Real Estate in Steamboat

DEAR BOB: My wife and I are thinking about listing our $425,000 home for sale with a real estate agency, which charges a $1,995 commission. They will list our home for 30 days. During the 30 days, we can sell the home ourselves or if they sell it, we owe only $1,995. If another broker sells the home during the 30 days, he would write in his sales commission on the offer, subject to our approval. During the 30 days, the listing agency will put a for-sale sign in our yard with an information box with flyers about our home. We would have to show our home to potential buyers if the listing agent isn’t available to show it. Our home will not be in the local MLS (multiple listing service) until after 30 days if it doesn’t sell by then. This agency claims to be a full-service real estate firm. But their competitors put their listings into the MLS within 24 hours after listing. Do you think we should list with this firm? –Don S.

DEAR DON: According to statistics from the National Association of Realtors, at least half of all home sales involve a listing agent and a buyer’s agent. Most of those sales originate through the local MLS, the most powerful sales tool available to real estate agents.

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Especially in the current buyer’s market for homes, why cut yourself off from half the potential buyers? They won’t even know your home is for sale if it isn’t shown in the local MLS and on the nationwide www.Realtor.com Web site where many home buyers start their searches.

Don’t fool yourself. That is not a full-service real estate broker if you have to show your own home to prospective buyers. How will it be shown while you are at work or perhaps out of town for a few days? If your home isn’t in the local MLS, and if it doesn’t have a lockbox on the door so MLS member agents can easily show your home, how do you expect it to sell?

A yard sign and a few flyers are not enough to get a home sold for top dollar in today’s market. You need a successful listing agent aggressively marketing your home. Before you decide to list with that discount broker, please interview at least three successful realty agents who sell homes in your vicinity. Listen to their listing presentations before selecting the best for your situation. Compare their success records with the discount broker.

HOW TO GET $750,000 TAX-FREE PROFITS FROM HOME SALE

DEAR BOB: My brother Joe lives with our parents. He has been paying his share of the mortgage since they all bought the home about 25 years ago. Title is held in joint tenancy with right of survivorship. Joe’s name is on the title. They are thinking of selling the home, which was bought for around $200,000 and is now appraised at $1 million. Is Joe entitled to $250,000 capital gains exemption along with the $500,000 exemption for my parents? I heard they need to change the title to tenants in common. –Jeff G.

DEAR JEFF: No need to change the title. Joint tenancy with right of survivorship is fine as long as all three names are on the title. The happy result is when your parents and your brother sell their principal residence, they will each be entitled to a $250,000 principal residence sale tax exemption for a total of up to $750,000 tax-free capital gains.

That presumes each of the three joint tenant co-owners meet the Internal Revenue Code 121 test requiring ownership and occupancy of their primary residence for at least 24 of the 60 months before its sale. For more details, they should consult their tax adviser.

WHAT INSURANCE DOES MOM NEED FOR CONDO PURCHASE?

DEAR BOB: My mom is thinking of buying a condominium. But the insurance is confusing. Is the condo owner or the homeowner association responsible for insurance? Should she purchase coverage for the complete condo just to be safe? –John M.

DEAR JOHN: Insurance is the easiest part of buying a condo. The homeowner’s association must maintain adequate negligence liability and hazard insurance on the common areas, including the structure. But that master policy does not insure the contents of individual condos in the event of a loss, perhaps due to a fire.

Your mom doesn’t have to buy any insurance. Her mortgage lender won’t require any insurance because condo lenders are protected by the homeowner’s association master policy in the event of structural damage.

However, I’m sure your mother is a very smart woman who wants to be adequately protected just in case a loss occurs to the contents of her condo or if she incurs negligence liability.

For just a few hundred dollars per year, she can buy a condominium owner’s insurance policy from a major insurance company. The policy will include negligence liability coverage, plus insurance for loss by theft, accidental damage to the contents of her condo, and other individual coverages not included in the association’s master policy on the condo complex.

SHOULD INVESTOR TAKE DEPRECIATION DEDUCTION?

DEAR BOB: I own a rental property on which I have been deducting the depreciation tax deduction. But I recently read in your column that when I sell my property I will have to pay a 25 percent depreciation recapture tax rate. I am currently in the 15 percent federal income tax bracket. If I will have to pay the 25 percent depreciation recapture tax when I sell, do you suggest I don’t even bother to claim the depreciation deduction since I will have to pay back 10 percent more than I am saving? –Marian M.

DEAR MARIAN: Please don’t jump to incorrect conclusions. Owners of depreciable rental property must take the depreciation deduction on their tax returns, even if no tax savings result. Although you are in the low 15 percent income tax bracket, the depreciation deduction probably saves you tax dollars.

If no savings result, the deduction from your rental property can be “suspended” for use in a future tax year, or when you sell the property.

More important, you might never have to pay that 25 percent depreciation recapture tax rate. Perhaps you never sell your depreciable building and you die while still owning it. Then Uncle Sam can’t “recapture” and tax that depreciation deduction you enjoyed.

Or you might make an Internal Revenue Code 1031 tax-deferred exchange for another qualifying rental property of equal or greater cost and equity to pyramid your holdings. Again, there won’t be any depreciation recapture on such an exchange. In summary, because the tax law requires you to claim the depreciation deduction, enjoy it and hope you never have to pay the recapture tax.

CAN PARENTS CLAIM SQUATTER’S RIGHTS BY ADVERSE POSSESSION?

DEAR BOB: I have a “doozy” of a question for you. My parents took care of my aunt and uncle for many years, paying their expenses such as the mortgage and property taxes. My uncle died about 13 years ago and my parents paid off the mortgage about 10 years ago. They took possession of the property after he died and continue to rent it today. But I just found out they don’t have any fire insurance because it terminated when the mortgage was paid off 10 years ago. What is the best way for them to take title? Squatter’s rights? Adverse possession? Probate? I know they probably need an attorney but is there any way to avoid that? –LaVon G.

DEAR LaVON: Your parents need a real estate or probate attorney to sort out this mess. If there was no probate proceeding or living-trust distribution after the aunt and uncle died, it is necessary to determine who was entitled to receive the property title. The answer depends if there were written wills or, if not, if the title passes according to the state law of intestate succession to the closest relative.

After that is determined, your parents can assert their claim to title by adverse possession. “Squatter’s rights” is just another name for adverse possession.

If the occupancy and possession by your parents has been open, notorious, hostile and continuous, plus payment of property taxes, for the number of years required by state law where the property is located, they might qualify to obtain title by adverse possession.

In the meantime, they need to promptly purchase a fire insurance policy.

CAN LANDLORD DEDUCT WALL REPAIR COST FROM TENANT’S SECURITY DEPOSIT?

DEAR BOB: Can I deduct from my former tenant’s security deposit the extra cost of scraping and plastering to repair the damage from removing two-sided Velcro tape put all over the walls? –Janet H.

DEAR JANET: Yes. However, you should hire someone to do that work. If you do it yourself, and if the tenant disputes your deduction in local Small Claims or Housing Court, many courts value the landlord’s labor at zero.

But if you pay someone to make the repairs, be sure to obtain a receipt marked “paid” and include a photocopy with your security deposit accounting to your ex-tenant.

The new Robert Bruss special report, “Pros and Cons of Today’s Five Best Real Estate Profit Opportunities,” 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

A prospective home buyer recently stopped by a Sunday open house to take a second look at a listing that caught his fancy. His real estate agent had advised him to keep a poker face as he walked through the house, and to ask no questions of the listing agent. Otherwise, he might tip her off that he was interested.

This is a popular negotiation strategy: Don’t show the other party that you might be interested in striking a deal. The presumed consequence if you do show enthusiasm is that the other party (the seller in this example) will gain an advantage over you.

There is usually something that backfires. Many home sellers have strong emotional attachments to their homes. With these sellers, the sale price is important, but it’s not all that matters.

For example, a couple with two small children had been looking for a new home in Oakland, Calif., for months. They fell in love with an exceptional property and decided they wanted to buy it. They were the first buyers to make an offer, but other offers followed shortly after. The first buyers’ offer wasn’t for the highest price.

The sellers were impressed by a letter from the first buyers in which they promised to take care of the property. The sellers had bought the house as a rundown fixer-upper and had renovated it extensively. It was important to them that the property ended up in the right hands.

When the offer from the first buyers was presented, their agent told the listing agent that the buyers would welcome a counteroffer if their price wasn’t right. If the sellers hadn’t known that the buyers were willing to pay more, they might have gone with the highest offer. However, knowing how committed the first buyers were, the sellers decided to offer the house to them at a higher price. The offer was accepted.

Expressing interest lets sellers know you’re serious. Your enthusiasm can put you in good stead with the sellers. This doesn’t mean that you have to reveal the highest price you’re willing to pay, or the terms on which you’ll buy the property.

HOUSE HUNTING TIP: Being the first buyer of several to commit can give you an edge. Many buyers retreat when they hear that someone else might be interested in the property. Some don’t want to get caught up in a bidding war.

Others back off because they don’t want anyone else to know what’s on their mind. They feel that by tipping their hat, they will in some way diminish their negotiating posture. This isn’t necessarily so.

In another example, prospective buyers decided to write an offer on a Piedmont, Calif., listing days before the seller was prepared to hear offers. There were three other interested buyers who vacillated between writing offers and waiting to see if the seller accepted the first offer. At the last minute, the other three buyers decided to wait and see what happened with the one offer that was written. Had the committed buyers not revealed their position early on, other buyers might have stepped forward with offers and they would have found themselves in competition.

A straightforward negotiation strategy is most effective if you can also convince the seller that you have done your homework. An earnest buyer who is preapproved for the financing he needs, and who has read all the pertinent disclosures on the property is a buyer who will be looked on favorably by the seller.

THE CLOSING: Telling a seller that you like his house doesn’t mean that you have to overpay for it.

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

“I plan to buy a house on the Costa Brava in Spain. Can I find a U.S. lender for the mortgage I will need?”

No, the best you could do is get a referral to a local (Spanish) lender. With very few exceptions, U.S. mortgage lenders don’t lend outside the United States.

In most other countries, you must be licensed to make mortgage loans, which U.S. lenders are not. Even if no license was required, U.S. lenders making mortgage loans in other countries could not enforce their liens against borrowers in default except by complying with the local rules regarding how liens are established and enforced. These rules are mainly determined by local laws and customs, and are often affected by local politics.

It is difficult enough, even in the United States, for a lender to take someone’s home away from them for failure to repay their loan. No lender wants to do it in a foreign country.

Even within the United States, our 50 states have 50 different sets of laws on lien enforcement. While differing in many important details, these laws have in common that they are written in English, and all provide lenders with the right to enforce their liens within a reasonable period by following some well-defined procedures that protect borrower rights. As a result, we have some national lenders who operate in every state. But we also have many lenders who don’t operate in all states, and many operate in only one.

Even in the United States, the process of enforcing liens may become politicized if the number of defaults in a state becomes very large. A U.S. lender experiencing heavy defaults in a foreign country would find the barriers to lien enforcement even greater.

A second reason that U.S. mortgage lenders don’t operate outside the country is that, with few exceptions, mortgage loans in other countries are made in the currencies of those countries. This would subject the lender to exchange risk. While many banks do cross-border lending in foreign currencies by hedging the exchange risks involved, this lending is relatively short term. Mortgage loans are long term and it would be extremely costly, if possible at all, to hedge exchange risk over their entire life.

The upshot is that when U.S. mortgage lenders elect to operate abroad, which some have done, it is in concert with a local partner. The U.S. bank provides the expertise, systems and business processes, but the partner makes the loans and enforces the liens.

Occasional exceptions arise in the case of our close neighbors, Canada and Mexico. For example, vacation houses can be purchased in areas of Mexico that are attractive to U.S. residents, which are financed by U.S. lenders. Both the houses and loans, however, are priced in dollars rather than pesos.

A Post-Mortem on Selecting a 15-Year Over a 30-Year Mortgage

In a recent column I advised that borrowers who can afford the payment on a 15-year fixed-rate mortgage but who take a 30-year in order to invest the cash flow savings were likely to end up poorer for it. The reason is that because of the lower rate on the 15, the required return on the cash flow savings is very high. For example, if the rates are 6 percent and 5.625 percent, and the borrower expects to have the mortgage five years, the required return on cash flow savings is 10.49 percent.

Some readers justifiably took me to task for not recognizing that some borrowers did indeed have access to high-return investments. A case in point is the borrower who is eligible for but not currently utilizing IRA, 401k or other qualified tax-deductible or tax-deferred plans. Borrowers who use their cash flow savings to invest in these vehicles can earn a very high rate of return. The same is true of borrowers who use the savings to pay down high-rate credit-card balances.

That I didn’t mention these possibilities in the article probably reflects my cultural chauvinism. I assumed that borrowers who have not fully exploited all tax-advantaged investments, or who have high-rate credit-card balances, are unlikely to have the iron discipline required to invest the cash flow savings month after month. I still believe that this assumption is partly right, but some financial planners who wrote me argued persuasively that I was partly wrong. They develop plans for borrowers in such situations, and they report that in most cases they are successful. I wish them well!

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

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Copyright 2006 Jack Guttentag

Mortgage rates fell all week long, at mid-week on sinking housing data and a slower Fed survey, the final drop early this morning on news that second-quarter GDP slipped to 2.5 percent growth — that versus forecasts in the 3.5 percent range.

Thirty-year low-fee mortgages are approaching 6.5 percent after four months just under the 7 percent barrier, now following the 10-year T-note’s run below 5 percent today.

This slowdown looks real. It’s possible to quibble with incoming data, and there’s a big load of July stuff next week, but the discussions will have to do with the slope and extent of slowdown, not its fact. The pattern in place is as classic as they come.

Slowdowns don’t come in one piece. In the last 60 years they have unfolded in a four-part sequence: the first to slow are housing, the stock market and other credit-sensitive sectors; the consumer in stage two; then the stage-three fade in the corporate world as consumption falls out from under expansion plans; and last, the stage-four job-market cave-in, which ultimately causes inflation to abate.

The Fed’s “beige book” this week marks our current status as entering the stage-two consumer slowdown, and leads to a reasonable forecast for the rest of this cycle.

This one is very different from the ’99-’02 slowdown, that one the most anomalous in the last 60 years. The Fed hiked from 4.75 percent to 6.5 percent in 2000, but did little damage to the credit-sensitive group. Had it stayed that tight for another year, it would have clobbered housing (as it is doing now), but the twin bubbles — stock and technology business — blew up from their own internal excess. The Fed switched to rescue mode in January ’01, the job market hurt but housing entering its first-ever early-recession boom.

The prior cycle, ’93-’95 was the most like this one. The Fed was easy all through 1993, completing the recovery from the ’91 recession. As the Fed tightened long and hard all through ’94, the economy followed the four-stage cycle above, and the Fed backed off in ’95 to an exceedingly soft landing and renewed expansion. The bond market hasn’t cared for Fed Chair Ben Bernanke and his diminutive stature as a figure of public leadership (on the last, of course, he follows the toughest-ever act). If Bernanke lands this economic bird softly, the bond market is going to learn to respect him even if it doesn’t care for him.

Betting in the market has switched this week to certainty that the Fed is done. Might go to 5.5 percent on Aug. 8 or Sept. 20, but if so, so much the sooner the Fed will reverse. The soft landing is periled by the oil-price boost to inflation, the extraordinary strength of corporate balance sheets, and the likely durability of the stock market because of earnings and cash hoards used in stock buy-backs. Since those sectors are resistant to Fed pressure, the slowdown is overweighted on consumers and housing, and that is the overdoing risk ahead.

Given the slowdown, there is reason to hope for decline in mortgage rates, but hopes should be kept modest. In the ’99-’00 cycle, the 10-year T-note ran all the way up to 6.66 percent before its collapse to 3.33 percent in ’03; in the ’93-’95 slowdown, the 10-year sprinted all the way to 7.96 percent (the Fed’s top only .75 percent above today’s!). This time, near the Fed’s peak, the 10-year has not made it past 5.25 percent, which very much limits the decline ahead. It’s hard to fall far off a low hill.

The big risk out there is not the U.S. economic cycle or the Fed. The big risk is the absence of any working arrangement for global security among the great powers, and a persistent tendency in American policy last seen at the Little Big Horn.

The biggest economic deal on earth: new International Monetary Fund stats say that in the last five years, global trade has doubled. Doubled. This engine of growth and wealth must be protected, and for the time being it is on its own.

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

Just about everybody understands the need to purchase automobile and homeowner’s insurance to protect against unexpected losses that are often more costly than most of us can afford to pay. We hope we never have to file such a claim but, just in case, we pay relatively affordable premiums for protection.

However, when buying or selling a house or condominium, there is another type of insurance with which most of us are unacquainted. For a one-time premium at the time of home purchase, the title insurer will protect the mortgage lender and/or the homeowner as long as the mortgage or home ownership is in effect.

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To illustrate, when is the last time you heard of a homeowner encountering a title insurance claim? Although I’ve been buying and selling real estate almost 40 years, I have never had to file a title insurance claim, nor have I ever heard of a title insurer paying a title policy claim.

Yet, title insurance is a “necessary evil” for real estate owners. Without title insurance, most mortgage lenders won’t lend. Smart home buyers won’t buy without an owner’s title policy to show marketable title. But our chances of ever filing a title claim are minimal.

Title insurers readily admit they pay out less than 10 percent of premiums collected for title claims. By comparison, most auto insurers pay at least 50 percent of premiums collected for policy claims. Instead, most title insurance premiums pay for title research to prevent losses, plus profit, of course.

WHY TITLE INSURANCE IS REQUIRED FOR VIRTUALLY EVERY PROPERTY SALE. Would you buy your house or condo based on the seller’s handshake assurance, “You can be sure the title is good”? I hope not.

Instead, as the buyer you should insist on receiving an owner’s title insurance policy to protect your equity just in case the title is not “marketable.” More important, you won’t be able to get an institutional mortgage unless the lender receives a lender’s title policy.

Virtually the only real estate sales that do not involve a title insurance policy are transactions between friends or relatives, inherited properties, all-cash sales and foreclosure sales. Although title insurance is available for such title transfers, the buyers often trust the sellers and try to save a few dollars by not insisting on receiving an owner’s title policy.

WHAT DOES TITLE INSURANCE INSURE? The exact answer depends on whether you are a mortgage lender or a property buyer. Lender’s title insurance offers more extensive coverage, such as for water rights, zoning and conditions obvious from a property inspection, such as an unrecorded, overhead-power-line easement.

But a property owner’s coverage is less complete unless the buyer purchases “extended coverage,” which is virtually the same as a lender’s title policy. Both coverages include protection for title risks, such as forged signatures in the chain of title (the major cause of title losses), encroachments, surveys (if specifically included), recorded easements, mechanics’ liens, property tax liens, claims by heirs and ex-spouses, title search errors, and many others.

WHO PAYS THE TITLE INSURANCE PREMIUM? The answer to this question depends on local custom and the terms of the property purchase contract. For example, in the county where I live, the custom is the buyer pays for the lender’s title insurance and, if desired, for an owner’s title policy. But in the adjacent county to the south, the custom is the seller pays for title insurance.

Local custom is not binding. For example, years ago I bought a San Francisco apartment building where the custom is the buyer pays for title insurance. As I was short of cash, I wrote in my purchase offer that the seller would pay for the lender’s and buyer’s title insurance. My offer was accepted so I saved several thousand dollars for the title insurance premium.

Equally important, whether you are the seller or buyer who is expected to pay for the title insurance, it pays to shop around. Except in a very few states where title insurance premiums are heavily regulated, title premiums vary by title insurer. If you are buying a $100,000 house or condo, you won’t save much by shopping among title insurers. However, if you are buying or selling a $1 million house, you can probably save at least several hundred dollars by shopping for title insurance.

If you are buying a new house or a new condo, chances are the developer has negotiated a discount rate with a title insurer. Be sure to inquire if you will receive a title insurance discount by purchasing from the developer’s title insurer.

WHEN YOU PLAN TO “FLIP,” ASK ABOUT A “BINDER TITLE RATE.” Another way to save on title insurance premiums occurs if you plan to make a quick resale (called a “flip”) after purchase. Ask if a discount title rate is available in your area.

Perhaps you are buying a fixer-upper house that you plan to upgrade and resell for a huge profit within less than 12 months. You are then a perfect candidate for the discounted “binder title rate.”

Where allowed by state title insurance law, the binder rate is usually 110 percent of the regular title insurance premium. However, when you resell the property in less than 12 months (up to 24 months in some states), you will receive a 100 percent title premium refund and the title insurer keeps only the 10 percent extra premium.

THE BIG RISK OF NOT OBTAINING AN OWNER’S TITLE POLICY. Especially in areas where it is customary for the seller to pay for title insurance, home buyers often think, “Well, the seller is paying for my mortgage lender’s title insurance policy so the title must be good, and I don’t need to buy an owner’s title policy.”

Wrong. In the rare case where there is a major title defect, such as a home builder has a defective title, or unpaid mechanics’ liens,” the title insurer will pay the lender’s claim up to the insured amount. But nothing will be paid to the homeowners for their lost equity if they didn’t obtain an owner’s title policy.

TITLE INSURANCE WON’T PAY UNTIL THERE IS A LOSS. Threat of a possible loss is not a valid reason for a title insurer to pay. Only an actual loss requires the title insurer to pay.

Title insurance is called an “indemnity policy,” just like your auto or homeowner’s insurance.

For example, suppose a neighbor claims your house encroaches on his lot. Until he actually files a lawsuit against you, the title insurer has no obligation to pay for a possible threatened loss. However, after the encroachment is proved, then the title insurer must pay.

SUMMARY: Title insurance is different from virtually every other type of insurance. For a one-time premium, title insurers provide coverage as long as the lender, the insured or his/her heirs own the property. Until a title loss occurs, the title insurer has no legal duty to pay even if a possible title loss might occur. For more details, please consult a local real estate attorney.

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

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Copyright 2006 Inman News

One hundred years ago when Frank Lloyd Wright was designing houses, he also designed the furniture, light fixtures, trim, cabinetry, stained-glass windows, drapes, table linens, and in some cases, even the dresses of the owners.

This degree of customization was possible not only because the clients were extremely wealthy. There was also an army of artisans readily available to execute whatever Wright designed. Today, even extremely wealthy clients cannot expect the degree of customization that Wright routinely delivered because the number of craftsmen is dramatically smaller.

But, in almost every town of any size in the United States, there are local artisans whose work could be incorporated into a new house at prices that are quite affordable. If you are willing to forgo granite countertops, pricey kitchen cabinet door upgrades and a whirlpool bath with jets that you will rarely use, you can use that $5,000 to $15,000 to enhance your home environment with unique and personalized features, whose irregularities not only indicate a hand-made provenance — but you’ll also know the artist who fabricated it.

Before you start agonizing over the choices available in your area, expect to spend some time tracking down the local artisans, and network with everyone you know. Most artisans run a small, one-person operation. Some have Web sites, but most market their work by word of mouth. When I started looking in my town — Ann Arbor, Mich. — I found one through our local art center, two who are friends of a friend of an architect, and one who’s a colleague of the mother of one of my children’s best friends.

Not all artisans toil in obscurity, however. Ann Arbor-based Motawi Tileworks is a small company with 22 employees and a national sales network. Headed by brother and sister Karim and Nawal Motawi, the firm uses 21st century technology to create tiles in the spirit of the Arts and Crafts movement of 100 years ago. Machines are used for the heavy lifting and mindlessly repetitive work like mixing the clay, but each tile is run through a hand-operated mold, and all the glazes are hand applied.

Motawi’s decorative tiles are made in a cuenca style with fine, raised white lines between each area of hand-applied color. Nawal Motawi, who designs all the tiles, clearly delights in the work of early 20th century decorative artists and architects, including Louis Sullivan, an early mentor of Frank Lloyd Wright. Her stylized flowers, northern pine forests and sailing ships will resonate with many people because the images often evoke childhood memories.

Motawi’s monochrome relief tiles have a subtle to pronounced depth (it ranges from 1/8 inch to 1 inch), and its plain “field” tiles have slightly domed surfaces. Both are hand dipped in colored glazes. There is such variation for a given color that the company insists that every customer view a sample of three to six tiles before ordering any. Judging by the samples I saw, the variation is startling, but it adds to the overall charm.

Where might you put Motawi tiles in your house? Two obvious applications are a fireplace surround and a kitchen backsplash. A custom builder can install these easily. Most production builders, however, will not install anything that is not on their standard options list. You’ll have to pull off their standard offering after you move in and then install your Motawi tiles.

A standard-sized, flat fireplace surround has about 15 square feet. Using Motawi’s field tiles, which run about $110 per square foot, you’d spend about $1,650 for the tiles and, in Ann Arbor, about $800 for their installation. A backsplash for a typical kitchen in a 2,400-square-foot house would be about 25 square feet, big enough that you might want to mix in some decorative or relief tiles. The tile would be about $2,750 and the installation charge in Ann Arbor would be about $1,200.

Another, far less costly tile option would be to incorporate several 4-by-4-inch-sized, $30 decorative tiles into the top trim piece of built-in bookcases or an entertainment center.

Perhaps the unusual ceramic item that you’re looking for is not tile, but a sink for your powder room. I.B. Remsen, a potter who makes sinks himself, said that the best way to find a potter is to attend one or two group shows of the potters in your area and look for one with a style you like. Then ask if he or she makes sinks.

This might seem to be going about it backwards, but Remsen pointed out that once a sink is installed, what you and everyone else will notice is the colors and shapes and nuances of the glazes, not the sink itself.

If the potter has never made a sink, be patient. There will be several false starts before he gets the technique down because a sink is on the outer edge of what most potters normally make, Remsen said. “Compared to a 4-inch-diameter bowl, a 16-inch-diameter sink is only four times as big, but it’s way more than four times as difficult. It could be 16 times as difficult to get it to come out right. You would have to make two or three to get what the customer wants. The potter might charge only $200 for a 16-inch-diameter sink, but you would also have to pay for the first two attempts, so it could be as much as $600.”

Within Ann Arbor’s artisan community there are also muralists. I met with two who specialize in trope l’oeil work. They create realistic illusions that trick you into thinking that the vista appearing through a window is real, when, in fact, both the window and the vista are actually painted on a wall.

Zane Mallory, a graphic artist who segued into murals from sign painting and t-shirts, starts with the client’s ideas and palette choices. He nearly always works up several sketches because, as he said, “Not many people want to turn you loose, they want to see a few sketches first.” His subject matter has run the gauntlet from Michigan landscapes to tropical underwater flora and fauna, but sometimes, he said, clients simply want him to recreate something they have seen elsewhere for less money. For example, for $1,800, he recreated antique French wallpaper that would have cost the homeowner $6,000 to $7,000.

Muralist Audrey Hayes characterizes her work as “creating environments.” She spends a lot of time with her clients, getting a sense of their tastes, interests and color palette and she often helps them choose interior finishes and colors as well as propose ideas for murals.

Some of Hayes’ work is so realistic it looks like a photograph, and her subject matter is wide ranging. For one household she created a family room mural with “30 odd pets dead and alive, plus three dogs underfoot while I painted it.” For another, she painted a mural on a garage door that appears to be three horses peering over a stable door.

Hayes’ landscapes can be simple or extremely detailed, but all of them manipulate perspective to make small spaces feel bigger. As muralists have been doing since the Renaissance, she places something in the foreground that is close in scale to the actual room where the viewer is standing and then she quickly zooms off into the distance.

Hayes said the cost of her work depends on the complexity of the mural as well as the logistics involved in painting it. An intricate, four-sided stairwell with four different perspectives and three interrelated scenes of northern Michigan required scaffolding. She spent 10 days painting it and charged $15,000. A simplified landscape that wrapped around an entry foyer did not require scaffolding. She spent only three days and charged $5,000. The garage door took her three days and was $1,000.

If you start to explore the artisan community in your town, you may find people with other specialties, such as glass blowing, metal working and furniture making. In fact, the ones I describe here are not the only ones in Ann Arbor. They’re just the ones I tracked down over a three-week period. Six months from now I should have located at least 20.

Contact Info:

Motawi Tileworks: www.motawi.com

I.B. Remsen: www.ibremsen-potter.com

Zane Mallory and Audrey Hayes do not have Web sites. Mallory’s contact info is zekemallory@comcast.net. Audrey Hayes does not have e-mail. Her business phone is 734-996-4095.

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

In the days before wood decks become as popular as they are today, the common choice for backyard retreats was the brick patio. Brick patios are still a beautiful and highly practical alternative to wood, and are very desirable both aesthetically and from a resale perspective.

There are several ways to create a brick patio, and one good option is the brick veneer. Brick veneers are “real” brick, they are just manufactured thinner then traditional bricks and are installed over a concrete slab instead of a compacted sand base, making them an easier project in many ways for the do-it-yourselfer.

Step one is to decide on the brick and the installation pattern. Your best bet is a visit to a local masonry supply retailer or wholesaler, who will have several different brick veneer styles available. Most are the standard 4×8 inch brick, although some other sizes are available, but there are typically a variety of colors and even some different surface textures available.

The dealer can also provide you with information on different installation patterns. Two traditional patterns that work very well for patios are the running bond, in which the joints between the ends of the bricks in one row meet over the middle of the bricks in the row prior, and the herringbone, with the bricks laid at a 45-degree angle. The bricks are typically installed with a 1/4- to 3/8-inch grout line between them, and there are plastic spacers available to simplify the spacing of the bricks as you begin to install them.

A brick veneer patio begins with a concrete slab that will be the base for the bricks. First, the area where the patio will go is cleared of rocks, sticks, and other debris. Rake the soil and roughly level it using a long, straight 2×4 with a 6-foot level on top, or with a transit or laser level – which can be rented – for larger areas. If the soil is firm and undisturbed, the slab can probably be poured directly on the soil. For loose or sandy soil, you will next want to add a layer of gravel as a base and compact it for stability.

Forms are next. Using 2x4s and wooden stakes, lay out of the perimeter of the slab. Your best starting point is where the new patio will meet any doorways, so that you can ensure that the slab will be at the correct height in relation to the door. Measure the thickness of one of the veneer bricks you’ll be using, add 1/4 to 3/8 of an inch to allow for the cement that will hold the brick in place, and measure down that amount from the door sill to establish the top of the slab. The slab should be level from side to side, and have a slope of approximately 1/4 inch per foot away from the house to allow for good drainage. Finish the top of the slab with a light broom finish to leave it slightly rough on top to help the bricks bond to the slab.

When the slab is dry, begin with the layout of the brick pattern. Most patios, regardless of the overall pattern of the installation, utilize a soldier course around the perimeter of the entire patio. A soldier course consists of one row of bricks laid side by side, and creates a very nice border. Taking several of the bricks, experiment with the layout until you have a good starting point and a design that works out well to the size and shape of the slab.

The bricks are installed using site-mixed mortar or with a material called thinset, which is easier for the do-it-yourselfer to work with. Thin set is a cement based dry powder that is mixed with water, often with a liquid latex additive for additional strength. There are several types of thinset available, so ask your dealer for specific recommendations. Complete mixing and installation instructions will be on the bag.

Spread the thinset using a notched trowel, working in a small enough area that you can set the bricks before the thinset you’ve applied begins to set up. This depends on the type of thinset, how thick it is being applied, how wet it was mixed, and how warm the day is, so it will probably take some experimenting. If the thinset begins to set up on the slab, do not try and lay brick over it. Instead, immediately scrape it up before it sets and discard it, then start over.

Set the bricks in the thinset according to your pattern, and press them down firmly by hand. The thinset should spread out below the brick without too much oozing up into the grout lines. Carefully watch your pattern layout and your spacing, and clean any excess thinset from between the bricks and off the tops of the bricks as you go. Bricks can be easily cut to fit the ends of the rows using a diamond-bladed masonry saw, which can be rented from the masonry supplier or any local rental yard.

When the installation of the bricks is complete, allow them to dry completely, then finish off the grout lines with mortar.  Depending on the size of the installation, you can use a premixed dry mortar that is mixed with water, or you can make your own from cement, sand, lime and water.

All of the tools and materials you need, including mixing and application instructions, are available from the same supplier where you purchase your bricks.

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

Every community has an abundant supply of fixer-upper houses, and in this column we’ll discuss the major sources of these profitable homes:

1. REAL ESTATE AGENTS AND THE LOCAL MULTIPLE LISTING SERVICE (MLS). The most obvious source of “fixers” is the local MLS and the local real estate agents who have houses listed for sale. Over the years, I probably bought at least 50 percent of my fix-up rental houses through this source. Of course, I didn’t pay the full asking prices!

Purchase Bob Bruss reports online.

Fixer houses are the most difficult for realty agents to sell. If they have tenant occupants, they can become almost impossible to sell. Competition from other home buyers for these “fixers” is usually minimal because most prospective buyers want to buy a house in tip-top condition and they won’t even consider purchasing a house needing immediate work.

As we enter a “normal” home sales market, due to slowing rising mortgage interest rates, I think many motivated sellers of fix-up houses will become very reasonable about negotiating discounts to compensate for the drawbacks of their homes.

2. FORECLOSURES. In many communities, the number of homes in the foreclosure process is slowly increasing. This is due to many causes, such as a slow economy in some towns, rising mortgage interest rates, personal problems of homeowners, and the huge numbers of adjustable-rate mortgages issue in the last few years to marginally qualified home buyers.

3. PROBATE AND BANKRUPTCY PROPERTIES. Closely related to foreclosures, probate and bankruptcy properties are often bargain fixer-uppers. But there is usually little buyer demand for these properties because they can be more difficult to purchase.

For this reason, these off-beat properties frequently sell at bargain below-market prices. Each probate and bankruptcy situation is unique. If you can be patient, you can pick up an incredible bargain.

4. VACATION AND SECOND HOMES. There are millions of vacation or second homes that do not qualify for the $250,000/$500,000 principal residence sale tax exemption. The obvious reason is the owners don’t spend enough time living in these non-primary residences. However, with some skillful tax planning, these secondary homes can qualify for the generous tax exemption of IRC 121.

Lots of vacation and second homes can profit from “fixing up” before sale. Today, few buyers of second or vacation homes want their rustic atmosphere without the modern amenities, especially up-to-date kitchens and bathrooms. The same fix-up cosmetic rules apply to secondary homes, using the same “look for the right things wrong” formula. Incidentally, only one spouse must meet the ownership and occupancy test — this can be especially useful to shelter up to $250,000 capital gains profits. However, if both spouses meet the 24-month occupancy test, then up to $500,000 tax-free principal residence sale profits are exempt from taxation.

(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 Robert Bruss

DEAR BOB: My dad died about six months ago. He was the surviving joint-tenant owner of the house where he and my mother lived for 34 years. She died in 1998. I am their only child. But my father did not leave a will. As I live about 600 miles away, I have no use for the house and want to sell it. However, a local probate attorney tells me that because there was no will or a living trust, a probate court proceeding is required. He said there is an expedited procedure, but it will take about six months, maybe longer. His fee, according to the state statute, will be about $6,400. This seems like a waste of time and money. Is this information correct? –Matt W.

DEAR MATT: Your dad died “intestate” without a written will, so his estate must be probated according to the state law of intestate succession where he resided. That requires notifying his possible creditors to file any claims, as well as checking to be sure there aren’t any other relatives entitled to a possible inheritance.

Purchase Bob Bruss reports online.

Of course, this could have been avoided if your late father placed his major assets, including title to the house, into a revocable living trust to avoid probate court costs and delays.

Before hiring that probate attorney, I suggest you politely ask if he can reduce his fee because this estate is so simple. Many probate attorneys will lower their fees if you ask. If he refuses, unless this is a complicated estate, you might want to consult several other local probate attorneys to compare their fees.

IS AN APPRAISAL REQUIRED FOR EVERY HOME SALE?

DEAR BOB: Does every home sale require an appraisal? I plan to pay cash –Mung L.

DEAR MUNG: If you are paying all cash for a home, and no new mortgage will be obtained, there is no need for a professional appraisal. However, if you will be obtaining a new mortgage to help pay for your home, the mortgage lender will arrange for a professional appraisal.

HOW TO GET DEADBEAT CONDO OWNER TO PAY MONTHLY FEES

DEAR BOB: I own a condo in a small six-unit homeowner’s association. We all get along very well, except for one owner. She is kind of a “hippie” who is often gone for weeks and even months. Her monthly condo assessment fee is $423 per month and it is now delinquent for 11 months. This is a big drain on our association’s budget. As the treasurer, I am wondering what we can do to collect this money? –Ken R.

DEAR KEN: You and your fellow condo owners have been patient far too long with that owner who doesn’t pay her monthly fees.

I suggest you consult a local real estate attorney who specializes in condominium law. It will be necessary to record a lien against the deadbeat’s condo title and then foreclose on that lien. The procedure is similar to foreclosing on an unpaid mortgage. Of course, the attorney’s fees should be added to the amount of the unpaid lien.

Starting the condo lien foreclosure procedure should bring payment. However, if the situation results in a foreclosure sale of the condo for the unpaid lien amount, plus costs, that’s the owner’s problem.

The new Robert Bruss special report, “Pros and Cons of Today’s Five Best Real Estate Profit Opportunities,” 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

DEAR BOB: I share a private road easement with two neighbors. A new neighbor bought a foreclosed house and took down the original fence to build a new one about 4 feet into the roadway easement, thus narrowing the road. I have heard it is very hard and expensive to fight easement disputes. What should I do? –Dorothy R.

DEAR DOROTHY: Presuming the road easement is recorded against all three property titles, one owner cannot alter those rights such as by extending his fence into the easement area. If you and the other neighbor allow it to continue, he might gain a permanent prescriptive easement to continue using that area as his own.

Purchase Bob Bruss reports online.

I trust you tried being nice to the offending new owner, but without results. To protect your easement rights, you and the other neighbor should get together to hire a local real estate attorney.

Even if a lawsuit must be filed against the offending neighbor, this case sounds like an easy one to reach a court-supervised settlement. But if you do nothing, your easement rights could be greatly diminished.

GETTING EQUITY OUT OF RENTAL HOUSE MIGHT BE DIFFICULT

DEAR BOB: My sister and I jointly own the house where our elderly parents live. It has been a very good investment and a good home for our parents. But I could use some of the equity in the house for tuition payments for schooling my three children. Any suggestion how to get the equity out while allowing my parents to keep it as their home? –Rob L.

DEAR ROB: Either refinance the current mortgage to take cash out, or obtain a new home equity loan. Of course, your co-owner sister would have to agree and you should work out a written agreement with her about your paying the increased payments.

NO WAY TO PREVENT MORTGAGE ASSIGNMENT BY LENDER

DEAR BOB: I recently refinanced my home loan to get cash out, to lower my interest rate, and to get a better mortgage company. My old mortgage company charged me a $4,000 prepayment penalty when I refinanced with another lender. To my shock, I learned my new mortgage has been sold and assigned to my dreaded old mortgage company with the bad customer service. Do I have any recourse regarding the prepayment penalty? –Scott R.

DEAR SCOTT: Sorry, there is no way to prevent the assignment sale of your new mortgage in the secondary mortgage market. Just because your old nasty lender bought your loan from the originating lender, there is no requirement your prepayment penalty must be refunded.

The new Robert Bruss special report, “Pros and Cons of Today’s Five Best Real Estate Profit Opportunities,” 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