Real Estate in Steamboat

Long-term interest rates and commodities are in the natural rebound upward following any straight-line decline.

The 10-year T-note is 4.64 percent (from 4.54 percent), taking mortgages a little above 6.25 percent (6.125 percent bottom), gold $605 (from $575), all in step with energy: oil $63 (from $59), and natural gas $5.45 (from $4.75). Only gasoline is still unwinding, and wholesale $1.48 might break two bucks at the pump after Halloween.

All of these markets are struggling to identify the slope of economic slowdown. “If” is in the past; the economy is slowing, and the Fed’s “moderation” is the most optimistic description in play. (Fed note: from now to the election, the Fed will attempt total invisibility, avoiding the appearance of favoritism with either party.)

You know we’re in a slowdown when every observer drags out the ol’ soft landing and hard landing economic airport, and then drifts to metaphorical sea, hedging his or her forecast with the always-slow-to-turn supertanker.

The newest economic data show steady slowing — neither abrupt nor stabilizing. August consumer spending rose a meager .1 percent, but that followed a .8 percent spike in July; reality is in the middle somewhere, slowing. Weakness in August orders for durable goods was a surprise, as everybody’s model has assumed a strong business sector and capital spending; two declines in a row say that slowing is spreading.

Housing is the gorilla in the slowdown, and perceptions are all over the place. (Ever hear the one about the blind men and the gorilla? Safer to feel elephants.) Analysis by people not connected to housing is now a competitive auction to see who can predict the worst disaster. Robert Shiller (of “Irrational Exuberance” fame, published the day the stock market nosed over in 2000) is in the lead, predicting a nationwide 25 percent decline in home prices. Stocks he knows; housing … he lives in.

Newsies know that bad news sells, and they are selling, putting on camera a parade of nouveau housing experts, one gleeful I-told-you-so after righteous it’s-about-time, or they-deserve-it-don’t-they. 

Housing people are notorious for their immemorial “It’s a great time to buy!” and it’s hard to tell which of the genuinely experienced housing experts are playing it straight, and which are shills. Even the straights can get it wrong; we are, after all, in the aftermath of the biggest housing-price run ever.

The best thing is to stick with the data, and evaluate commentators by what they say about it. Example: this week the National Association of Realtors announced that median home prices fell in July, headlines shrieking. Someone who really wanted to know what is going on would have to dig deep to find reality: a decline in median prices just means that more cheaper homes are selling than expensive ones; the median says nothing about the fate of an individual house or neighborhood, or city.

So far, declines in price from prices actually paid a year ago are very minor, and centered in economically weak zones. So far, we have a 20 percent year-over-year decline in new home construction. So far, we have a 50 percent nationwide increase in inventories of unsold homes, but from all-time lows. So far, there is no sign of a downward price spiral in any market. We know that we have a decline in home-equity extraction to support consumer spending, and can’t identify alternate stimulus to replace it.

Stick with the airplanes and supertankers, and let the catastrophists handle Iraq.

Also, while waiting this out, for black comedy never miss David Lereah, top economist for the Realtor association. Latest in a line of the inept in that job, he has decided that the only thing wrong with the housing market is that sellers want too much money for their houses. Cut prices far enough, and demand will return.

Noting that the median price of homes rose in the West in July, he said, “Something is going to give in the West. Sellers are stubborn there.”

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

Most buyers, sellers, landlords and realty agents still don’t understand the simple, but potentially costly, liability disclosure rules for pre-1978 houses, condos and apartments. “What the heck is he talking about?” I can hear you say.

If you are involved with selling or leasing a residential property built before 1978, chances are nine in 10 the property contains lead-based paint, which can be potentially dangerous to residents unless the paint is in good condition.

Purchase Bob Bruss reports online.

The Federal Consumer Product Safety Commission banned lead-based paint in 1978. The reason is that lead-based paint can be harmful to individuals — especially small children — who are exposed to contaminated dust, soil or deteriorated paint.

In 1992, to enforce the ban, Congress enacted the Residential Lead-Based Paint Reduction Act (RLPHRA) to establish the simple disclosure rules. This federal law does not require sellers and landlords to remove lead-based paint, just disclose it.

However, RLPHRA requires sellers and landlords to (a) reveal if they know of lead-based paint on the premises, and (b) provide prospective buyers and tenants with a federal lead-based-paint disclosure form and information booklet.

MOST LEAD-BASED PAINT IS NOT A HEALTH HAZARD. Millions of U.S. houses, condos and apartments built before 1978 contain lead-based paint. It is not a serious health problem unless the paint is peeling and/or its dust gets ingested, especially by small children who are most vulnerable to lead poisoning.

Since 1992, the RLPHRA has required home sellers, landlords and their real estate agents of pre-1978 residences to provide buyers and tenants with a lead-based-paint disclosure and the federal information booklet.

More specifically, the federal law requires (a) a Lead Warning Statement required by federal regulations, (b) the property owner’s disclosure statement of any known lead-based paint, and (c) a notice to buyers (but not tenants) giving buyers 10 days to obtain a professional lead-based paint inspection at the buyer’s expense, if desired.

Residence buyers can waive their 10-day inspection period in writing. Short-term vacation rentals less than 100 days are exempt from this federal law.

But long-term residential leases and month-to-month rentals over 100 days of pre-1978 rental property must include the landlord’s written lead-based-paint disclosure stating whether he or she knows about lead-based paint on the property.

This disclosure form requires the lead-paint warning statement, the landlord’s report of any known lead-based paint on the premises, and the signatures of the landlord, tenant and real estate agent (if applicable).

DISCLOSURE PREVENTS SELLER, LANDLORD AND REALTY AGENT LIABILITY. There have been several federal court decisions imposing liability on residence sellers, landlords and their realty agents for failure to disclose known lead-based paint on the properties. Older residences with peeling interior paint are especially troublesome.

For example, in the case of Mason v. Morrisette (403 Fed.3d 28), minors Jason and Natasha Mason were diagnosed with elevated lead levels in their blood. Mental retardation and other physical problems often result, especially in small children.

Their mother was not provided the federally required disclosure or the lead-based-paint information booklet before she rented the pre-1978 lead-ridden apartment. However, on a technicality the U.S. Court of Appeals ruled the landlords were not liable to the children because RLPHRA creates liability only to the actual tenants and not to their minor children.

However, the landlords incurred defense costs that could have been avoided. If they had been found liable, their penalty would be treble damages as determined by a jury. That lawsuit could have been prevented if the landlords provided the federal disclosure form and a lead-based-paint information booklet before the tenants moved in.

Real estate sales agents are not immune from similar liability for non-disclosure of lead-based paint. In the case of Smith v. Coldwell Banker (122 Fed.Supp.2d 267), a real estate agent suggested to her home seller that a lead paint test be made on a house built in 1860. The test was positive.

Although the seller completed the lead-based-paint disclosure form, it was not given to the buyer. The broker, acting as a dual agent representing both seller and buyer, orally told the buyer about the lead paint and the existence of the report but it was not provided until the sale closing. The court held the realty agent’s oral disclosure was not adequate.

HOW TO PROVIDE THE REQUIRED DOCUMENTATION. The purpose of RLPHRA is to be certain buyers and tenants of pre-1978 residential buildings are informed there might be lead-based paint on the premises. This federal law does not require sellers or landlords to investigate or remove lead-based paint.

All that is required for sellers, landlords and their realty agents to comply with RLPHRA is (a) provide a copy of the Environmental Protection Administration (EPA) lead hazard information booklet “Protect Your Family from Lead in Your Home” and (b) have the owner provide a written disclosure of the lead-based-paint warning and any specific information about known lead-based paint on the property.

The EPA lead-based-paint booklet is available on the Internet at www.epa.gov.

FAILURE TO COMPLY PENALTIES. If a landlord or seller of a pre-1978 residence fails to comply with RLPHRA, the potential liability is three times actual damages suffered by the tenant or home buyer, plus court costs and attorney fees.

The simple solution is to provide the disclosure form and the booklet to prospective buyers and tenants, thus avoiding potential liability.

In most situations, unless the lead-based paint is peeling and in very bad condition, disclosure of the possibility of lead-based paint usually won’t harm the residence seller or landlord. However, when a dangerous, lead-based-paint condition exists, the required disclosures will alert the buyer or tenant to take precautions and seek further information. Further details about complying with RLPHRA are available from local real estate attorneys.

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

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Copyright 2006 Inman News

Q: I’m originally from Norway and I’ve seen several Norwegian Web sites that say you should cover the underside of the insulation in your crawlspace with exterior-grade plywood. However, the American sites say to leave the bottom of the insulation open or to cover it with a non-tight covering. I tend to trust the Norwegian way of doing things because they have to deal with such crazy weather, but I want to make sure I’m not missing something here if I don’t do it the “American” way. –Rune I.

A: Air will naturally move from a warm area to a cold area. The warm air in your house wants to move toward the colder crawlspace, and as it does it will take any moisture vapor it contains along with it. For that reason, when installing floor insulation, the paper or foil face of the insulation is installed facing up, against the underside of the subfloor, to create a vapor barrier that prevents most of that moisture from ever reaching the insulation.

However, that floor insulation vapor barrier still has gaps in it, so some moisture vapor will still get into the insulation. Having the insulation open below – facing the crawlspace – allows that moisture to escape. On the other hand, if you have added exterior-grade plywood below the insulation, which has several moisture-impermeable glue layers in it, you have now created a second vapor barrier below the insulation. Any moisture that gets into the insulation is now essentially trapped there, and if it builds up in sufficient quantities it can cause potentially serious structural and mold problems.

One last thing – when you insulate your floor, make sure that you add a vapor barrier over the ground, and that any water pipes in the crawlspace get insulated as well.

Q: I removed wallpaper from some of my bathroom walls, and it took of some of the paper face of the drywall. I’ve patched most of it with joint compound, but in some areas it still looks wavy. What is my next step? –Tom S.

A: Typically, if you have removed enough of the surface paper of the drywall to expose the gypsum core, the gypsum should be sealed first with a product such as Sherwin-Williams Drywall Conditioner – other manufacturers also make similar products –to prevent the porous gypsum from absorbing too much moisture from the drywall compound. I’m assuming that no sealer was applied, so that could be your problem here.

You mentioned that this is a bathroom. If the original drywall was waterproof – it will have a greenish-colored top paper and the inner core will appear more gray than white – and you have a number of areas where the paper was damaged, your best bet is to remove the drywall completely and install a new sheet or two.

If it was not a waterproof drywall and it is not in an area that gets a lot of moisture, you can try sanding off your patches and then applying a thin coat of all-purpose drywall compound. Let it dry, sand again and then skim coat the entire wall with the same material. Let it dry, sand smooth and then apply a sealer such as Sheetrock’s “First Coat.” Apply whatever texture you want, apply another coat of sealer, and then paint with satin or semi-gloss paint.

Q: About how long would it take a pro to install brick veneer on a 14 x 14 patio, and how long should a rookie expect to take if this is the first I’ve even done it? –Mike P.

A: It depends somewhat on the complexity of the design and the number of cuts required, but in general I would say that a pro could do the installation of the bricks in one to two days, with one additional day for grouting. The rookie has to deal with a lot of “head-scratching” as to layout, spacing and other installation details, as well as getting a feel for the use of the tools, so I would roughly double that time frame.

Remodeling and repair questions? E-mail Paul at paul2887@hughes.net.

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Copyright 2006 Inman News

In China, single-family homes are rare, and the vast majority of people live in what Americans would charitably call high-rise apartment blocks or, put less delicately, projects. As dismal as these may sound (and as dismal as they sometimes appear), the neighborhoods that form around these Chinese projects really work. They’re far from tidy and seldom beautiful, but on the whole they’re livelier, safer and more inviting at all hours of the day than any American equivalent. They are as successful as most American housing projects have been catastrophic.

Why? For one, the Chinese are not hamstrung by the sort of fanatically segregated zoning that has made so much of America a vacant no man’s land after hours. In China, the street levels of residential buildings (not to mention office buildings and sometimes even factories) are customarily lined with a whole panoply of stores and workshops, a tradition handed down from millenia of mercantile culture.

A few minutes’ walk from my second home in Suzhou, for example, a road leads right through the heart of several large housing projects. Under American single-use zoning, this would likely be a desolate — perhaps even threatening — place. Yet in China, it’s a bustling social center. Jammed into the span of a few short blocks are grocery and dry goods stores, at least five bakeries, a fresh meat and vegetable market, three or four fruit vendors, a couple of pharmacies, two banks, a custom tailor, eight or nine barber shops, and perhaps 60 other shops variously selling toys, shoes, dresses, hardware, paint, baby clothes, and what have you, along with a couple of dozen eateries ranging from street vendors to large sit-down venues. Improbably mixed in among these are also three metal fabricators, a bicycle repair shop, a motorcycle repair shop, and two shops that build windows. The range of goods and services is so comprehensive that it’s easier to list what the street doesn’t have: There’s no cafe and no Japanese restaurant — they’re a few blocks away on another street.

Many of these shops are no bigger than a one-car garage, so nearly all of them borrow a chunk of real estate from the great swath of sidewalk that runs from one end of the project to the other. Perhaps 30 feet wide, it flanks a gratifyingly narrow street that discourages through traffic. And although China can hardly be described as a pedestrian-friendly nation, neighborhoods like this one are clearly meant for people and cyclists, and not for cars. The result is that neighborhood life, day or night, takes place outdoors, in front of the shops. People eat, nap, bake, cook, cobble, weld, grind, build and dismantle things on the sidewalk — a prospect that would horrify American planners — and wonder of wonders, no one seems the worse for it.

This kind of sidewalk city, which is utterly typical of urban China, is already bustling at sunrise, and it’s still crowded late into the evening, when the restaurants and karaoke bars are going full tilt. Yet there’s never a compulsion to look nervously over your shoulder, no matter how late the hour. There are just too many people around living normal lives to feel unsafe.

“Chaotic” is a word many order-loving westerners have used to describe Chinese cities, whether the twisting old longtangs, or back alleys of yore, or today’s less romantic but equally ebullient neighborhoods. If this is chaos, it’s the kind that American cities could use more of.

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Copyright 2006 Arrol Gellner

DEAR BOB: Must a deed be recorded to be considered valid? Is a deed not a contract regardless? –Irvin S.

DEAR IRVIN: Without recording in the public records where the real property is located, a deed properly signed and notarized or witnessed is valid only between the grantor and the grantee. Because it is not recorded, it does not give “constructive notice” to the world.

Purchase Bob Bruss reports online.

A deed is not a contract; it is just evidence of a conveyance of real property.

Some states have statutes requiring deeds to be recorded within a time period, such as one year, or they are presumed to be not valid. For details, please consult a real estate attorney in the state where the property is located to determine if the deed is valid between the parties even though it is not recorded.

DEATH IS THE ONLY WAY TO AVOID DREADED DEPRECIATION RECAPTURE TAX

DEAR BOB: Almost a year ago, I bought a rental condominium to complete an Internal Revenue Code 1031 Starker tax-deferred exchange. Due to my job loss, I sold my primary residence and moved into the condo because it has no mortgage payments. Is this OK? Also, somewhere I read (maybe in your articles) that if I own my primary residence acquired in an IRC 1031 exchange for five years and live in it at least two of those years I can qualify for the $250,000 primary residence sale exclusion. Does this also apply to the deferred gain as well as any gain on the condo’s market value? –Mark L.

DEAR MARK: Yes. Your information is basically correct. However, when you sell your personal residence, which was acquired in an IRC 1031 tax-deferred exchange, your Internal Revenue Code 121 principal residence sale tax exemption up to $250,000 (up to $500,000 for a qualified married couple filing jointly) does not apply to the 25 percent depreciation recapture tax.

The only way to avoid that dreaded depreciation recapture tax is to die while still owning the property. Death is the ultimate tax shelter of all. For details, please consult your tax adviser.

BUYING VACATION CONDO IS SPECULATING, NOT INVESTING

DEAR BOB: I am interested in buying a vacation condo on the island of Kauai, Hawaii, where I see one-quarter- and one-sixth-share purchases being advertised. How do these work in terms of getting mortgages, and who controls the property decisions such as when to paint and replace appliances or furnishings? I am interested in buying a vacation condo and selling off timeshares –Linda M.

DEAR LINDA: That is not real estate investing. That’s speculating. What you describe is very risky. The condo management company usually makes the decisions. Investigate very carefully.

Never spend money on high-risk vacation properties, especially such as the situation you describe, where you will ever need to see your money again.

The new Robert Bruss special report, “How to Sell Your Home for Top Dollar in a Buyer’s Market,” 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

Question: Recently my mother signed a lease and paid a deposit for an apartment and decided it was not the right choice for her. She contacted the landlord within two days (verbally) and gave a written letter within three days. The landlord said it was fine but then changed his mind and now wishes to hold her to the lease. I thought that there was a consumer protection law that allows a cooling off and rescission period for leases?

Tenants’ attorney Kellman replies:

While some jurisdictions may have provisions that allow consumers to change their minds with no consequences, generally there is no cooling-off period for leasing real property. Once the landlord and tenant sign a lease and a copy is delivered to the both parties, it becomes a valid contract. Contacting the landlord by verbal or written means within three days of signing it will not automatically terminate the contract. Now in your mother’s case, the landlord said the lease termination was “fine.” While technically that may be a verbal termination of the lease, it will be hard to prove because the landlord changed his mind and then apparently forgot that agreement. It is always better to get such agreements in writing. Looking beyond that verbal agreement, there may be grounds to rescind or “break” the lease based on your mother’s decision that the unit was not right for her. For example, if the unit was misrepresented as being something it is not or having something it does not have, she may declare a rescission of the contract. Further, if the unit significantly fails in the stated rental value of the unit due to defects or other problems, she may also declare a rescission for these reasons. A valid rescission will terminate her obligations under the contract and even give her rights to claim damages. In cases of rescission, you must set forth the grounds in a written notice of rescission to the landlord and return the keys as soon as possible. As always, before taking any such action, seek legal assistance to protect your rights.

Landlords’ attorney McKinley replies:

Like Kellman says, I am not aware of any cooling-off period after signing a residential lease. When you sign a lease, you have signed a binding contract. Unless the landlord signed a document agreeing to terminate the lease, the lease will still be in effect. Most leases specifically state that the lease may not be modified verbally, and that any modification must be in writing for it to be valid. Unless the landlord actually made some misrepresentation with respect to getting your mother to sign the lease, or there is some hidden defect in the property, it will be difficult for your mother to break the lease. Presumably your mother had a chance to inspect the property prior to signing the lease, and if there were no problems then, it would seem suspicious if there are problems now, especially given the fact that she has not moved into the property. I would suggest negotiating a termination of the lease with the landlord, rather than unilaterally declaring the lease rescinded.

Question: I’m in a position where I may have to leave the area due to a job change. If I remember it right, there is a provision in the law for just such a case where the renter would not be liable for the balance of the lease if he/she gave suitable notice. Is that true and can I break the lease on those grounds?

Tenants’ attorney Kellman replies:

You remembered it wrong. The law that governs leases does not automatically give you the right to cancel that lease based on your personal change of circumstances. If this were true, leases would be pretty worthless since you could claim a change of personal circumstances (i.e. job change, divorce, found a better deal elsewhere) anytime and cancel the contract. The landlord could not rely on your responsibility to that contract if it can be broken so easily. The contract also binds the landlord who cannot evict you based on their change of circumstances either. The contract is an acceptance of responsibility for a set time regardless of changed circumstances. Each party must be able to rely on the other’s compliance for a contract to have any meaning. The notable exception under federal law (which applies to all states) is for military personnel under the guidelines of the Servicemembers Civil Relief Act of 2003. Another exception would be if your lease specifically allowed for a cancellation based on a job change. There are several ways a lease can be terminated with a minimum of obligation. See an attorney before trying to break any lease.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of “Property Management for Dummies” and co-author of “Real Estate Investing for Dummies,” and San Diego attorneys Steven R. Kellman, director of the Tenant’s Legal Center, and James McKinley, member of the Moffitt & Associates law firm, which represents landlords.

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

Questions should be brief and cannot be answered individually.

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Copyright 2006 Inman News

DEAR BOB: If I sell my rental house to my tenant and carry back a mortgage for my buyer, what happens if the buyer-tenant goes bankrupt? Is there any way I could lose my right of foreclosure to some other creditor? –Bill K.

DEAR BILL: No. Your seller-carryback mortgage (or deed of trust) should be secured by the rental house you sell to your tenant. If your buyer files Chapter 7 or Chapter 11 bankruptcy, you remain a secured creditor because your mortgage (or deed of trust) is recorded against the house’s title.

Purchase Bob Bruss reports online.

Nobody can get ahead of you in priority (except the local property tax collector who always has top priority for unpaid property taxes). You might have to wait to get paid, but you have the mortgage security recorded against the property you sold to the tenant.

The best thing that could happen to you (but probably won’t) is: you have to foreclose; no bidders show up at the foreclosure auction; and you get the property back to sell again for a second profit. That happened to me only once, but it was very profitable. For details, please consult a local real estate attorney.

IS A 5 PERCENT SALES COMMISSION TOO HIGH FOR LAND SALE?

DEAR BOB: I own five acres zoned for up to six houses per acre in a fast-growing area. A real estate agent wants a 5 percent sales commission and a six-month listing with six more months of commission if I sell after that. Isn’t 5 percent a lot considering this is a small property? –Jean-Claude B.

DEAR JEAN-CLAUDE: No. A 5 percent sales commission for a vacant land sale is quite reasonable. The customary sales commission for land sales is up to 10 percent of the gross sales price. Sales commissions are negotiable. Selling vacant land isn’t as easy as selling a house.

A six-month listing term is fair for vacant land. However, that “savings clause” of 180 days after the listing expires should apply only to prospects that the listing agent registers with you during the listing term. Be sure it doesn’t apply to any sale you make on your own to somebody who was not introduced to the land by the listing agent or a cooperating buyer’s agent.

HOW TO ENFORCE A JUDGMENT OUT OF STATE

DEAR BOB: I bought a Florida house direct from the seller. No agent. Part of the well equipment was rented. But the seller told me he owned it. I took the seller to Florida court and won a judgment against him without using a lawyer. But the seller has now moved to Georgia. I contacted a Georgia lawyer who tells me it would cost more for his services than the judgment is worth. Do I just have to forget about collecting this Florida judgment? –Joan O.

DEAR JOAN: If you have a large judgment, and if the seller owns any other Florida real estate, it may be worthwhile recording your judgment in the counties where he owns real property. When he eventually sells such Florida property, then your judgment must be paid to deliver marketable title.

Or, you can take your judgment to Georgia and have a Georgia attorney enter it in the court records where your seller now lives. Under the Full Faith and Credit clause of the U.S. Constitution, your Florida judgment can then be recorded as a Georgia judgment. When the seller goes to sell hisGeorgia property, then your Florida judgment must be paid in full if it is recorded in the county where that property is located. For details, please consult a Georgia attorney.

The new Robert Bruss special report, “How to Sell Your Home for Top Dollar in a Buyer’s Market,” 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

Without her knowledge, an unknown perpetrator used the name, Social Security number, credit history and identification of Aurora Lepe to purchase a residence and obtain two mortgages secured by the property.

Lepe’s signatures on the documents were forged. Due to nonpayment of its mortgage, lender CTC Real Estate Services sold the property at a foreclosure auction sale.

Purchase Bob Bruss reports online.

After paying off the balances on the first and second mortgages, $51,334 surplus funds remained.

Not knowing what to do with the remaining funds, the lender interpleaded the money into court. The lender said to the judge the fair and equitable result would be to have Ms. Lepe receive the surplus funds to help compensate for her identity theft and all her inconveniences. Nobody contested the interpleader.

If you were the judge would you give the excess funds to Ms. Lepe?

The judge said yes!

Ms. Lepe has established by a preponderance of the evidence she was a victim of identity theft, the judge began. Although she had nothing to do with title to the residence being taken in her name, and an unknown perpetrator profiting from the first and second mortgages, she is the only individual who has a claim to this money, he continued.

“The mere fortuity that the wrongdoer has disappeared without receiving the surplus and is not subject to legal action should not, as a matter of equity, preclude Ms. Lepe from being able to recover the funds not in the possession of the identity thief,” the judge emphasized.

No one else has claimed the funds remaining after paying off the foreclosed mortgages secured by the property, and as a result of the identity theft and foreclosure, Lepe’s credit was ruined, although she was an innocent victim, he commented. Therefore, the $51,334 excess funds remaining after the foreclosure sale and paying the attorneys fees shall go to Ms. Lepe as restitution in this unusual situation, the judge ruled.

Based on the 2006 California Court of Appeal decision in CTC Real Estate Services v. Lepe, 44 Cal.Rptr.3d 823.

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

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Copyright 2006 Inman News

Q: We have been plagued by moisture in the crawl space of our home (built in 1978).

A French drain system surrounding our house was installed two years ago. A pest inspection at that time indicated there were no pest or mildew problems. However, when it rains, we get a terrible odor in our home. It smells of wet chemical earth.

Should we have heavy plastic installed in the crawl space? The pest inspector said the earth would never dry out then. But other home gurus on television and the Internet seem to advise doing this.

We are having our carpets replaced with wood floors this year, which will include a moisture barrier between the subfloor and the new floors, but we also want to protect our subfloor from any moisture.

A: We disagree with the pest control inspector. You would be well served to install a vapor barrier of 6-millimeter plastic in the crawl space of your home. The plastic will help reduce the moisture in the crawl space, which we suspect is the cause of a mold/mildew problem. We suspect the odor you describe when the soil is wet is mildew, which thrives in wet, underventilated areas and is dormant in dry conditions.

Mildew is the generic name for a few types of fungi that grow readily on moist surfaces. Once it invades your home, it spreads rapidly and reproduces itself by releasing airborne spores. Eliminate the moisture or reduce the mildew’s ability to release spores into the air and you’ll eliminate the odor.

Lack of ventilation is a major cause of mildew production. Although it is almost impossible to completely eliminate it from your home, you can take some positive steps to control it.

Even though the pest control inspector claims to have not found mildew in the crawl space, we’d bet a dollar to a doughnut that the inspection took place in the summer months when the ground had dried out and mildew spores were dormant.

Attacking your problem is a three-step process — one of which you’ve already completed by installing the French drain. The next two are installing the vapor barrier and making sure the crawl space is adequately ventilated. The goal is to reduce moisture infiltration and increase ventilation to effectively control mildew in the crawl space.

First, carefully inspect the crawl space to determine if there is an obvious source of water infiltration. Do this during or immediately after a rainstorm and search for evidence of water. If you find any surface water at all, you must eliminate the source. Check the gutters and downspouts for blockages. Make sure the downspouts are discharging the water away from the foundation. Finally, make sure the dirt adjacent to the foundation slopes away from the house.

Next, install the vapor barrier to lessen the overall amount of water vapor entering the crawl space from the ground. Lay a heavy plastic tarp — 6 millimeters or thicker — over the entire area. If you must use multiple sheets, overlap them by at least 2 feet. Use stones to hold the plastic down. The plastic acts as a vapor barrier, eliminating much of the migration of water vapor from the ground to the crawl space. Consider spraying a TSP/bleach mix before installing the vapor barrier to kill any existing mildew spores.

Finally examine the ventilation of the crawl space. This means the foundation vents. Make sure they aren’t blocked by plantings and that there are enough of them. Here, more is better. The minimum amount of ventilation required is determined by the square footage of the footprint of the foundation. The presence or absence of a vapor barrier affects this number.

Check with your local building department as local codes vary depending on your area’s particular moisture and weather conditions. Check the volume of ventilation provided by your foundation vents and ensure it meets or exceeds the minimums required for new construction in your area.

We’d also suggest that you install fiberglass batt insulation between the floor joists to isolate the crawl space from the subfloor before you have your new hardwood floor installed. Take these steps and we believe you’ll severely reduce or eliminate the moisture and odor problems.

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

Copyright 2006 Bill and Kevin Burnett

When I first picked up “Confessions of a Real Estate Entrepreneur” by James A. Randel, I wasn’t enthused by its bland, noncreative cover, which makes the book look dull and boring. Wrong. Instead, it is one of the best real estate books of 2006 so far because it tells how a super-successful investor evaluates real estate opportunities.

What makes this new book so unusual is the self-deprecating author emphasizes his real estate mistakes as much as the highlights of his successes. The book’s title could have been “Real Estate Mistakes I Made But How I Succeeded Anyway.”

Purchase Bob Bruss reports online.

James A. Randel started with an excellent educational background from Columbia University where he obtained his law degree. Then he wisely became a real estate broker so he could participate in real estate commissions as well as practice law. When briefly mentioning his New York City residency during college years, Randel admits he didn’t spot the opportunities to buy run-down buildings near Columbia for upgrade profits by adding value.

The book’s theme is “add value” whether you invest in raw land, houses, a fixer-upper factory building with potential for rezoning profits, or a run-down office building. What makes this book so special are the personal stories the author shares, emphasizing how he profited when he (and his investor partners) added value and how they lost money when their planning was faulty.

Every college real estate program should require this book as pre-enrollment reading to open the eyes of students to all the opportunities involving real estate. Randel recommends specializing in commercial real estate because of its higher earnings potential compared to residence sales. But he also suggests related realty fields such as mortgage brokerage and becoming a full-time investor.

Throughout the book, the author shares how he went into many investments with little or no cash of his own but he creatively raised the necessary financing and cash down payments. One of the best examples came when Randel bought one of the first factory outlet buildings by borrowing the down-payment money from the existing tenant who was willing to pay to get out of the lease. Randel then tells how he creatively borrowed the down-payment cash for one day from a bank until his ex-tenant paid him.

One of the book’s best chapters is about “persuasion.” Most of us would call it “negotiation.” But the author says real estate involves looking at transactions from the other party’s viewpoint and then persuading that person to do what is mutually acceptable.

Randal also explains what it takes to be successful in real estate. In a nutshell, it takes enthusiasm and thick skin to avoid being depressed by rejections. He shares lots of personal examples how, when one tactic didn’t work, he tried others until one worked.

Chapter topics include “Learning to Add Value”; “Possibilities”; “The Basics; Options”; “Contracts with Contingencies”; “Development”; “Revitalizing Existing Properties”; “A Complete Makeover”; “Other Mistakes I’ve Made”; “Buying Wholesale, Selling Retail”; “The Next New Great Idea”; “Brokerage”; “Leases and Other Property Interests”; “Other People’s Money”; “Finding Deals”; “When You’re a Seller”; “Attorneys”; “The Art of Persuasion”; and “Success Skills.”

If you are or want to be a serious and successful real estate investor, this is a “must read” book. Don’t be turned off by its bland cover, as I was. Hidden under that shell is one of the best real estate investment books I’ve ever read. On my scale of one to 10, this unique book rates an off-the-chart 12.

“Confessions of a Real Estate Entrepreneur,” by James A. Randel (McGraw-Hill, New York), 2006, $29.95, 256 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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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Copyright 2006 Inman News