have to have an equal number of properties facing east, west, south and north. There is no reason why you can’t have most houses face south, southwest or southeast so that passive solar heating, which captures the free warmth of the sun, could be incorporated into their design.”

A developer can also provide community-wide energy savings if he/she takes advantage of the logistics at a project’s initial stage and does things that normally are left to individual builders, Philips said. Before construction begins, large and cumbersome equipment can easily move through an entire subdivision, so that, for example, the exterior portion of a ground source heat pump can be installed for every house at far less cost. For a 2,400-square-foot house, the cost drops from about $13,000 to about $4,000.

A ground source heat pump takes advantage of the stable temperature of the earth to provide both heating and cooling. It’s so efficient, a homeowner’s annual operating cost can be as much as 70 percent less than the cost to operate a conventional furnace and air conditioning system.

Many climate-tailored strategies for reducing a household’s energy use are widely available, but they haven’t been widely implemented because home builders are skittish. In the past, when they responded to exhortations for energy efficiencies that exceed local requirements, most buyers were uninterested and unwilling to pay for them. But, home builders will immediately jump on the bandwagon when they are convinced that buyers have decided that a cooler planet for their grandchildren in 2050 is a higher priority than a granite countertop today, and they spend their housing dollars accordingly.

Developers, builders and architects can only take residential energy efficiency so far, however. Heating, cooling and hot water on average only consume about 53 percent of the total. The remaining 47 percent is consumed by the appliances, “plug loads,” and lighting fixtures that the owners bring into the house. This can be significantly reduced by purchasing Energy Star equipment whenever possible and by using more efficient lighting, such as compact florescent bulbs.

Homeowners can also help to reduce carbon fuel emissions by purchasing, where possible, renewable energy. Many electric utilities now offer their customers the option of buying slightly more expensive electricity that is generated by wind, solar or hydropower. The latest generation of wind turbines is so efficient that wind farms off the East or West coasts or across the Great Plains states could supply enough electricity for the entire country. This seemingly futuristic scenario many come sooner than you think. In a recent press conference, Washington, D.C., environmentalist Lester Brown announced that the cost of wind-generated power is now competitive with conventionally produced electricity.

Questions, 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