Real Estate in Steamboat

Whether you are a home buyer, seller or real estate agent,you can never learn too much about negotiation tactics. Sooner or later, someor all of these key tricks will be used by your negotiation opponent. Even thebest negotiators admit there is always more to learn.

Having been involved in real estate sales, purchases andbrokerage more than 40 years, I admit to having been the victim of too manyshrewd negotiators. However, I always learned from the experiences and vowednever again to let someone get the best of me in a negotiation.

Purchase Bob Bruss reports online.

Frankly, many real estate negotiators are not aware whenthey are using a negotiation strategy. Instead, they are just doing what comesnaturally to them.

But savvy real estate negotiators recognize key strategiesand anticipate how to avoid becoming a victim. Here are the five mostoften-used real estate negotiation tricks to expect:

1. THE HIGHER AUTHORITY “TWO BITES FROM THE APPLE”NEGOTIATOR TRICK. This famous negotiation strategy has manyvariations. In a real estate sales situation, it most frequently occurs when abuyer negotiates a home sale as to the price and terms. Then, before signingthe contract, he says, “This looks good. But I need to run it by myattorney (or accountant, mother, father, grandmother, etc.).”

Oops! The negotiation opponent has just become a victim ofthe higher authority or “two bites from the apple” strategy.

To prevent this from happening, smart negotiators start byasking, “Is there anyone not present who must approve this transaction forus to proceed?”

As a property seller and a real estate broker, I’ve learnedthe importance of having all parties involved present. Occasionally, I’ve madeexceptions when one party seemed to have control over the absent person, suchas a property co-owner.

Whenever a sale or purchase is subject to approval ofanother person, especially if that individual is financially involved by payingall or part of the down payment, if the contract says it is subject to thatthird party’s approval, there’s no sale until that “higher authority”approves.

What often happens is the “higher authority”will find something wrong. That’s their job!

For example, years ago, without realizing, I became that”higher authority” for my law school classmates, Fred and his wife,who were buying their first house. I recall crawling underneath the house withFred and finding nothing wrong. The house was immaculate. But Fred said to me,”Bob, you’ve got to find something wrong so I can negotiate a betterpurchase price.” That’s when I realized I was the innocent higherauthority.

When you realize the higher authority “two bites from theapple” negotiation strategy is being used on you, the best strategy is tobe firm but friendly. Even if you absolutely must negotiate a transaction,pretend you really don’t care. “Take it or leave it” should be yourattitude, but don’t take the property off the market while awaiting higherauthority approval.

2. THE NONSTOP NEGOTIATOR WHO NEVER STOPS”NIBBLING” TRICK. Nonstop negotiators are usually buyers. They neverquit trying to get a better price or terms. To them, signing the sales contractis just the start of the serious negotiations.

A frequent example occurs when a home purchase contract,signed by the buyer and seller, includes a contingency clause for the buyer’sapproval of the professional inspection report. This is normal.

However, the nonstop negotiator will use that professionalinspection report to re-open negotiations to get the seller to either reducethe sales price or offer the buyer a credit to repair a real or imaginedpreviously undisclosed defect.

Some buyers will even instruct their professional inspectorsto make minor defects seem extremely serious and costly to repair. For example,I recall selling a house to a nice man who was buying it for his parents. Theirinspector, a retired contractor, found all sorts of minor problems. I readilyagreed to have two serious problems, a missing chimney spark arrestor and anelectrical junction box in the attic, fixed.

But the buyer’s inspection report also said the furnace heatexchanger or firebox was cracked. This is a serious and potentially dangerousproblem, but my inspector said the furnace was fine.

So I called the buyer’s bluff. But I was always very polite.I arranged to have my furnace repairman, plus a representative of the local gascompany, inspect the furnace at the same time. I invited the buyers and theirinspector to attend. Everybody showed up. My furnace repairman checked out thefurnace and said he could find nothing wrong. Next, the gas company man came tothe same conclusion. The buyer agreed to accept their verdicts and the saleclosed without further delay.

Another example of the nonstop negotiation method occurswhen the buyer asks to repeatedly re-inspect the house, such as to measure therooms for furnishings or drapes. The truth is the buyer is really looking for realor imagined defects to re-open negotiations on price and terms. Smart sellersand their realty agents head off this tactic by not allowing re-inspections,except for the customary inspection the day before the sale closes.

3. THE “GOOD COP-BAD COP” NEGOTIATION TRICK. Eitherhome buyers or sellers can use this negotiation tactic which we have all seenon TV shows. Usually, the bad cop will ruthlessly browbeat the suspect, hopingto get a confession. When that doesn’t work, the bad cop leaves the room andthe good cop comes in, makes friends with the suspect, and gets him to confess.

In real estate, husbands and wives use this negotiationtrick especially well. Years ago, this tactic was used on me by wealthy”for sale by owner” sellers Carl and Elsie. They were selling theirvacant rental house. The reason I didn’t recognize this technique was Elsie wasthe bad cop.

Although she was extremely pleasant, I didn’t realize shewas the one holding out for top dollar and all cash. Carl, a retiree, turnedout to be the good cop. He was more laid back and relaxed. He realized thehouse was less than perfect. Also, I think he was bored and wanted to get backto working on his classic car collection of Nash Ramblers.

After several weeks of informal negotiations, bad cop Elsiefinally realized if she wanted to get top dollar she would have to accept myterms of 10 percent down and a 90 percent seller carryback mortgage, whichwould add to the sellers’ retirement income.

Elsie and Carl later became my good friends, and weentered into several mutually profitable real estate transactions together.

4. THE SURPRISE AUCTION NEGOTIATION TRICK. Few homebuyers expect to become involved in an auction. This negotiation trick canoccur when the asking price for a property is artificially low. The result isto create a “buyer frenzy” of competitive bids. The winner is alwaysthe seller.

Real estate agents sometimes use this method to get topdollar for their sellers. This is often accomplished by saying, “Anotherbuyer is seriously interested in this house. You better make your offerfast.”

However, you think you are in competition with another buyerand raise your offer without even a counteroffer from the seller. The result isyou are bidding against yourself.

When this situation occurs, smart buyers either (a) drop outof the bidding to see what happens, or (b) ask for the seller to make acounteroffer rather than the buyer making a higher offer against a mythical,possibly nonexistent second buyer.

5. THE “WOULDJATAKE” NEGOTIATION TRICK. Realestate agents hate this negotiation tactic. As a buyer, I love it. Whenever Ican arrange to meet the home seller before making a written purchase offer, Itry to do so.

Of course, real estate agents usually attempt to keep buyersand sellers from ever meeting, at least until after the sale closes.

This method works best in face-to-face buyer-sellercontacts, such as during an open house or a home inspection. After informalchitchat with the seller, I turn the conversation to the house and the askingprice. My favorite question is, “Wouldjatake $— for your wonderfulhome?”

Then I shut up. The realty agent is usually shocked.Sometimes the seller says “maybe.”

But a better question to ask of the seller is, “What isthe lowest price you would accept for this house?” If that price isn’tacceptable, then ask the “wouldjatake” question.

However, the correct answer for the seller when encounteringa tough buyer like me is to politely reply, “Well, why don’t you put thatoffer in writing so I can seriously consider it?”

SUMMARY: Home buyers, sellers and their real estate agentscan never know too much about negotiation tricks. The five tactics above andtheir many variations are the most frequently encountered. More details are inmy special report, “How to Become a Super-Successful Real EstateNegotiator,” available for $5 from Robert Bruss, 251 Park Road,Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internetdelivery at www.BobBruss.com.

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

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Copyright 2006 Inman News

Q: What is the optimal way to replace old windows? Myhouse has outdated aluminum windows that I want to replace with new vinyl ones.Some installers want to remove the nailing fins from the new windows andinstall them by attaching through the sides of the windows into the studs. Thatway they won’t disturb my vinyl siding. Others want to cut back siding andinstall the new window with flashing. Is this overkill? –Mark E.

A:  As far as optimalis concerned, the preferred method for installing a vinyl window is to flashthe opening and then install the window with the fins over the flashing. Thisis done to help create a seal around the window so that any moisture –wind-driven rain, for example — that might penetrate through the joint betweenthe window and the siding will not get all the way into the house.

That being said, retrofit windows are certainly anacceptable alternative. Properly fit and installed, and properly caulked andsealed into place, they should form a weather-tight seal that will be safe andeffective. Unfortunately, with the ridiculous proliferation ofconstruction-related lawsuits that builders and consumers alike are having topay for, some contractors have begun to shy away from retrofits because of thepotential liability.

If the cost difference between the finned window (includingall the work on the siding and trim) and the retrofit window is not too great,I would suggest going with the finned window. However, if it’s a substantialjump in price or there is a risk of damage to the siding, you should be finewith the retrofit alternative.

If you do go with retrofits, I would ask the contractor fora couple of references, and go check out one or two of their installations foryourself. Make sure you like the way the windows fit and operate, and like theappearance of the installation. After the windows are installed, you’ll need tocheck them once a year to make sure the caulking between the window and thesiding is in good condition, and recaulk the joints as needed.

Q:  I just bought ahouse with a gas fireplace. I would love to use it, but I can’t get the thinglit. The previous owners didn’t leave any instructions, and the home inspectorsaid lighting a fireplace doesn’t fall into his scope of inspections, althoughhe did check to see that the fireplace seemed to be in good condition. Myneighbor pointed out a valve I should turn, but I’m wondering if I should justhave a technician come out and look at it? –Wyndye F.

A:  You definitelywant to have the fireplace checked and receive proper instructions on its useprior to turning on any valves or attempting to light it. If you and your homeinspector are not suspecting that there are any problems with the fireplace andno problems were disclosed to you at the time you bought the house, I wouldbegin by contacting the gas company (the local utility that you purchase yourgas from) and ask them to come out and light it for you. This should be a freeservice from the utility company. Your other alternative would be to contact alocal fireplace shop or heating contractor – preferably one that’s a dealer forthe brand of stove that you have – and pay them a service call to come out tothe house and get things going for you.

Either way, I once again want to caution you to wait andhave the stove checked and lit by a competent person.

Q:  I have a metalroof, and I’m curious to know if they are considered a lightening hazard. Isthere some kind of treatment that’s done on installation to reduce thelikelihood of a strike? –Marsha R.

A:  I’m not aware ofany significant increase in lightening danger arising from having a metal roofon a house. I checked with the Metal Construction Association’s TechnicalBulletin 1040, Lightening and Metal Roofing, and I agree with the findings intheir report, which says, in part:

“The probabilities of a strike to a metal roofedstructure are no more or less than any other kind of structure, as theseprobabilities have to do with height and size of the structure and itssurroundings, rather than its construction materials.”

In any area that is prone to lightening, it’s always a goodidea to consider a lightening protection system that will safely conduct thelightening strike to the ground, but that would be true of homes with any typeof roofing.

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

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Copyright 2006 Inman News

If askedwhat is America’s most important contribution to residential architecture, mostpeople would probably suggest the log cabin of Abraham Lincoln, a Southernplantation mansion like Scarlet O’Hara’s Tara (even though it was only a movieset), or George Washington’s Mount Vernon.

Thecorrect answer? The ranch house.

Not onlyis it an American original, its echoes are present in nearly every house builtsince World War II. If this sounds, well, ridiculous, just peel away thoseTuscan touches and Tudor treatments and take a closer look at the constructionmethods, the location of the major living spaces on the back of the house, thegenerous use of glass that blurs the distinction between indoor and outdoorspace, and open floor plans that combine several functions within one area ofthe house. No matter how different a house might look at first glance, you’llfind that the ranch’s fingerprints are all over the place.

Adding thesuburban ranch house to the American architectural pantheon may surprise somehousing aficionados. Ever since the post-World War II period, when this housetype became a fixture on the suburban landscape, critics have derided the ranchhouse as a bland and colorless box.

The truthis more complicated and much more interesting.

A smallnumber of architects working in California and the southwest during the 1920sand ’30s designed the first suburban ranch-style houses. These were based onthe simple, one-story houses built by working ranchers who lived in the harshclimate of the plains and mountains of the West. For young architects seekingforms that were defined by their function and not layers of Victorian brick abrack or the colonial-styled treatments that were popular in the East, theranchers’ houses had particular appeal.

Thearchitects also admired the way the casual lifestyle of ranching households wasreflected in their houses. All the rooms opened onto a shaded verandah, whichfunctioned as both a hallway and an important living area for much of the year.

On theirdrawing boards, the young architects recreated the solitude of the vastprairies by centering the living and dining areas around a private backyardfrom which no neighbors could be seen. Even more startling to the homeowners ofthat time was the way that some of these designers merged indoor and outdoorspaces. Drawing on the work of Frank Lloyd Wright, they used multiple windowsand French doors on the exterior walls that faced the landscaped backyard, aninnovation that made the outdoor area appear to be part of the indoor livingspace. Another Wrightism was using the same space for multiple functions, as ina living-dining room or an eat-in kitchen. Locating the bedrooms on the frontof the house was also unusual for that era.

Becausethe architects’ clients were usually wealthy, the houses were big, oftensprawling across the owner’s building lot as the ranchers’ houses sprawledacross the prairies.

To a 21stcentury eye, the simplicity of these early ranches — with their adobe or boardand battan walls, exposed beamed ceilings and interior spaces that are filledwith natural light — is highly attractive. But the style did not initiallyreceive the architecture establishment’s imprimatur. Though some of thepioneering designers had a conventional architectural education, Cliff May, whois credited with popularizing it and was one of its finest practitioners, wasby training a furniture designer, and he never became a licensed architect.O’Neil Ford, one of the earliest ranch-house designers in Texas and later oneof the state’s most respected architects, learned his craft by correspondence.

During the1920s and ’30s ranches remained a regional house type. After World War Two whencivilian residential construction resumed, they became a nationwide phenomenon,but this did not happen overnight. As with any change in the home buildingindustry, it started with a few pioneers whose success was quickly copied.

Thecircumstances that led to the widespread adaptation of the ranch were unique.

In 1945American home builders faced an unprecedented challenge. Theirs had been asmall-scale cottage industry. The largest firms never built more than 20 housesat a time, and their construction methods were laborious. But with the war’send, home builders faced several million buyers who were eager to leave crowdedand often-substandard apartment living in cities for houses in the suburbs, andwho had the means to do so in the form of federally guaranteed mortgages.

Not onlydid the builders need to build houses quickly, but the houses had to beaffordable and appealing to a whole new market, largely composed of people whohad never been able to afford a house before.

Inresponse, several California builders offered a streamlined, slimmed-downversion of the earlier ranch-styled houses. These new houses were smaller, andthey were built differently, using a vastly simplified, assembly-line approachto home building that had been developed in the San Francisco and Los Angelesareas to house the huge number of workers who had moved there to work indefense industry plants.

Thepostwar ranches were built directly on a concrete slab, which eliminated thetime and expense of excavating a basement or crawl space. The wood framingarrived at the site in precut pieces that could be assembled quickly into wallsand then erected. Windows, doors and kitchen cabinetry that had been fabricatedat the building site before the war were now made in factories and shipped tothe site, ready to be installed. With these innovations, less skill was requiredto build the houses, and the builders could tap a much larger labor pool.

From ahome builder’s perspective, the simplified ranch was a perfect design choicefor the postwar market. With no stylistic or aesthetic dictates and an inherentair of informality, it could be endlessly adapted to any budget without lookinghopelessly compromised. The ranch’s multifunction spaces such as the eat-inkitchen and the living-dining room reduced the number of walls within thehouse. This, plus the big windows that overlooked the backyard, gave a spaciousfeel to these small, two-bedroom houses with less than 1,000 square feet. Tomake the ranches look larger, the builders turned the longer side to face thestreet. As with the earliest ranch houses, the living areas were usually on theback and the bedrooms were on the front.

From amarketing perspective, the ranch style was a stroke of genius because it tappedinto the popular culture’s fascination with the Old West as portrayed inmovies, books, radio shows and magazines, and as personified by movie starslike Roy Rogers and John Wayne.

Themass-produced ranches were frequently designed by architects, but the relationbetween the architect and the homeowner was radically altered. The architect’sclient was the home builder, and the houses were designed without regard to aparticular building site. The architect had far less artistic control over theend product because the builder determined the specifications and supervisedthe construction.

Thesuccesses of the California builders and William Levitt, who developed asimilar assembly-line approach on the East Coast, were soon copied by homebuilders across the country. For the next 30 years, from the late 1940s to theend of the 1970s, the ranch was the dominant house form in the United States.

One-storyhouses are still built in many markets, but as land costs have escalated,multistoried houses on smaller lots are becoming the norm. Today a one-storyhouse is rarely called a ranch, and the postwar ranch homeowners would notrecognize the present-day versions. They’re nearly three times as big, with twoto three times as many rooms and crammed onto smaller lots with the next-doorneighbors as little as 10 feet away.

But theessential features of the scrappy little postwar ranch live on in the eat-inkitchen/family room that is the heart of every house built today, in theorientation of these light-filled spaces towards a private backyard rather thanthe street, and in the informal lifestyle that has become the national norm.

Questionsor queries? Katherine Salant can be contacted at www.katherinesalant.com.

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Copyright 2006 Katherine Salant

DEAR BOB: What would be the process to trade two homes forone? The two homes are valued at $1.5 million total. The home for sale is valuedat $1.2 million. The seller will trade. What is the first step to take?–Phyllis S.

DEAR PHYLLIS: If I understand your question correctly, youwant to trade two rental houses worth a total of $1.5 million for one rentalhouse worth $1.2 million. That would be a partially taxable trade down becausethe two rental houses are worth $300,000 more than the one rental house beingacquired.

Purchase Bob Bruss reports online.

This could get a bit complicated because there is the 25percent depreciation recapture tax to consider in such a down trade.

If the owner of the $1.2 million rental house is willing totake your two rental houses and pay you the $300,000 cash difference, thatwould be the easiest way to go.

However, if he is not willing to pay you $300,000 cash, youshould then consider selling the two rental houses in a Starker delayedtax-deferred exchange using Internal Revenue Code 1031(a)(3).

That means you sell your two rental houses for cash, havethe sales proceeds held by a qualified third-party intermediary accommodatorbeyond your constructive receipt, and then within 45 days after the first salecloses designate the property to be acquired. You then have up to 180 days tocomplete the acquisition.

After the purchase is completed, then you will receive the$300,000 cash “boot,” which is taxable to you. For details, pleaseconsult a tax adviser experienced with IRC 1031 tax-deferred exchanges.

IS RENTAL CAPITAL GAIN TAX 15 PERCENT OR 40 PERCENT?

DEAR BOB: I have owned a rental property for a year. If Isell it in the next few months, what is the capital gains tax I will pay? Iread an answer you gave someone that the government wants a 25 percent tax backon the depreciation. Does that mean the government gets a total tax of 40percent? –Steve B.

DEAR STEVE: No. If you owned your rental property at least365 days, you qualify for the federal long-term capital gain tax rate, which isa maximum of 15 percent.

However, a portion of your capital gain that is due to thedepreciation you have deducted will be “recaptured” (that means taxed)at the special federal depreciation recapture tax rate of 25 percent (insteadof 15 percent tax on the balance of your capital gain).

In addition, don’t forget the state tax, unless the propertyis located in one of the lucky states without income tax. For full details,please consult your tax adviser.

DOES STEPPED-UP BASIS APPLY TO LIVING-TRUST ASSETS?

DEAR BOB: I understand the rule for stepped-up basis tomarket value on the date of death for inherited property. Does that same ruleapply to my house that is held in my living trust? –Andrew G.

DEAR ANDREW: Yes. Holding title to your house and othermajor assets in your revocable living trust does not deprive your heirs of thebenefits of stepped-up basis on inherited property. They will thank you for leavingyour assets to them via your living trust, thereby avoiding probate court costsand delays.

But they will still get the same stepped-up basis to marketvalue on the date of your death as if your property went through probate. Moredetails are in my special report, “24 Key Questions Answered: Living TrustSecrets Reveal How to Avoid Probate Costs and Delays,” available for $5from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this columnare welcome at either address.

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

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Copyright 2006 Inman News

We’re aday early because of a little local weather problem, but there’s nothing in asecond 3-foot snowstorm in one week to compare with the trouble brewing in thebond market.

The10-year T-note blew above 4.7 percent this morning on generally healthyeconomic data — that’s up from the 4.43 percent low three weeks ago, and willshortly put mortgages at 6.25 percent and at risk for a sustained move upward.

The datasince mid-month have not been all that strong, but enough to change thebond-market psychology from a debate about hard versus soft landing to softlanding versus no landing at all. Even if the economy does stay a tad soft,Gross Domestic Product growth in the 2 percent-something range, on current datathere is no reason to expect the Fed to cut its rate from 5.25 percent, andthat means that 10-year bond yields near 4.5 percent have been a tad silly.

As regularreaders know, the New Year ceremony at this rag is to recite Peter Drucker’sdictum: “Nobody can predict the future. The idea is to keep a firm graspof the present.”

Threeitems dominate the present — housing, risk and Iraq — and the word”spillover” is the key to each.

Housinghas been the center of expectations for a deep economic slowdown and theequally deep 2006 anticipatory decline in long-term rates. The financialmarkets have made two large errors in these expectations: they have assumedthat housing behaves like financial markets, and that housing weakness would dogreat harm to the rest of the economy.

Pricecorrections in financial markets happen fast, but housing moves at the pace ofmunicipal snow removal. Expectations today that housing has bottomed are justas poorly founded as the one six months ago that we would be buried inforeclosures by now. The thing to watch for: the development of a loan-defaultcredit-crunch spiral — that’s the only means for housing to get ugly enoughfor recession.

The seconderror has been the spillover one: surely, the markets believed, the end of thebig price gains would shock homeowners out of consumption and into saving.Surely all those ex-Realtors, ex-mortgage lenders, ex-construction workers,ex-Home Depot employees, furniture, rug, and appliance makers … surely thosejob losses would tip over the economy. Uh-uh. Nope. Not enough people involved,and the ones who have lost jobs have readily re-deployed.

The onehousing spillover at work: equity withdrawal is diminishing — a certainty in aflat-price environment — and that will tend to dampen the economy.

Risk is aneasy thing to measure in money land: you get paid for risk by higher return.Except … not now. Returns for risk over time or for credit or for liquidityare as low as they ever get, and all prior similar episodes have endedunhappily. Although that painful back-look has 100 percent accuracy, there isno way to know when risk premia might return to reasonable levels, or whatmight trigger risk re-pricing.

Iraq’sspillover into financial markets has thus far been small. However, the cost ofthe venture is going to begin to matter: in current operations, in deferredspending on equipment and maintenance, in manpower expansion, and in the needto cease starving other ventures (Afghanistan). Two choices: borrow, or raisetaxes.

Thefeedback potential from Iraq into risk is now substantial. Never before in ourhistory have policy convictions been so deeply held and so scattered withstakes so high, nor — rather worse — with so little probability of accurateanticipation of future consequences of any line of action.

The richespouring into markets and paychecks today are the return from the millennialexpansion in global trade, and that trade depends on stability.

LouBarnes is a mortgage broker and nationally syndicated columnist based inBoulder, Colo. He can be reached at lbarnes@boulderwest.com.

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Copyright 2006 Lou Barnes

DEAR BOB: Can a home builder force us to buy the home? Wehave reached our boiling points with our builder. The mortgage monthly paymentsare too high and we decided not to purchase the home –Chandra K.

DEAR CHANDRA: Of course, you can’t be “forced” tobuy a house you don’t want.

Purchase Bob Bruss reports online.

However, if you signed a valid purchase contract that wasaccepted by the home builder, you can be held liable to the builder formonetary damages due to your unjustified breach-of-contract damages.

Surely, before you signed a purchase contract with thebuilder you knew what your monthly mortgage payments would be.

If you got “cold feet” while waiting for your newhome to be completed and changed your mind about completing the purchase, youcan be held liable to the builder for damages due to your cancellation of thepurchase contract. Before defaulting, I suggest you consult a local real estateattorney to discuss your choices.

HOW TO KNOW IF YOUR DEED WAS RECORDED

DEAR BOB: How do I know if my deed was recorded? Doesn’tthat get taken care of after signing the closing papers? I bought mycondominium on Sept. 28, 2005. But I haven’t received any proof that I own it.Shouldn’t I have received the deed or something in the mail showing my deed wasrecorded? –Gay N.

DEAR GAY: The exact procedures vary by locality. In moststates, the local recorder of deeds now makes a digital record of the deed asit is recorded. Then the original is usually mailed to the owner or to themortgage lender whose name and address appears on the deed.

My experience has been this can take several weeks or evenmonths, depending on how busy the recorder of deeds is. But you should havereceived proof of the recording long ago.

If you ordered an owner’s title insurance policy at the timeof purchase, as you should have, then you’d have received that title policy,which shows you now own the condominium. In addition, you should have a copy ofthe closing settlement papers.

I suggest you contact the firm that handled your titletransfer. Maybe it is holding the deed from the recorder’s office.

However, in “title theory” states, the mortgagelender often holds the deed until the mortgage or deed of trust obligation ispaid in full. But it won’t hurt to follow up now to learn where your deed islocated and to be sure was properly recorded.

DO CO-JOINED DRIVEWAYS LOWER A HOME’S VALUE?

DEAR BOB: I have lived in my house 27 years and never thoughta co-joined driveway was detrimental, but this all came to an end when a newowner moved in next door. He immediately converted his garage to a live-in unitand rented it out. Then he installed a swimming pool. Now he invites 25 guestsat a time when the weather is good. They fill his driveway to capacity andspill out into the street. He rents out other bedrooms. Now the house has nogarage. There are always four or more cars parked in our co-joined driveway. Isthis detrimental to my home’s value? –Colin W.

DEAR COLIN: I am not sure what you mean by “co-joineddriveways.” If you own half of the shared driveway, and the neighbor ownsthe other half, with the lot boundary line down the middle, what would stop youfrom erecting a chain link fence down the middle of the wide driveway?

Of course, before doing that be sure to check your title tobe certain you and the neighbor don’t have mutual easements to use each other’shalf of the driveway.

Have you had a polite conversation with the new neighbor todiscuss your concerns? Maybe he is not aware of the problems he is creating foryou. In the conversation, don’t threaten but just point out the problems allthe cars parked in the driveway are causing.

Before you take any action, such as contacting the city aboutthe conversion of the garage to a residential unit without a building permit,or erecting a fence down the middle of the shared driveway along the lotboundary, please consult a local real estate attorney to determine your legalrights.

The new Robert Bruss special report, “When It’s Smartto Prepay or Refinance Your Mortgage,” is now available for $5 from RobertBruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736or 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

Ulysses Lee was a full-time IRS tax examiner. His brother,Kai, worked as a full-time professor of radiology. Together, they are partnersin Lee Brothers Investments, which owns a rental house, a five-unit apartmentbuilding and another small apartment building. Each investor also owns severalrental properties individually.

On their income tax returns, the brothers claimed passiveactivity tax loss deductions, mostly from depreciation of their properties,against their substantial ordinary income from their full-time jobs.

Purchase Bob Bruss reports online.

Upon audit by the IRS, using Internal Revenue Code469(c)(7)(B), they claimed each brother performed more than 750 hours of realestate professional services annually (about 14 hours per week) and more thanone-half of their personal services are performed operating their properties.

On their income tax returns, the brothers depreciated theirproperties on a 10-year depreciation basis, rather than the 27.5 years requiredby IRS straight-line depreciation rules. When the IRS denied the accelerateddepreciation deductions, and denied the unlimited real estate tax lossesagainst the ordinary job incomes, the brothers took their dispute to the U.S.Tax Court.

If you were the U.S. Tax Court judge would you allow thebrothers to use accelerated depreciation and to qualify as real estateprofessionals?

The judge said no!

There is no question Ulysses Lee and Kai Lee spentconsiderable time involved with their real estate investment properties, thejudge began. They qualify as “material participants” in their realestate ventures, he opined.

However, their “ballpark guesstimate” of the timespent on different real estate activities were not contemporaneous logs, thejudge continued. “We do not find the logs, or the testimony accompanyingthem, credible,” he added.

The judge found 280 hours to close the books on theirinvestments to complete their tax returns, 24 hours to replace miniblinds, 186hours to show vacant apartments, and 200 hours answering phone calls fromprospective tenants over a two-year period to be excessive.

“The exaggeration of their logs of real estate work wasmatched by understatements of time spent at their full-time jobs,” thejudge noted. In addition to the extra tax due, the judge assessed penalties fornegligence because neither taxpayer could be considered a real estateprofessional working at least 750 hours annually.

Based on the 2006 U.S. Tax Court decision in Kai andUlysses Lee v. Commissioner, 92 Tax Court Memo 2006-193.

(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

Q: Eighteen months ago I had a contractor build a wraparound deck of about 1,000 square feet with three separate levels and three sets of steps. I decided to have the deck built with the Brazilian hardwood ipe after viewing some of the decks he had built using this wood. They were beautiful. My new deck looked so good that I asked him to build a new fence adjoining the deck using the ipe wood. When the construction of the deck and fence was complete he sanded them and then stained them with a stain made specifically for that kind of wood. The results were spectacular.

But, after the first rain, about two months later, the stain was completely gone from the deck except for a small area under the roof overhang. The contractor brought his crew back and they re-sanded the deck (not the fence) and stained it again using the same stain.

Within another three months, the stain was gone from all the flat surfaces of the deck again. This time there was no rain, but the sun hit the deck a good portion of the day. This poor contractor was beside himself. He again brought his crew back and this time they re-sanded the deck and stained it with Penefin, which is supposed to be made specifically for this kind of wood. Within three months, with no rain, the wood was back to its natural state. The vertical fencing, which is mostly in the shade, has not had this problem and is very rich looking.

Last week I had a contractor who specializes in cleaning and treating decks come to my house to see if he could do better. He told me it is not the contractor’s fault because the wood is so dense that nothing will penetrate it. Both Cabot and Penefin (both wood stain companies) say they have no service representatives who will come to my home to see what is going on. Can you offer any suggestions or solutions to this problem?

A: Ipe is also known as Ironwood. It’s gorgeous, rot-resistant, pest-resistant, extremely strong and extremely dense. The characteristics that make it long lasting, its strength and density, also make it a tough candidate for holding a finish that will maintain an unweathered look.

Most deck stains are really penetrating sealers. They are designed to penetrate the fibers of the wood and protect against ultraviolet light, which causes weathering and color change. Ipe is so dense that most stains cannot penetrate it. They simply dry on the surface of the wood and are at the mercy of the sun and the rain.

You are right when you say your contractor is not at fault. We’ve reviewed some of the technical literature available on the Internet and found recommendations that ipe be treated with penetrating stains and oils. Clearly, this did not work for you.

These sites tout the rot- and pest-resistant qualities of ipe, claim it is relatively maintenance-free and suggest that it be allowed to weather naturally to a silver gray. Almost as an afterthought they suggest “sealing” it with tung oil or a penetrating stain.

Recently we attended the annual Pacific Coast Builder’s Conference. Kevin brought your question up in an extensive interview he did with Jennifer Haney of Duckback Products. The people at Duckback, based in Chico, Calif., have been making deck treatments for more than 20 years. Bill has used their Superdeck product on a redwood deck he built and finished and was very pleased with its performance.

According to Duckback, they have recently developed a new product specifically for exotic hardwoods. Superdeck Exotic Hardwood Finish and Sealer is a water-based urethane coating (not a penetrating stain) containing finely ground transparent iron oxide pigments that they claim prevents wood from graying and fading.

Some color is necessary to provide protection from ultraviolet light, the culprit in aging wood. According to Haney, this product has performed admirably for more than 3,000 hours in a laboratory weather simulation.

We think this approach makes sense. As you’ve seen, the density of ipe makes it inhospitable for a penetrating stain. A surface sealer may well be the right approach. We think it’s worth investigating.

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

Copyright 2006 Bill and Kevin Burnett

NEWORLEANS — Large conventions and small meetings have steered clear of theCrescent City since the devastating effects of Hurricane Katrina. So just howpleased was the region to host the recent National Association of Realtorsannual convention?

Talk abouta holiday present … it was also the biggest real estate story of the yearbecause of its impact on the ravaged region.

“Ifelt like painting a huge blue ‘R’ on top of the Superdome and renaming it theNAR Dome,” said longtime native Arthur Sterbcow, executive director ofLatter & Blum Realtors, a New Orleans-based residential chain. “In thepast year, the president of NAR has visited more often than the president of theUnited States.”

Approximately25,000 members of the nation’s largest trade organization attended businessmeetings, political forums, and educational and training sessions over fourdays at the Morial Convention Center and injected more than $34 million intothe New Orleans economy.

The confabwas the first major event in the city — other than New Orleans Saints footballgames — in more than 14 months. From cab drivers to hotel desk clerks,bartenders to tour operators, the city appeared grateful and relieved that aconvention crowd had finally returned.

Thebustling, energetic scene at the convention center was in direct contrast tothe sadness, destruction and frustration vividly portrayed in news reportsduring the first days following the Aug. 29, 2005, catastrophe.

While thisis a city of hope, despair definitely lingers. Several neighborhoods in St.Bernard Parish and the Lower Ninth Ward have few residents and even lessbusiness activity. For example, only 100 of the 1,600 hundred homes in the HolyCross neighborhood are occupied, while another 200 have trailers in the yards– temporary residences as work continues on the main home, according toStephanie Bruno, a representative from the Preservation Resource Center.

“Wethought it was very important to keep our pledge to New Orleans,” said PatVredevoogd Combs of Grand Rapids, Mich., NAR’s new president. “We heardrumors that people would get sick, that there would be safety issues, that therooms wouldn’t be ready. We had several research teams visit New Orleans sinceJanuary and not one person reported that they felt we should move theconference.”

Many ofthe attendees brought their work boots and signed up to help in the city’srecovery effort, which included a Realtor-built Habitat for Humanity home,framing other homes, cleaning and beautifying City Park, sorting books at thepublic library and spiffing up De La Salle High School.

Sterbcow’srealty firm lost 24 of its 28 offices as a result of “the storm.” Hereported that all 28 are now open and doing business, an example of theresilience of many local operators.

“Whatother areas of the country often don’t understand is that on Aug. 29, 2005, 1.3million people in the New Orleans area got an eviction notice,” Sterbcowsaid. “I would estimate that about 1.1 million have come back. But we needmore businesses here because we can’t get people into homes without jobs.”

Even withthe massive rebuilding effort, many local residents and rehabilitationsupervisors still are handcuffed by snafus in the recovery system. There arestories almost daily about an unfulfilled insurance claim, incorrect buildingmaterials order, and the lack of timely, skilled laborers. One report detailedhow a temporary living trailer finally arrived on an owner’s front yard but theowner had no keys to the unit.

Thebiggest challenge for homeowners — especially those displaced by the storm –is the skyrocketing cost of homeowners insurance. For example, James O’Bourne,a section editor for the New Orleans Times Picayune and a member of thenewspaper’s team that was awarded the Pulitzer Prize for its coverage ofHurricane Katrina, saw his homeowner’s annual premium jump from pre-Katrina$800 to more than $5,000 on his new home.

O’Bourne,one of 13 newspaper newsroom staffers to lose their homes as a result of thefloods, was given a three-month respite on his mortgage payments from hislender. However, he still needed a place for his family of four to live. Hedecided he could not afford the cost of holding down two homes, plus creditcards and other family expenditures, so he sold his once-flooded home to aneighbor who was rehabilitating other homes in the O’Bourne’s Lakeviewneighborhood.

“Icame out OK on the real estate, but we had a lot of contents that were notcovered,” O’Bourne said. “Of course, you can’t replace the personalthings.”

So manythings still need to be replaced here — from homes to infrastructure toconvention business. The Realtors chose to keep their convention pledge and thiscity will never forget it.

TomKelly’s new book “Cashing In on a Second Home in Mexico: How to Buy, Rentand Profit from Property South of the Border” was written with MitchCreekmore, senior vice president of Houston-based Stewart International. Thebook is available in retail stores, on Amazon.com and on tomkelly.com. Tom canbe reached at news@tomkelly.com.

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

Copyright 2006 Tom Kelly

DEAR BOB: My mother died in 1988, and dad passed away in 2006.The house was, and still is, in my late mother’s name alone. All dad did aftermom’s passing was continue to pay the property taxes on the house. A couple ofother children belong to dad from a prior marriage. What needs to be legallydone to clear the title to the house? –Mr. A.M.

DEAR MR. A.M.: What a mess! If your mother’s estate wasnever probated or distributed to her heirs, her will needs to be probated inthe local probate court where she was a resident at the time of her death. Thatproceeding will determine if your late father received title to the house, orif her will left it to somebody else.

Purchase Bob Bruss reports online.

If mom didn’t leave a written will distributing her assets,then her estate will pass according to the state law of intestate successionwhere she was a resident.

Presuming your late father received the house from your latemother, then another probate needs to be opened to distribute his assetsaccording to his will or by the state law of intestate succession. For details,please consult a probate attorney in the county where your mom was a resident.

HOW SELLING PROPERTY “SUBJECT TO” THE MORTGAGEWORKS

DEAR BOB: I own a piece of commercial property, which has asmall mortgage. Can I sell this property without the buyer coming up with a bigdown payment to pay off the existing mortgage? –Jerre V.

DEAR JERRE: Yes. You can sell any property “subjectto” its existing mortgage. Of course, the buyer must make the monthlypayments or lose the property by foreclosure.

But the lender might enforce the due-on-sale clause, ifthere is one. However, only very dumb lenders enforce due-on-sale clauses ifthe monthly payments are made on time. If that should happen, your buyer canrefinance the mortgage with another lender to pay off the existing mortgage.

You should be aware that because the mortgage was acquiredin your name, you will remain liable on its obligation. If your buyer fails tokeep up the monthly payments, that will reflect adversely on your creditreport, but not on the buyer’s credit report.

HOW TO RETURN PEACE AND TRANQUILITY TO THE NEIGHBORHOOD

DEAR BOB: My neighbors have anywhere from seven to 13 carsparked in front of their house. They run a gardening business with daylaborers, a daycare business, and a rooming house from the home. Theneighborhood has single-family houses of four to six bedrooms in the$750,000-value range. The constant traffic and noise, as well as strangers onour block, drives us crazy. Can anything be done to return peace andtranquility to the neighborhood? –Edwin T.

DEAR EDWIN: Presumably you already had a polite conversationwith the neighbor but it didn’t produce satisfactory results. Next, I suggestyou contact the city code enforcement officer to have the situationinvestigated to determine what zoning and other laws are being violated.

If that doesn’t produce satisfactory results, then you andyour neighbors should consider bringing a lawsuit against the neighbor to abatethis private nuisance that is disturbing the neighborhood.

NO EASY WAY TO AVOID TAX ON SALE OF A TWO-UNIT PROPERTY

DEAR BOB: My wife and I own a property that contains tworental houses on one lot. To sell the property and avoid capital gains tax, canwe occupy one of the houses and still rent out the other one? Or must we occupyand/or not rent both for two years? –Jon H.

DEAR JON: You and your wife could occupy one of the rentalunits as your principal residence at least 24 of the last 60 months beforeselling the property. Then you will avoid capital gains tax apportioned to thatunit, up to $500,000 for a married couple filing a joint tax return. If youwere single, Internal Revenue Code 121 provides a principal-residence-sale taxexemption up to $250,000.

However, your capital gains tax apportioned to the otherrental house will remain taxable. Keeping the other unit vacant won’t reduceyour capital gains tax on its sale. For more details, please consult your taxadviser.

ALWAYS GET OWNER’S TITLE INSURANCE WHEN BUYING OUT CO-OWNER

DEAR BOB: I will soon be buying out my investor co-owner inan apartment building for about $260,000. We are not relatives. We obtainedtitle insurance when we bought the property about six years ago. Do I needtitle insurance again? –Herb W.

DEAR HERB: Yes. Always get an owner’s title insurance policywhen acquiring any property or, especially, when buying out a co-owner. That’sthe only way you can be certain you are obtaining marketable title.

Although remote, there is a possibility your co-owner hasunpaid judgment liens, income tax liens, child support liens, or other lienswhich may have attached to the property. Go back to the title company whichoriginally insured your title and ask if they have a discounted or “bringdown” rate for your situation.

SHOULD HOME SELLER REFUND DEPOSIT IF BUYER DIDN’T TRY HARDTO GET A MORTGAGE?

DEAR BOB: The buyer of our home made a quick Internetmortgage application and was declined. I offered to carry back the mortgage forthe buyer on exactly the terms stated in the sales contract financingcontingency clause. But the buyer refuses and wants to cancel the sale. Am Iobligated to refund the buyer’s good faith deposit? –Mary Ann P.

DEAR MARY ANN: The buyer is obligated to use good faith toremove the contingency clauses in the purchase contract. Applying with just onemortgage lender is clearly insufficient and does not show good faith.

Your offer to carry back the mortgage for the buyer showsfinancing is available.

However, if the buyer wants to get out of the sale, youmight not want to do business with that person. Buyers like that aredisgusting.

If I were in your situation, I would have my attorney writea letter to the buyer giving him the opportunity to clear his breach ofcontract by either accepting your finance offer or obtaining a mortgageelsewhere.

If he refuses to complete the purchase as agreed in thesales contract, I would keep his deposit (presuming it is several thousanddollars). Let him sue you for it if he thinks the judge might rule in hisfavor. The buyer will look silly suing for a deposit refund when the buyer is inbreach of the contract. For details, please consult a local real estateattorney.

ARE NO-PET CONDOMINIUM RULES ENFORCEABLE?

DEAR BOB: I enjoy your educational and entertainingarticles. Last weekend I was looking at condominiums for possible purchase. Severalof the sales agents informed me when the condo complex has no-pet rules. Aresuch rules legal? It seems to me a condo owner should be allowed to keep anindoor cat if it doesn’t go outdoors and never bothers anyone –Victoria G.

DEAR VICTORIA: Many upscale condominium complex CC&Rs(covenants, conditions, and restrictions) prohibit pets. Such restrictions haverepeatedly been upheld by the courts so don’t even think about having a pet ina no-pet complex. But perhaps you might get away with having a goldfish.

U.S. MORTGAGE LENDERS WON’T LOAN IN FOREIGN COUNTRIES

DEAR BOB: My wife is from Trinidad and Tobago, West Indies.We intend to buy a home in Tobago. I am hoping we can get a mortgage in theUnited States. Is that possible for foreign real estate? –Mark L.

DEAR MARK: Sorry, you cannot get a home mortgage in theUnited States for use in a foreign country. Perhaps your banker can refer youto an affiliate or correspondent bank in Tobago for assistance with financingthere.

NO WAY TO BE CERTAIN HOUSE IS LEFT TO SPOUSE IN A WILL

DEAR BOB: My husband and I have been married 27 years. He israther “old school” and set in his ways. When we purchased our houseabout six months after getting married, he insisted title be taken in his namealone. I went along with that. We have had a good marriage, raising threewonderful sons, but my husband’s health is declining. I am concerned what willhappen if he dies first. He refuses to show me his will. When I bring up thesubject of what happens to the house when he dies, he says, “Don’t worry.It will go to you.” How can I be sure I am named in his will to receivethe house? –Ida C.

DEAR IDA: There is no way to be certain you are named inyour husband’s will to receive the house. He might leave you, for example, onlya life estate with the remainder to go to the three sons after you die.

Of course, because of the long period of your marriage,under the laws of most states you have probably established marital rights inthe house. Other than that, you can’t be 100 percent certain of receiving titleto the house when your husband passes on.

The new Robert Bruss special report, “When It’s Smartto Prepay or Refinance Your Mortgage,” is now available for $5 from RobertBruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736or 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