Real Estate in Steamboat

DEAR BOB: I co-own a summer home with siblings and first cousins. Our large group is not getting along and it looks like the property will have to be sold. No consensus can be reached among the co-owners for selling shares within the group, and threats of a partition lawsuit have developed. I am guessing most of the group will want to avoid this. Can a majority interest block a partition lawsuit? –Randy A.

DEAR RANDY: No. Anything can happen in a partition lawsuit to force the sale of a property when at least one co-owner wants to sell but another co-owner doesn’t.

Purchase Bob Bruss reports online.

Partition is an ancient common-law tradition allowing a property to be sold despite a lack of agreement among all the co-owners. Most states allow partition lawsuits.

Majority rule does not apply to partition lawsuits. It is up to the judge to decide. For example, I’ve seen a judge give the co-owners 30 days to resolve their differences or he will order a sale of the property with the sales proceeds divided among the co-owners. For details, please consult a local real estate attorney where the property is located.

SHOULD HOMEOWNER SELL TO A REAL ESTATE INVESTOR?

DEAR BOB: We are putting our house on the market for sale this month. But our local market is very slow. If our house doesn’t sell before our new home is completed, what are the pros and cons of selling to an investor who advertises “We buy houses” in the newspaper? –Chauncey L.

DEAR CHAUNCEY: Real estate investors who advertise “We buy houses” usually offer a price highly discounted from full market value. In return, you get a quick cash sale. But don’t expect to receive top dollar.

REINVESTING HOME-SALE CASH WON’T AVOID CAPITAL GAINS

DEAR BOB: My wife and I (recently married) own homes with over $350,000 in equity each. If we sell those two homes and use all the profits to buy a larger home, can we avoid capital gains tax on both sales? Also, would it be to our advantage to add each other’s names on each house? –Mark S.

DEAR MARK: What you do with the sales proceeds is irrelevant to avoiding tax on the sales of those two houses.

If each of those houses were your principal residences before marriage, and if you each meet the Internal Revenue Code 121 requirement of 24 out of the last 60 months ownership and occupancy before sale, then you each can qualify for up to $250,000 tax-free profits on the sale of your separate residences. I don’t see any advantage to adding your name to the other’s house. For details, please consult your tax adviser.

The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Ask to Avoid Overpaying 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 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: I have a friend who owns a rental unit and the tenant refuses to pay the rent. This has gone on for several months. The tenant is a menace and offered to move if my friend gave him $7,000. My friend was desperate so he agreed, but the tenant changed his mind — this deadbeat would rather live rent-free. My friend has consulted lawyers but has been told tenants’ rights (especially in some rent-control areas) are so strong that there is nothing he can do. Any advice?

Landlords’ attorney McKinley replies:

Your friend has been given bad advice. A landlord should never agree to pay a tenant to vacate the property. This agreement could have been binding on your friend, which would have required him to pay the tenant to vacate; in addition, your friend would have waived any claim for rent. However, since the tenant changed his mind, and apparently nothing was put in writing, it appears that no agreement was reached. Your friend should immediately serve a legal notice for all rent currently owed. Make sure your friend meets the requirements for the notice and does not ask for sums that aren’t allowed. Also please remember, all legal notices to pay rent or quit should include the landlord’s name, address for delivery of rent, office hours for personal delivery of rent, and a phone number. An attorney familiar with landlord-tenant law should be able to provide a proper notice form, or prepare the notice for your friend. Your friend must attempt to personally deliver the notice to his tenant, but if the tenant is not home, he can serve the notice by taping it to the door and mailing the notice by first-class mail to the tenant. It is always best to personally serve the notice, so your friend should attempt to serve it when he knows the tenant is home. If the tenant does not pay within the notice period, the next step is to file an unlawful detainer action. The unlawful detainer, or eviction action, is the fastest way for a landlord to recover possession of real property. Your friend should definitely retain an attorney experienced in unlawful detainers to handle this matter for him.

Tenants’ attorney Kellman replies:

This is a great example of how myths are perpetuated and then acted upon to great damage. The idea that tenants have too many rights and cannot be evicted is simply untrue. The truth is that both landlords and tenants each have certain rights in their favor, which can easily be lost by improper action, lack of action or misinformation. Here, the lack of proper action could have cost your friend plenty. McKinley is right when he says that nonpayment of rent, even in rent-controlled areas, could bring about a relatively swift eviction (except of course if the tenant has a legal defense to the notice or some other valid reason for the nonpayment). The complexity of the notice requirements McKinley shares with us is a reminder that a landlord should seek legal advice before commencing legal action. Also, they should get advice before making any such significant agreements with a tenant. Many tenants also act under misunderstandings of the law and get in trouble. For example, this tenant believed in the myth that he cannot be easily evicted and has demanded a lot of money to move. It is only because the landlord was unaware of his own rights that the discussions reached a point of negotiating a price of $7,000. A knowledgeable landlord would have simply handed the case to his/her attorney and the eviction proceedings would have commenced. No move-out payment. No delay. In this case, the combination of a landlord and a tenant who both did not know of their rights and duties under the law sent their case spinning into strange lands. Fortunately it appears that no agreement was finalized so an eviction could be commenced. As a landlord or tenant the advice is the same: seek competent professional assistance to understand and protect your rights before taking legal action.

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

The Guru Nanak Sikh Society applied for a building permit to construct a temple that would seat 75 people on a 1.9-acre parcel on the outskirts of town. But the neighbors protested because there would be considerable traffic on the residential streets. The permit was denied.

To meet these objections, the members purchased a 28-acre parcel in an agricultural zone further away from the city. They applied for a building permit. The county planning commission granted the permit, subject to 20 special conditions such as traffic mitigation.

Purchase Bob Bruss reports online.

But a few neighbors appealed to the county board of supervisors, arguing this would be an undesirable “leapfrog development” away from the town. After a public hearing, the county reversed the planning commission and denied the permit by a 4-0 vote.

Guru Nanak Sikh Society then sued the county for denying a building permit, claiming religious discrimination. The members alleged violation of the federal Religious Land Use and Institutionalized Persons Act (RLUIPA) and the U.S. Constitution. They alleged their 75-seat temple would be away from a residential or business area, and they would comply with the 20 special conditions imposed by the county planning commission.

If you were the judge would you order the county to issue the building permit?

The judge said yes!

The evidence shows the Guru Nanak Sikh Society has attempted to be a good neighbor by complying with the requests of nearby residents by building “out in the country” and complying with the 20 conditions imposed by the planning commission, the judge began.

However, the county still denied the building permit, he explained. The evidence clearly shows the county board of supervisors violated RLUIPA and burdened the organization’s religious exercise, the judge continued.

The purpose of RLUIPA is to allow religious organizations to obtain building permits when they comply with reasonable conditions, he emphasized.

The argument that this would be a “leapfrog development” away from the town is insufficient reason to deny the permit, the judge ruled. Therefore, an injunction shall be issued requiring the county to approve the building permit, the judge concluded.

Based on the 2006 U.S. Court of Appeals decision in Guru Nanak Sikh Society of Yuba City v. County of Sutter, 456 Fed.3d 978.

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

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Copyright 2006 Inman News

DEAR BOB: Is it a disclosure requirement for a home seller to tell the buyer that the home has just been re-zoned into a nonconforming status? Are there times when an owner just does not know? –Dick B.

DEAR DICK: A property use that does not comply with the current zoning is known as a nonconforming use. For example, a single-family house located within a commercial zone is a nonconforming use.

Purchase Bob Bruss reports online.

Whenever a property is proposed for rezoning, the owner must be notified and given an opportunity to speak at a public hearing for or against the rezoning.

As a home seller, you must disclose on the listing information and to your buyer if your property was rezoned, or rezoning is under consideration by city or county officials, and your residence will become a nonconforming use. A nonconforming use can have a major impact on the market value of the property.

When a property is rezoned and the current use does not meet the new zoning rules, most existing uses are “grandfathered” and allowed to continue either indefinitely or for a specified number of years.

But most zoning laws specify that if more than 50 percent of a property is destroyed or severely damaged, such as in a fire, the structure cannot be rebuilt as a nonconforming use.

MUST HOMEOWNER’S ASSOCIATION ABATE A NEXT-DOOR NUISANCE?

DEAR BOB: I own a condo that is adjacent to an apartment building where there is frequent loud noise. The police have been called many times but without effective results. Our homeowner’s association board and the so-called professional management company refuse to take action. When I tried to find out who is in charge, nobody seems to know. This concerns me because I feel the noisy neighbors will devalue my investment. If I rent my condo, I’m afraid I won’t be able to keep renters when they discover the noise. What can I do to get the homeowner’s association to act? –Carol M.

DEAR CAROL: You should attend the homeowner’s association meetings to politely express your desire to have the association take action because this noise problem must be affecting most or all of the units. A letter sent by both first-class mail and certified mail with return receipt requested should ask the management company and the association to take action on behalf of all the condo owners.

If the homeowner’s association directors refuse to act, then it is up to you and your condo neighbors. Keep a careful record of your phone calls to the police.

If the loud noise continues, your legal action is to bring a private nuisance abatement lawsuit against the owner of the apartment building and the offending tenants. For details, please consult a local real estate attorney.

READ THE COVENANTS, CONDITIONS AND RESTRICTIONS (CC&Rs) TO LEARN AMENDMENT DETAILS

DEAR BOB: I live in a rural subdivision of 25 half-acre lots. We are governed by CC&Rs recorded in 1976. They are to run for 30 years, with an automatic 10-year extension, unless a majority of the owners agree to change them. The original CC&Rs were poorly written, difficult to enforce, and are out of date. The elected directors of the homeowner’s association have submitted revised CC&Rs to the members, subject to a 51 percent vote for approval. Legally, can a simple majority of lot owners pass CC&Rs applicable to 100 percent of the owners? –Stan D.

DEAR STAN: If the existing CC&Rs allow changes or amendments by a vote of 51 percent of the eligible lot owners, then a simple majority can enact new CC&Rs affecting all lot owners. But that can be difficult to achieve because many members might not care so they fail to vote. For details, please consult a local real estate attorney.

The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Must Ask to Avoid Overpaying 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 delivery at www.BobBruss.com. Questions for this column are welcome at either address.

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

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Copyright 2006 Inman News

Q: I enjoyed your recent column on silencing squeaky floors. I have one more question for you that I really hope you can answer.

Last summer we had 1,000 square feet of Brazilian cherry professionally installed on the first and second floors of our home. It cupped. We then had the crawlspace under our house lined.

I bought a hydrometer and took humidity readings. Our bedroom on the second floor and other rooms still seem to have too much moisture — 60 percent after we wake up in the morning — before showers.

What should I do? I have noticed a difference in the cupping when we have “controlled” the humidity. We run fans continually under the house in the encapsulated space. We also run fans in the living room and in our bedroom.

I am heartbroken about our floors and at a loss as to what to do. We have spent so much money on the floors and the crawlspace liner.

A: As you point out, “cupping” of your newly installed floorboards is likely the result of excessive moisture. One possible source of the problem might be that the wood flooring was not allowed to stabilize before it was installed. If the wood contained excessive moisture at installation, natural warps and cups appear as it grows accustomed to its new environment.

Although a possibility, we don’t think it is likely since the floor was installed during the summer and the problem seems to have arisen during the winter. Rather, it’s more likely that the cupping you are experiencing is the result of high relative humidity in a warm house during a cold, wet winter.

Cupping is the result of wood trying to return to its natural shape. Look at the end of a board. If you see growth rings that are concave the board is likely to cup. When installing similar boards, it is best to install them with the cup facing down. Whatever fasteners you use — nails or screws — will inhibit the boards from taking their natural shape.

Excessive moisture can wreak all kinds of havoc on home and owner, including itchy skin and nasal passages, mold growth, water damage to organic materials and, in extreme instances, rot.

Reducing the interior relative humidity provides a solution to these problems. You have already experienced it downstairs from putting the liner in the crawlspace. Taking the next step is going to require a little detective work.

You’ve taken the right first step by checking the humidity level to verify that moisture levels are high. We agree that 60 percent relative humidity is a bit high for a home’s interior and indicates a problem. Now the challenge is to find the source.

Some possible causes of excessive moisture might be outside landscaping (are you surrounded by trees?), defective insulation, lack of ventilation, or some of your living habits such as air-drying clothes inside. It may also just be the quirkiness of your home.

If you have exhaust fans, use them. If your bathrooms do not contain exhaust fans, install one in each bathroom where you bathe or shower. In the meantime, open the window while running the bath or shower to vent the warm, moist air outside.

There are other more detailed steps you might take. Installing a whole house fan encourages even air distribution throughout the house to eliminate cold spots.

Consider installing a dehumidifier to reduce the relative humidity in the home to 50 percent or less. A dehumidifier works by removing moisture from the air by directing the air over cold coils, wringing the water out and channeling the condensation to the outside.

In researching our answer to your question we came across a story from a nurse who came home from a trip out of town to find her house unbearably humid. She’d recently purchased a dehumidifier that she immediately put into service. She claims that within “about half an hour” of installation the humidity level was reduced to around 50 percent. Even though this story is merely anecdotal evidence, we give it some credibility. You can read her story online at www.allergynursing.com/moldy/dehumidifier.html.

A good heating, ventilation and air-conditioning company can help you with installation of a dehumidifier, if you choose to go that route. But we encourage you to learn something about them before you approach the pros. This Canadian Web site is a good place to start: www.cmhc-schl.gc.ca.

Finally, we caution you that installing a dehumidifier is not a “silver bullet” that necessarily will solve the problem. Start with reducing the sources of moisture in your home first. That may just do the trick.

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Copyright 2006 Bill and Kevin Burnett

Reverse Mortgage of America, a subsidiary of Seattle Mortgage and the third-largest producer and servicer of reverse mortgages in the country, plans to roll out the first new reverse product in nearly a decade when its privately funded jumbo program — The Lifestyle Plan — hits the market in the next few weeks. 

The new product initially will be available in Washington, Oregon and California. It will be marketed to the remainder of the country early next year.

Designed for owners of higher-value homes, The Lifestyle Plan product is similar to Financial Freedom’s Cash Account and allows for a higher percentage of available home equity to borrowers, exceeding the federal loan limit placed on reverse mortgages insured by the Federal Housing Administration.

Both the Reverse Mortgage of America (RMOA) offering and the Financial Freedom mortgage function similarly to the FHA Home Equity Conversion Mortgage (HECM) and Fannie Mae HomeKeeper reverse-mortgage programs, but are funded by a third-party lender.

The Lifestyle Plan could be more beneficial than the HECM for homeowners with substantial equity. For example, a HECM would provide a typical 73-year-old couple with an appraised home value of $700,000 with approximately $203,723 in available funds. Under The Lifestyle Plan this same couple could avoid closing costs and loan fees, netting $291,915 in available funds, a difference of $88,192, according to Reverse Mortgage of America.

“The Lifestyle Plan provides additional opportunities for seniors across the nation, particularly those in expensive housing markets, who are eagerly seeking alternate sources of income,” said John Nixon, executive vice president of Reverse Mortgage of America. “It is important that seniors understand and fully examine their financing options. As our population ages, reverse mortgages will supplement retirement and enhance the quality of life for many more senior homeowners.”

Financial Freedom first introduced a jumbo reverse mortgage in 1996 and had no competition until now. Jumbo amounts, now starting at $417,000, adjust annually and are greater than the “conforming” limits established by Fannie Mae and Freddie Mac.

The interest rate on the new RMOA program is the six-month LIBOR Index, plus 3.6 percentage points. That rate today would be 9.02 percent, compared with 5.07 percent three years ago. While the new RMOA program’s “margin” is slightly higher than the Financial Freedom mortgage (3.6 compared with 3.5) the RMOA mortgage offers a more flexible no-fee option.

Most seniors prefer predictable, reliable mortgages. Many have requested a fixed-rate reverse to the unpredictable moves of an adjustable, but underwriters have been unwilling to take on the risk of a long-term product.

Tom Scaberti, who left Financial Freedom last year to head up the soon-to-be-released reverse mortgage at Countrywide Home Loans, said it has been difficult for potential mortgage investors such as Lehman to commit to gauge how long seniors will remain in the home. That information, plus other research, would bring more mortgage variety and result in lower rates and fees for consumers.

“There are actuarial tables, like the ones insurance companies use, to predict how long a senior will live,” Scaberti said. “But we don’t have a lot of data yet on the move-out rate. How long will they stay once they get the reverse?”

FHA’s HECM is clearly the nation’s most popular reverse mortgage and carries a lower interest rate than the jumbo products, but borrowers are limited in the amount they are able to borrower by FHA’s loan ceilings and geographic regions. Urban areas typically have higher loan ceilings than rural areas. Borrowers have to pay HECM loan fees, typically 2 percent of the appraised value plus a 2 percent mortgage insurance premium, but these fees can be subtracted from the loan proceeds. Thus, borrowers do not have to pay “out of pocket” for most of these fees.

Reverse borrowers make no monthly payments on their mortgage during its term. The loan comes due when the borrower permanently moves out of his or her home. To qualify, consumers must be at least 62 years of age and own their own home. The home does not have to be paid off entirely, but the greater the equity, the greater the reverse loan amount.

However, seniors can “outlive” the value of their home without being forced to move. The homeowner cannot be displaced and forced to sell the home to pay off the mortgage, even if the principal balance grows to exceed the value of the property. If the value of the house exceeds what is owed at the time of the homeowner’s death, the rest goes to the estate.

Tom Kelly’s book “The New Reverse Mortgage Formula” (John Wiley & Sons) is now available in local bookstores and on Amazon.com. He can be reached at news@tomkelly.com.

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Copyright 2006 Tom Kelly

If you are a serious real estate investor or realty sales agent, reading and applying “Trump-Style Negotiation” by George H. Ross will pay handsome dividends in the form of more successful real estate transactions. This new book offers an insight into the negotiation strategies of both Donald Trump and his trusted longtime adviser and attorney, George H. Ross.

This extremely well-written book reveals Trump’s big thinking negotiation strategies. He focuses on the real estate goal. However, Ross reveals, Trump has little patience for details of the transaction, and he leaves those to trusted associates such as Ross who has worked with Trump for more than 30 years.

Purchase Bob Bruss reports online.

But this book isn’t just about Donald Trump’s negotiation tactics. It is primarily George Ross’s negotiation strategy playbook. He emphasizes how he tries to establish rapport with the other party to the negotiation before moving on to the actual transaction.

This is a book serious real estate entrepreneurs will want to read several times to fully absorb the author’s valuable negotiation strategies. Having taught a negotiation course at New York University for many years, Ross has highly organized his negotiation thinking so he knows what works and what doesn’t.

Along the way, he shares how he reluctantly met Trump (as a courtesy to Trump’s father, Fred), how he worked out the very complicated details of Trump’s first transaction (the Grand Hyatt Hotel on 42nd Street in New York), and how Trump came to rely on Ross to handle the details of Trump’s complex transactions.

The book is filled with real-life negotiation examples that work. It reads almost like a novel because it is packed with suspense, as each transaction works its way to a usually successful conclusion. If the book has a weakness, it doesn’t provide enough details.

For example, Ross shares how a Minneapolis entrepreneur wanted the local franchise for Trump Ice bottled water. When he learned Ross was coming to Minneapolis on a book tour, he phoned Ross, arranged to pick him up at the airport, and had a police escort take them to a Minnesota Twins baseball game where Ross, at age 76, threw the ceremonial first ball and got it across home plate for a “strike.” The entrepreneur even gave Ross a Twins uniform with his favorite number 16 and name on it. After that, negotiating the franchise was easy. But readers never learn that entrepreneur’s name.

The keys of Trump’s real estate negotiation success, according to Ross, are: build trust, build rapport, and create satisfaction. He emphasizes how important it is to find a common ground with the negotiation opponent. Then take time to establish rapport by talking and listening. Finally, create satisfaction so each party involved in the transaction gets everything he/she wants.

A good example of that is the negotiation where Trump assembled the land where the famous Trump Tower is now located on New York’s Fifth Avenue. Ross says, “Donald Trump rarely starts off any negotiation by telling the other side exactly what he really has in mind.”

Then he explains how Trump and the late Leonard Kandell negotiated a land lease under Kandell’s building on 57th Street and unused excess air rights, which could be used to increase the height of Trump Tower. Ross next reveals the intricate negotiation details of how both parties got what they wanted. To this day, Ross is an adviser to the Kandell heirs.

This is the best real estate negotiation book I’ve ever read (and I’ve read quite a few). Not only does it organize and explain negotiation principles, but it provides abundant real-life examples.

Chapter topics include “How I Became Donald Trump’s Negotiator”; “What is Negotiation Really?” “Build Trust, Friendship, and Satisfaction with the Other Side”; “Probe to Learn What the Other Side Wants”; “Be a Master Salesman”; “Control the Pace of the Negotiation”; “Psychological Negotiating Tactics”; “Information is Power: Become the Expert on the Topic You’re Negotiating”; “Keep Multiple Solutions in Mind”; “Win Through Discipline”; “Power Negotiating Tactics and Countermeasures”; “Negotiating with Difficult People”; “Get Tough Strategies and When to Use Them”; and “The Most Intricate Deal I Ever Negotiated.”

This real estate book is so valuable it should be read only one or two chapters at a time. I plan to re-read it because I’m sure I missed some key tactics in the first reading. This book is so well written it should become the textbook for college real estate negotiation courses. On my scale of one to 10, this great book, which cannot be recommended too highly, rates an off-the-chart 12.

“Trump-Style Negotiation,” by George H. Ross (John Wiley and Sons, Hoboken, NJ), 2006, $24.95, 259 pages; Available in stock or by special order at local bookstores, public libraries, and www.Amazon.com.

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

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Copyright 2006 Inman News

DEAR BOB: In August 2006 I purchased an apartment in a condo conversion in the resale market. My seller bought the condo eight months earlier direct from the condo converter. To what extent and for how long a time frame can the developer be held liable for repairs and warranty work to each individual unit? For example, if a front-door lock is defective, and the third-party manufacturer offers a 25-year warranty, who is responsible for repairs, bearing in mind the manufacturer requires a copy of the invoice? –Helena S.

DEAR HELENA: In a condo conversion, the developer is liable to the homeowner’s association (HOA) for any structural defects, such as a foundation problem, in the common areas. However, if something goes wrong within your condo unit after purchase, the developer usually has no liability to the owner, especially a subsequent owner who was not the original buyer.

Purchase Bob Bruss reports online.

If you are asking who is responsible for repairing your front-door lock, don’t expect the developer to replace it (although a good developer will take responsibility and then deal with the lock manufacturer). Your best recourse is against the lock manufacturer. Or forget it. For more details, please consult a local real estate attorney.

HOME ON LEASED LAND USUALLY NOT ELIGIBLE FOR REVERSE MORTGAGE

DEAR BOB: I have friends who own their home, which is on leased land. The senior-citizen reverse mortgage lender told them the residence is not eligible. Is this correct? –Anthony L.

DEAR ANTHONY: If the residence is a manufactured house or a mobile home on a leased lot, it clearly is ineligible for a reverse mortgage.

However, if it is on a leased lot with an option to purchase, then some lenders will approve a reverse mortgage in such a situation. Owning a residence on leased land is never an advantage and is frequently a detriment.

ODDS OF LENDER ENFORCING “DUE ON SALE CLAUSE” ARE MINIMAL

DEAR BOB: You recently had an item about a mortgage-due-on-sale clause where you said it was unlikely the lender would call the loan. What are the odds the lender would find out and call the loan due in full? –Lawrence L.

DEAR LAWRENCE: As long as the monthly mortgage payments are made on time, mortgage lenders rarely risk enforcing the due-on-sale clause when a property title is transferred “subject to” the mortgage.

If a lender should attempt to enforce the due-on-sale clause, unless the transfer is exempt under the Garn-St. Germain Act such as an interspousal transfer, the new owner can then either pay the lender’s assumption fee (usually 1 percent of the mortgage balance) or refinance with another lender.

Unless mortgage interest rates skyrocket, a mortgage lender would be very stupid to attempt to enforce a residential due on sale clause today.

The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Must Ask to Avoid Overpaying 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 delivery at www.BobBruss.com. Questions are welcome at either address.

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

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Copyright 2006 Inman News

Dear Barry,

When I bought my home, I made the mistake of not being present for the home inspection. Instead, I trusted that the inspector did a good job and that everything was OK. After moving in, I began finding things the inspector had missed. Worst of all was moisture and rotted wood at the base of the kitchen cabinets. I tore out the cabinets and spent a lot of money to repair them. What recourse do I have against the home inspector for missing these problems? –Fawn

Dear Fawn,

Your case against the inspector is weakened if the damaged cabinets are no longer on the property. The basis for a claim depends upon whether the moisture and damaged materials were visible and accessible at the time of the inspection. If the cabinets are gone, so is the evidence. When the problem was discovered, you should have called the home inspector and the pest inspector. Both were responsible for finding that kind of defect. If you’ve still got the cabinets, you should call the inspectors immediately.

Dear Barry,

We have standing water in the crawlspace under our house, but the source is a mystery. We checked the water pipes and sewer lines but found no damage or leaks. What can we do? –Benjamin

Dear Benjamin,

There are two possible sources for the water beneath your house. Either there are plumbing leaks in buried portions of the water lines or waste piping, or there is a problem with groundwater drainage.

Water-line leakage can be determined by observing your water meter for a period of 15 minutes while no plumbing fixtures are in use. If the gauge advances, there is a leak. To determine underground waste-line leakage requires the expertise of a qualified plumber. A video inspection of drain lines may be necessary. If no plumbing leaks are found, the water source is most likely faulty ground drainage. For a comprehensive evaluation of site drainage problems, a geotechnical engineer should be consulted.

Dear Barry.

Before we bought our home, we hired a home inspector and relied on his advice. During the inspection, he told us the seller had mentioned a plumbing problem involving slow drains. But he did not indicate any need for concern or further investigation. Now that we own the home, we’ve learned that the entire drainpipe system needs replacement. Shouldn’t our inspector have red-flagged this problem? –Michael

Dear Michael,

If the inspector was aware that the waste-line system was slow, it was his responsibility to recommend further evaluation by a licensed plumber. It was also his responsibility to indicate this disclosure in the written inspection report, not simply to “mention” what the seller had said. Failure to report such conditions in writing and to recommend further evaluation by a qualified specialist constitutes professional negligence. However, holding an inspector accountable for something he said but did not declare in writing could be very difficult.

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

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Copyright 2006 Barry Stone

DEAR BOB: My wife and I bought a house in 1995 for $180,000. Since then, we have taken out home-improvement loans and now owe $320,000. Similar nearby houses sell for $600,000. In 2004, we bought our current home for $640,000 and rented out our former home. We have been told if we sell our first home within three years after buying our second home we won’t owe any capital gains tax. Or should we try to sell it now although the local home sale market is a bit slow? –Manuel A.

DEAR MANUEL: You received incorrect tax information. Buying a replacement home is irrelevant. Also, the mortgage balance on your old home doesn’t matter.

Purchase Bob Bruss reports online.

To qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 for a single person (up to $500,000 for a qualified married couple filing a joint tax return), you must have owned and occupied the home at least 24 of the last 60 months before its sale.

That means you have up to 36 months after moving out of your principal residence to claim your tax-free sale profits. If you rent it longer than 36 months, you lose your exemption.

However, since you rented the house after vacating, the depreciation you deducted on your tax returns will be taxed at the special 25 percent federal tax rate for recaptured depreciation. For full details, please consult your tax adviser.

WHAT IF 81-YEAR-OLD MOM STOPS PAYING DAUGHTER’S MORTGAGE?

DEAR BOB: My 81-year-old mom recently co-signed a 40-year mortgage for my “derelict” sister. The loan is in my mom’s name but the house deed has both her name and my sister’s name on it. My sister has really bad credit. Although she can afford it, she refuses to pay the mortgage monthly payment to my mom, so mom makes the payment. My dad, age 79, is worried about his credit rating. I say, at their ages, does it really matter? My mother also has dementia so my sister and the bank took advantage of her. What should she do? –Dee G.

DEAR DEE: If your mom stops paying the mortgage payments, the bank will foreclose on the house. Should it not sell for enough to pay off the mortgage, the bank could come after your mom for any deficiency loss (although that is highly unlikely).

Of course, if that happens, your mom’s credit will be ruined. But, as you say, at age 81, who cares?

This extreme situation shows why an individual should not co-sign for credit to primarily benefit another person, especially a “derelict.”

If you and your father knew this was going on, you should have stepped in to stop your mother from co-signing for your sister.

AFTER YOU QUITCLAIM TITLE, YOU CAN’T GET IT BACK

DEAR BOB: A few weeks ago you had a question from a man who wanted to add his girlfriend to the title to his house. You suggested use of a quitclaim deed to convey a half interest. My question is after quitclaiming your title, how can you get it back again? I’m asking because in two years I plan to add my boyfriend’s name to the title of my home we will share as our primary residence before selling it two years later –Jeanne S.

DEAR JEANNE: When a property owner signs a quitclaim deed, he conveys whatever interest is desired, such as 50 percent or 100 percent, has his signature notarized, and the deed is recorded to complete the conveyance. After title is transferred, the grantor can’t get that title back again.

Before you transfer a partial interest in your property to your boyfriend, please consult a local real estate attorney to determine the best way to hold title. Also consult your tax adviser to discuss the tax consequences.

NO WAY TO GET YOUR NAME OFF MORTGAGE AFTER A DIVORCE

DEAR BOB: As part of my divorce settlement two years ago, I signed a quitclaim deed on the house that was in both our names. The mortgage is still in both our names. He has since remarried and is still living in the house. He says he can’t refinance and isn’t sure when he is going to sell the house. If something were to happen to him, it is my understanding I will still be responsible for the mortgage payments. Would I get the house? Or would it go to his wife? Can I make him refinance? I really want my name off the mortgage and the house –Teresa B.

DEAR TERESA: If you had a decent divorce attorney, he or she would have resolved these issues in your divorce agreement. Because you signed that quitclaim deed, your ex-husband now owns the house in his name alone.

But your name will always remain on the mortgage obligation. The lender is 99 percent certain to never release you from liability, and you can’t force your ex-husband to refinance. It’s a shame this wasn’t handled as part of the divorce.

If your husband dies, his living trust or will determines who receives title to his house. By signing that quitclaim deed, you are out of the picture to receive the house unless he wills it to you (very unlikely).

Sorry to be the bearer of bad news. But there is nothing you can do to force your ex-husband to refinance or sell the house to get your name off the mortgage.

WHAT IS BEST TAX STRATEGY TO RECEIVE RENTAL HOUSE?

DEAR BOB: What is the best tax strategy for my mother to give me her rental house? Initially, we bought it together, but when it was refinanced my name was taken off the title –Jan B.

DEAR JAN: The best way for you to obtain title to that rental house is to inherit it after your mother dies. Then you get a new stepped-up basis of market value on the date of her death.

If she gifts the house to you now, then you take over her presumably low depreciated adjusted cost basis for the rental property. Also, she must file a federal gift tax return. But no gift tax will be due unless she has given away over $1 million in lifetime nonexempt gifts exceeding $12,000 each. For full details, please consult your tax adviser.

SHOULD HOMEOWNER SWITCH FROM ADJUSTABLE TO FIXED MORTGAGE?

DEAR BOB: I am 64, single, and retired. I have a $125,000 mortgage with an adjustable interest rate currently at 6.3 percent (it can go up to 11 percent). My home is worth about $550,000. I am not planning to sell, but am thinking of refinancing at a 6.375 percent fixed interest rate. It would cost me $2,000 in fees ($1,000 in lender fees and $1,000 in title and escrow charges). Do I really need to spend $2,000 to avoid any future interest-rate increases? –Richard L.

DEAR RICHARD: It’s up to you to decide if spending $2,000 to lock in your interest rate at 6.375 percent is worth the $2,000 expense and hassle. I can’t give you a payback analysis because you won’t be saving anything. But you won’t have to worry about rising interest rates.

NO LIABILITY IF TREES AREN’T DAMAGING NEIGHBOR’S PROPERTY

DEAR BOB: After I moved into my home, the neighbor insisted my trees are cracking her patio foundation. The seller knew about this but didn’t tell me. I then hired an arborist. According to his report, my trees are not directly affecting the neighbor’s home. I do not want to remove my three trees because they make my home secluded. There is a PUD (planned-unit development) association. What are my rights as a homeowner? –Lori K.

DEAR LORI: Depending on the exact facts, it sounds like you have no liability if your trees are not damaging the neighbor’s house or patio. The PUD association probably has no involvement because the homeowner’s association just manages the common areas, not the individual homeowner lots. For more details, please consult a local real estate attorney.

The new Robert Bruss special report, “The 20 Essential Questions Smart Home Buyers Must Ask to Avoid Overpaying 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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