Real Estate in Steamboat

Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

If you (or someone you know) admit to being at least 62 and own your principal residence house or condominium, and if you can use more tax-free cash: read on. However, if you are just plain snoopy, unless you fit the aforementioned profile, this article isn’t for you.

Now that I have aroused your curiosity, you probably wonder what I am going to reveal.

Purchase Bob Bruss reports online.

As thousands of baby boomers decide to retire every day, many suddenly realize they don’t have enough income to provide for a comfortable lifestyle. Meager Social Security income certainly isn’t the answer.

But there is an easy solution. It’s a reverse mortgage, which can provide lump sums of cash for any purpose (such as a new roof, new car, trip around the world, bill payoffs, or something frivolous), a credit line for emergencies or investments (except in Texas), or lifetime monthly income even if you live to 110.

Or, you can select any combination of the above. The best part is tax-free reverse-mortgage money never needs to be paid back as long as you live in your principal residence. Also, there is no personal liability.

Even if your home plummets in market value, the reverse-mortgage lender must honor its agreement and can never force you out of your home (as long as you live in the home and pay the property taxes and the homeowner’s insurance).

WHAT IS A SENIOR-CITIZEN REVERSE MORTGAGE? Instead of paying money to a home mortgage lender who loaned you money secured by your residence, a reverse mortgage is the exact opposite.

A reverse mortgage lender pays money to you, the homeowner. But no repayment is required until you move out for longer than 12 months, sell your house or condo, or die.

Then the reverse mortgage “matures” and the lender becomes entitled to receive the principal repayment plus accrued interest. The remaining home equity goes to you or your heirs.

Contrary to widespread misbelief, the reverse-mortgage lender does not own the residence. If your heirs want to keep the house, they can refinance the mortgage to pay off the reverse mortgage balance.

To be eligible for a tax-free reverse mortgage, you and any co-owner must be at least 62. If any co-owner is younger than 62, the residence is not eligible unless that under-62 co-owner signs a quitclaim deed conveying the title to the over-62 co-owner.

The amount of reverse-mortgage eligibility is determined by the age of the youngest co-owner and the appraised market value of the residence. The older you are, the greater your reverse-mortgage entitlement.

For this reason, homeowners in their 70s, 80s and 90s can receive the largest reverse-mortgage payments. The reason is their life expectancy is shorter than for youngster homeowners in their 60s.

NOT ALL HOMES ARE ELIGIBLE. Because a reverse mortgage is recorded like a first mortgage, there can be no other financing secured by the residence. However, if you have a small mortgage balance, such as less than 25 percent of your home’s market value, you still can probably qualify by using a reverse-mortgage lump sum to pay off the old mortgage.

Because most senior citizens own their residences free and clear, or with a small mortgage balance, this is usually not a problem. However, a large mortgage balance over 40 percent of the home’s appraised value usually makes a reverse mortgage unavailable.

Eligible homes include an owner-occupied house, condominium, or a manufactured house located on an owned lot. Ineligible properties include vacation, second and rental homes, most co-op apartments, houseboats, mobile homes, commercial properties, and farms (unless the residence is on a separate lot).

THREE MAJOR REVERSE-MORTGAGE LENDERS. Although there are a few local reverse-mortgage lenders, the three nationwide lenders are FHA (which has over 90 percent of the market), Fannie Mae and Financial Freedom Plan.

FHA reverse-mortgage interest rates are tied to the Treasury Bill Index, plus a margin. But the big disadvantage, especially for owners of expensive homes, is the low FHA limits that vary by county.

The Fannie Mae “Home Keeper” reverse mortgages have a higher limit, currently $417,000 (higher in Hawaii and Alaska). These loans are tied to the one-month secondary market CD adjustable-rate index. Fannie Mae is the only lender offering a reverse mortgage for home purchase so you can buy a retirement home with no monthly payments.

Financial Freedom Plan reverse mortgages have no maximum limit. They are most attractive for owners of homes worth over $500,000. But this program is not available in all states.

HOW TO COMPARE REVERSE MORTGAGES. The best way to compare reverse mortgages from the three major companies is to use the Internet reverse-mortgage calculator at www.financialfreedom.com.

Federal law requires reverse mortgage borrowers be provided with a Total Annual Loan Cost (TALC) calculation. This TALC shows the annual effective interest rate for 1) the first two years as a percentage of the amount borrowed (usually very high), 2) at the borrower’s life expectancy age (much lower), and 3) at 40 percent beyond the borrower’s life expectancy (very reasonable).

The TALC considers the up-front loan origination fees. Because these lender fees are usually substantial, senior citizen homeowners should not obtain a reverse mortgage unless they plan to stay in their home at least five years. A homeowner in poor health, or who plans to move in a few years, usually should not obtain a reverse mortgage.

WHERE TO FIND REPUTABLE REVERSE-MORTGAGE LENDERS. Although there are only three major nationwide reverse mortgage lenders, these loans are originated by local representatives. The largest reverse mortgage originators are Financial Freedom Plan, Wells Fargo Mortgage, Seattle Mortgage and GMAC. Most local banks and other home loan lenders do not offer reverse mortgages.

The easiest place to find a reputable local reverse-mortgage originator is on the Internet at www.reversemortgage.org. Then click on your state for a list of local lenders and the types of reverse mortgages they offer. If you don’t have a computer, your local public library reference department will be glad to assist you.

REVERSE-MORTGAGE DISADVANTAGES. Although reverse-mortgage tax-free money sounds wonderful for senior-citizen homeowners, there are possible disadvantages.

The reality is the homeowners will be borrowing on their home equity. The result can be greedy prospective heirs often discourage obtaining a reverse mortgage because the homeowners will be “spending” the heir’s inheritance.

But many potential heirs encourage their senior-citizen parents to obtain a reverse mortgage to enjoy their “golden years” with financial comfort.

However, senior-citizen homeowners who are receiving SSI (Supplemental Security Income) or Medicaid (Medi-Cal in California) should know these benefits can be reduced if the recipients do not spend their entire reverse-mortgage income each month. But Social Security and Medicare benefits are not affected by non-taxable reverse-mortgage income.

Further information is available in my special report, “The Whole Truth About Reverse Mortgages for Senior Citizen Homeowners,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com.

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

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

Copyright 2007 Inman News

It’s difficult to make predictions, especially about the future. But one thing we know for sure — we are all getting older, and in increasing numbers. In three years, about one-third of the U.S. population will be 50 and older, an unprecedented demographic milestone. It is the first time in history that a nation has achieved such an extended life span for so many of its citizens.

Membership in this extraordinary cohort, however, is one that many in the over-50 crowd are not ready to acknowledge, especially the ever-youthful baby boomers. Even though the calendar says they are getting older, they are not growing old. Planning for their old age while they’re planning a new house is, well, unthinkable.

But age-denying boomers and homeowners of any age might consider making a new house “visitable,” on the off chance that someone using a walker or a wheelchair will be visiting. This person could be a parent, a grandparent, or a much younger person — for example, an Iraqi war veteran.

Though not widely known, the visitability concept was first proposed about 20 years ago by Eleanor Smith of Decatur, Ga., who remains one of its strongest proponents. The inspiration came from her personal circumstances, she said.

A wheelchair user since childhood when she contracted polio, Smith had no trouble moving about in the public realm — driving a car and navigating about in the local mall, the cineplex and her bank, for example. But in her own neighborhood she was always confined to her house. Not only was this hard for her, it was stressful for her entire family.

This changed dramatically in 2000 when Smith moved into a new subdivision where every house is visitable. For the first time in her life, she said, she can visit her neighbors on the spur of the moment and attend social occasions in someone else’s home.

There is no national visitability advocacy group, but at Smith’s urging, determined disabled residents in a number of municipalities around the country have succeeded in getting visitability standards mandated for all new houses.

What makes a house visitable? At a minimum, your guest needs a way to get into your house and a powder room that is accessible.

To be more specific, your guest will need a “no-step threshold,” an entrance doorway that is 34 inches clear, a doorway to the bathroom of similar width, and a 5-foot diameter turnaround space inside the bathroom next to the door. The latter will enable your guest to turn around and close the door and to transfer from the chair to the toilet, which should be 18 inches high. Your guest will also be appreciative if the flooring in your main living areas has a minimal threshold at those spots where the material changes from carpet to wood or something else.

The only thing on the visitability checklist that’s tricky is the “no-step threshold,” and then only if you’re building a house with a basement (more on this below). If you’re building on a slab, this would be an unusual but not impossible request of your builder.

How big a leap is it to go from making your house visitable to making it livable for yourself, should you one day be using a walker or a wheelchair?

To get a sense of what it feels like to navigate a house in a wheelchair, “imagine a car that is 30 inches wide and 48 inches long. Now drive it around the house,” said Mary Jo Peterson of Brookfield, Conn., a kitchen designer and age-in-place expert who has worked on livability issues for more than 10 years. If you can do the mental exercise that she suggests, you soon realize that the most livable houses have an open floor plan with few walls.

Though the livable-house idea may seem daunting, Centex Homes found it to be easier than they anticipated when it adapted one of its standard houses to be a universally designed, aging-in-place demonstration home in Manassas, Va., said Jeff Albertz, Centex’s vice president of marketing.

(The term “universal design” is commonly used to describe a house or other facility that can accommodate people of different sizes — a 3-year-old child and a 6-foot parent — and differing ability — again a small child and a grandparent who uses a walker.)

With 3,900 square feet of living space, Albertz said, it was not difficult to rejigger the floor plan to get wider 48-inch hallways, 40-inch stairs, 42-inch aisles in the kitchen, and a 5-foot-diameter turning circle in the master bathroom. Incorporating universal design features into a smaller house will be harder, but Albertz said that their experience with this one has shown that it will not be impossible.

The biggest challenge for the Manassas house was the no-step threshold, Albertz said. To avoid a 25-foot-long ramp to the front door, Centex lowered the first-floor level about 18 inches, making it only 12 inches above the grade level outside. This halved the length of the ramp, giving it such a subtle rise that the casual observer notices only that there is a walkway from the driveway to the front entry.

This solution, however, required additional excavation for the basement. In order to get enough headroom in the basement rooms, the basement floor was lowered by about 12 inches, explained Tom King, an architect with Devereaux Associates in McLean, Va., the firm that designed the project.

The kitchen was outfitted for a homeowner in a wheelchair. There are recesses under the cooktop and sink; the dishwasher is raised so that it can be loaded while in a seated position; and all the important storage can be easily accessed by a person in a wheelchair, Albertz said, adding that all the universal design features have been so seamlessly incorporated that Centex has two tour guides on hand whenever the house is open to point out features that visitors would otherwise miss.

How much did the universal design features add to Centex’s cost? Many of the modifications including the wider door openings and blocking behind bathroom walls to support grab bars for the toilet, tub and shower were costless, Albertz said.

The two biggest items were the no-step entry and the kitchen. But, Albertz pointed out, the kitchen modifications could be easily switched in later, as long as you build in the 42-inch aisles, wide enough for a person in a wheelchair to be comfortable and for other household members to get around him or her.

All told, the modifications added about 10 percent to 12 percent to the base price of the houses in this subdivision, which range from $550,000 to $750,000, Albertz said.

Are any of the age-in-place features that Centex incorporated widely available? Not as yet, largely because the buying public has proved to be squeamish. Pulte Homes, which builds active-adult communities all over the country, has found that the subject must be gingerly approached and “subtle in delivery,” said Mark Marymee, director of corporate communications. Buyers are more receptive to details that are simply “cool” than to ones that are “helpful to older buyers,” he said. For example, in their Phoenix and Las Vegas active-adult communities, Pulte offers a roll-in shower that is enclosed by a rounded, frosted glass wall instead of a door or a curtain.

For more information on “visitability,” visit www.concretechange.org.

For more information on Centex’s Demonstration House and Universal Design, visit http://www.pwcgov.org/ud/.

Questions? Queries? Katherine Salant can be contacted at www.katherinesalant.com.

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

Copyright 2007 Katherine Salant

Looking for a nice way to upgrade your kitchen and add both counter space and convenience? You might not need to look any further than replacing your existing range hood with a microwave/hood combination. Now known generically as a microhood, this useful appliance comes in a variety of colors, sizes and features to fit the requirements of just about any kitchen. Plus, it elevates the microwave to a more convenient height and gets that pesky little appliance off your countertop, freeing up valuable space.

Microhoods are available in standard sizes and venting options that, in most cases, make them relatively easy to install in place of a conventional hood. When shopping for a microhood, look for a model that is the same width as your existing hood — typically 30 inches to 36 inches wide — and then look for the features you need. As with most appliances, features add cost, so concentrate on the ones you think you’ll really use.

INSTALLATION

Installation is a relatively straightforward endeavor, and most units are well designed for the do-it-yourselfer. The unit should come with all of the brackets and bolts you’ll need, along with a mounting template that greatly simplifies the placement of the necessary fasteners.

The first step is to remove the old unit. First, shut the electricity to the hood, and verify that it’s off. Locate the junction box on the underside of the hood, remove the cover and disconnect the wires. Remove the screws that hold the hood to the underside of the cabinet, and lower the hood. As the hood comes down, pay close attention to how the electrical cable enters the hood and how the hood is vented. You may need a second set of hands to support the hood while you carefully disconnect both the cable and the vent pipe.

Unpack the new unit, and carefully study the instructions. The first step is typically to figure out how you are going to connect the vent, which is usually dictated by how the old hood vented. Most microhoods give you the option of venting through the top or through the back, and there is usually a metal plate over the fan that can be moved to accommodate which venting option you want to use.

Microhoods have a rectangular vent outlet, usually with a damper, so if you have an existing round duct you will either need to install a rectangular-to-round adaptor or replace your old round duct with rectangular. The template that’s supplied with the appliance will give you exact locations where to place the vent, and the dealer where you purchased the microhood can supply you with any pipe or transition adaptors that you might need.

Another option with some microhoods is to make the unit recirculating, meaning that it does not vent to the outside of the house. While definitely easier, since it doesn’t require ducting, recirculating hoods pump a lot of moist air back into the home, so avoid the temptation to use this option.

Once you have the venting figured out, the next step is to install the mounting bracket. Place the template on the wall as directed in the instructions. Determine which mounting holes you are going to use — the template will give you several options, depending on where the structural supports are in the wall — and predrill these locations. Remove the template.

The microhood itself mounts into a bracket or a box, which is supplied with the unit. The bracket is installed with lag bolts into the wall for support, along with fasteners that hold the bracket to the cabinet. Remember that microhoods are quite heavy, even empty, and that weight increases as you load it with food. Make sure that you install all of the necessary bolts and other fasteners supplied with the kit, and that they are seated into solid wood as required.

Most microhoods have a cord with a plug, as opposed to the hardwiring found on most range hoods. If your old hood was hardwired and you now have an electrical cable to deal with, you will need to route the cable into an electrical box and install a standard grounded outlet that the microhood can plug into. If you are not comfortable with how to do this correctly, be sure and consult with a licensed electrician.

The final step is to install the unit itself. Drill a hole in the bottom of the cabinet as specified, and route the electrical cord through the hole. Slip the microhood into the mounting box or bracket, and secure it in place. Plug in the cord, remove all packing materials, and you’re ready to go.

Each microhood installs a little differently. Be sure you read and follow the manufacturer’s instructions exactly, that you comply with all necessary clearances, that you have a properly installed and grounded electrical outlet, and that you install all the required fasteners. If you have any doubts about any aspect of the installation, your dealer can help you arrange for professional installation.

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

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

Copyright 2007 Inman News

Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

DEAR BOB: Can I sell my house, plus my rental house, and buy one house for my children and me to live in a better neighborhood without having to pay capital gain tax? –Amelia A.

DEAR AMELIA: Thanks to Internal Revenue Code 121, if you have owned and occupied your principal residence at least 24 of the 60 months before its sale, you can sell it and claim up to $250,000 tax-free capital gains (up to $500,000 if your spouse also meets the 24-month occupancy test and you file a joint tax return in the year of home sale).

Purchase Bob Bruss reports online.

However, the only way to defer capital gain tax on the sale of your rental house, and to avoid the dreaded 25 percent “recapture tax” on depreciation you have deducted, is to make an Internal Revenue Code 1031 tax-deferred exchange for another “like kind” rental or investment property of equal or greater cost and equity. For full details, please consult your tax adviser.

WILL SON BE TAXED ON THE SALE OF PARENT’S HOME?

DEAR BOB: My mother, 88, wants to sell her home so she can move to an assisted-living residence where several of her friends live. I am 100 percent in favor of the move so someone will be watching out for her and I can stop worrying about her. But my problem is that my name was placed on her title, upon the advice of her lawyer and tax adviser, about 10 years ago. The reason was because I paid her property taxes and mortgage payments. By being on the title, I could deduct the interest and taxes paid. When she sells her house, will I be taxed on part of her profit (about $175,000)? –Jonathan H.

DEAR JONATHAN: Congratulations on being a “good son” and looking out for your elderly mother by helping her with the household expenses.

You can simply sign a quitclaim deed to get your name off the title to her home before the sale. Your tax adviser might suggest filing a federal gift tax return, although no gift tax will be due if your lifetime non-exempt gifts are less than $1 million.

READER SAYS DO-IT-YOURSELF SELLERS ARE NOT “GREEDY”

DEAR BOB: I usually agree with 95 percent of your excellent advice. However, I strongly disagree with your recent item where you said a home buyer might have to pay his or her buyer’s agent if a home is purchased from a “greedy” do-it-yourself home seller who refuses to pay the agent half of the customary sales commission. Home sellers have the right to sell their homes alone without having to pay a sales commission. Why don’t you mention the “greedy agents” who charge a 6 or 7 percent sales commission just for filling in a few blanks on a sales contract? –Zygmont C.

DEAR ZYGMONT: Most “for sale by owner” (FSBO) house and condo sellers are only too happy to pay a sales agent who produces an acceptable buyer 50 percent of the customary sales commission, usually 3 percent of the sales price.

However, some “greedy sellers” don’t understand the benefits of having a buyer’s agent represent the buyer. Those buyers’ agents do double-duty of guiding the FSBO sale to a successful completion. Yet, some FSBO sellers stubbornly refuse to pay the buyer’s agent even half of a normal commission, so then the buyer might become obligated to pay his or her buyer’s agent.

As for your comment about “greedy agents” who charge 6 percent or 7 percent sales commissions, are you aware how sales commissions are split among sales agents and their brokerages?

Usually, the listing agent and the buyer’s agent receive half of the gross sales commission. Then half of that portion of the commission goes to the brokerage. Of course, the exact split of the sales commission depends on each agent’s agreement with their brokerage.

The result is what seems to you like a huge sales commission is split four ways and the agents really aren’t as “greedy” as you might think.

The new Robert Bruss special report, “2006 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com. Questions for this column are welcome at either address.

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

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

Copyright 2007 Inman News

Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

James McGowan owned a four-unit apartment building where Lori Dutton and her 4-year-old daughter, Amy, lived in one of the apartments.

McGowan sold the building to Mohammed Hakeem in May 2001. Dutton and her daughter continued to occupy the apartment. In September 2001, McGown cancelled his State Farm property owner’s insurance policy.

Purchase Bob Bruss reports online.

During a thunderstorm in October 2001, a rotting tree next to the building collapsed onto the Dutton apartment, killing Amy.

Dutton subsequently sued former owner, McGowan, for damages. She alleged McGowan was negligent during the time he owned the building by failing to correct the dangerous condition created by the rotting tree and his negligence caused or contributed to Amy’s death.

McGowan tendered defense of Dutton’s lawsuit to State Farm, his former insurer. State Farm refused to defend under the policy that was an “occurrence” policy.

State Farm then sued its former insured, McGowan, for declaratory judgment that it has no duty to defend or indemnify him against this personal injury lawsuit that occurred after the policy was cancelled.

If you were the judge, would you order State Farm to defend and provide insurance policy coverage although the insured cancelled the policy before the loss occurred?

The judge said yes!

Although Amy’s death occurred after McGowan cancelled his State Farm’s insurance policy, the judge explained, his alleged negligence “occurrence” took place during the policy term while McGowan owned the building.

McGowan’s alleged negligence was an event that took place during the policy period if he failed to inspect the rotting tree and have it removed, the judge noted. The question is whether this negligence was an accident that resulted in bodily injury, namely Amy’s unfortunate death, the judge continued.

Dutton’s complaint alleges McGown failed to adequately inspect and maintain the tree, the judge reported.

“Because the fall of the tree was unforeseen, unexpected and fortuitous, McGowan’s negligent omission constituted an accident as the term is used in insurance policies,” he emphasized.

State Farm repeatedly asserts that a negligent act alone is not an occurrence, the judge explained. However, the policy does not specify when the bodily injury must take place, although it must manifest itself to trigger State Farm’s obligation to defend McGowan if the occurrence occurred during the policy term, he added.

Because the insurance policy is ambiguous as to when the injury must occur, ambiguities must be resolved in favor of the insured and against the insurer, the judge noted. Therefore, State Farm must defend McGowan in this lawsuit and possibly pay damages to Dutton if he is found to be negligent, the judge ruled.

Based on the 2005 U.S. Court of Appeals decision in State Farm Fire and Casualty Co. v. McGowan, 421 Fed.3d 433.

(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 2007 Inman News

Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

DEAR BOB: I know you answered a similar question several months ago, but I don’t recall the answer. I own a six-unit apartment building, in which my wife and I have a large profit. If we make an outright sale, we will owe a huge capital gain tax. My wife remembered an item in your column saying we could make a tax-deferred trade of the apartment building for our “ultimate dream home,” and then we could sell the house in a few years to claim $500,000 tax-free profits. Is there a minimum holding time for the house? –Harold J.

DEAR HAROLD: Yes. You first can make an Internal Revenue Code 1031(a)(3) Starker tax-deferred exchange of your apartment building for your dream home.

Purchase Bob Bruss reports online.

However, please remember the basic Starker exchange rules: 1) you must trade equal or up in both price and equity, 2) you can’t take any taxable “boot” such as cash or net mortgage relief out of the trade, 3) sales proceeds from the apartment building must be held by a qualified third-party intermediary accommodator, 4) you have only 45 days after the sale to designate the replacement property, 5) you must complete the title acquisition within 180 days, and 6) the house you acquire must be a rental at the time of acquisition.

Second, although there is no official IRS answer, most tax advisers suggest renting the acquired residence at least six to 12 months (to show investment intent) before converting it into your personal residence.

Third, to qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 (up to $500,000 for a qualified married couple filing a joint tax return), you must occupy the principal residence at least 24 of the 60 months before its sale.

Fourth, for residences acquired in an IRC 1031 tax-deferred exchange, effective Oct. 22, 2004, you must hold the principal residence at least 60 months to qualify for the IRC 121 exemptions.

This five-year rule applies only to residences acquired in a tax-deferred exchange. For other principal-residence sales, the minimum holding time is only 24 months (presuming the owner occupied the principal residence for the same period). For full details, please consult your tax adviser.

BE CAREFUL WHEN DEALING WITH OUT-OF-AREA REALTY AGENT

DEAR BOB: There is a house listed for sale in my town that has a “for sale” sign from a real estate brokerage that is located at least 125 miles away. Why would any home seller list with an agent whose office is so far? I might be interested in buying the house. Are there any special precautions? I tried phoning the brokerage and was told I had to have my own “buyer’s agent” call to inspect the house. Should I be wary? –Paul G.

DEAR PAUL: There are many possible reasons why that house is listed with an out-of-area realty agent. For example, many FHA, VA, and bank foreclosures are listed with one or two brokerages that handle sales throughout an entire region or state.

Frankly, this makes managing multiple foreclosed properties easier for the lender, but it is not the best way to earn top-dollar sales price. No out-of-area realty agent can do as good a sales effort as a local agent.

Another reason for listing with an out-of-area realty agent is the home seller might be a friend or relative of the listing agent. That’s no way to hire a listing agent, but many people do it anyway.

As a buyer, you definitely need your own “buyer’s agent” when attempting to buy a home listed with an out-of-area realty agent. Often, the house doesn’t have a lock-box and inspection access is not easy. Or it might be difficult to negotiate with the home seller through the out-of-area realty agent.

Personally, I’ve bought several bargain properties that were listed with out-of-area agents who had no clue as to the property’s true value. You might be on the trail of such a below-market price bargain purchase.

WHY IS THERE LITTLE INTEREST IN PROBATE PROPERTIES?

DEAR BOB: As a law student, I have become interested in possibly investing in probate properties. But I find there is little interest among real estate agents in listing and marketing such properties. Why? Do you think the probate property field is less crowded than for other investment properties? –Mr. B.K.

DEAR MR. B.K.: There are far fewer probate properties being sold by estates than there are other properties listed for sale on the open market.

As an investor, I’ve purchased several probate properties, but none was a simple routine sale. Dealing with heirs, executors, and attorneys is rarely easy.

One time I made an offer to buy a probate property where I later learned 29 heirs had to sign the acceptance. I quickly realized that property was a waste of time unless one heir could speak for the entire group.

An excellent recent book to read for more information on this topic is “Creating Wealth Through Probate,” by James G. Banks. It is available in stock or by special order at local bookstores, public libraries and www.amazon.com.

The new Robert Bruss special report, “2006 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” is available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com. Questions for this column are welcome at either address.

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

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

Copyright 2007 Inman News

Q: I’m building a small deck in the backyard and for cosmetic reasons am painting it rather than finishing the wood. So, being cost-conscious, I am wondering whether using a Douglas fir 2-by-6 versus a con-heart redwood makes sense. The lumber cost is less than half.

A friend said that the redwood really ought to cure 90 days and then be washed with oxalic acid to leach out the tannins so the paint doesn’t peel and crack.

Whichever wood I choose, I was figuring I could buy it, prime it and screw it down prior to applying the top coat. I didn’t factor in any period for curing, and 90 days is a long time (just because I was in the mood to see my creation finished). But it sounds important to let it cure for some time before doing any of that.

A: Cool your jets. Your friend’s right about allowing redwood to cure prior to painting. The same thing applies to fir if you go that route. Moisture levels in lumber must stabilize prior to painting for the paint to successfully adhere to the wood.

Construction-grade lumber has a relatively high moisture level. The wood must acclimatize before you seal the surface with paint. Excess moisture must evaporate to give the paint its best chance to stay on the wood.

Buy the boards, and stack them with sticks between each board to allow air to circulate. We can’t overemphasize the importance of this step, as it allows air to get to all sides of each board. Let the boards cure for two to three months to allow the moisture content to stabilize. If you can stack the boards out of the weather (under a patio or in the garage), that would be best. If that’s not possible, and they get rained on, the curing time will be extended.

When the curing is complete, plan on priming all six sides of each board. Pay special attention to the ends because the end grain is the most susceptible to moisture penetration and the resultant paint peeling. If you don’t precut the decking, you’ll have to prime them once you’ve screwed them to the joists. Speaking of joists, we strongly recommend using pressure-treated material for the framing to inhibit the possibility of rot.

Consider applying two coats of primer to the decking for extra protection. It’s more work, but it will make the job last longer. This is especially important if you choose to go with fir, as it doesn’t take paint quite as well as redwood.

As to the choice between Douglas fir and con-heart redwood, we’d save a buck and go with fir. The extra work involved is offset by the cost savings. We know this is heresy to lumber dealers, but if you select vertical grain fir, cure it properly and prime and paint it thoroughly, it will perform. An added bonus is that fir is harder than redwood and will resist heavy foot traffic and dings a bit better.

Lowe’s and Home Depot will allow you to go through the “stacks” to select boards without charging a premium. Lumberyards allow it also but generally charge a premium for the “select” grade. Look for vertical grain as opposed to the flat grain. It holds paint better. Use good quality primer and deck paint and you’ll get many years of use from your new deck.

An alternative we’d consider for a painted deck is a composite product we saw a couple of years ago at the Pacific Coast Builder’s Conference. Generally, we’re not big fans of composite decking, but a product called CorrectDeck CX caught our eye. It’s a manufactured plastic/wood product and has a paint-like surface that is impervious to staining. Check it out at www.correctdeck.com/products/decking/cx/default.htm.

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

Copyright 2007 Bill and Kevin Burnett

The comment simply added an international flavor to what has become an ongoing wrestling match about real estate commissions.

Simon Baker, a successful Australia-based publisher of real estate information who is now managing director and chief executive of realestate.co.au Ltd., a Web site posting property listings in several countries, was part of panel discussing how and where high-net-worth individuals were purchasing real estate around the globe.

Many high-end agents based in the United States had explained how they had contacts and clients in foreign countries — Russians, Germans, Italians, Japanese — who had come to the United States and bought expensive homes and apartments.

“But if you have a U.S. client looking to buy a second or third home abroad, don’t expect to receive a commission or a referral fee,” Baker said. “Commissions are a lot lower in other parts of the world. They are 1.75 percent in the U.K., 2.2 percent in Austria, about 2.5 percent in New Zealand. Nobody gets as much as you get here, so enjoy it while you’ve got it.”

Ah, commissions. If you want to tweak some tender nerves, bring up the subject with friends in the business. The debate on commission fees has been going on for decades.

By law, all commissions are negotiable in the United States, yet it’s been common practice for real estate representatives to receive a 6 percent commission on the sale of residential property for homes priced $300,000 and less in many of the country’s markets. Of that total, the selling side receives a 3 percent commission on the sales price and the buying side receives 3 percent. (Years ago, the selling side received two-thirds and the buying side one-third). Some traditional companies have reduced their commissions, and others introduced a “discounted fee” structure, while a few have gone to a “menu” or “a la carte” system.

Seven years ago, when Gomez, a research firm specializing in the measurement of customer experiences, released a study showing that online consumers wanted better service and lower fees and were willing to take a more active role in the home buying and selling process, Realtors first began to consider a menu or a la carte approach to the sales process.

Richard Mendenhall, then president of NAR and perhaps the strongest leader ever to guide the country’s largest trade association, was asked to comment on the Gomez report.

“What will drive the change?” Mendenhall responded. “I think you will see the market dictate change. If Realtors can execute more deals in the new model, then they will move to that model.”

Companies such as Redfin have a new model. The Redfin model is aimed at computer-oriented professionals who know how to search their desired neighborhoods online and have an idea of the type of home they would like to own. Once a home is targeted, customers visit open houses, and then contact Redfin when they are ready to write an offer through the company’s “online wizard.” A Redfin agent then contacts the listing agent to ascertain the seller’s needs and expectations, then critiques the offer and negotiates with the seller’s agent.

If the deal is accepted, Redfin says its agents stay in the loop via telephone, coordinating the appraisal and inspection plus escrow and title insurance services. It’s this portion of the transaction — after the purchase and sale agreement is signed — that has drawn the attention of traditional agents. Many of them feel that discount brokers disappear once the contract is “signed all around,” leaving the listing agent to perform all the chores needed until closing.

Where’s the answer? Somewhere in between. Consumers want to sit down at a table and write up a deal with an agent, face to face, and know that the agent will go to bat for them. Yet, many also want lower fees. A majority of consumers are opposed to the perception of being involved with a “discount broker,” while a niche could care less. Acceptable fee changes will come only from a well-defined real estate menu that includes face time. And, that menu will not be jump-started in a flat market — especially for domestic second homes.

To get even more valuable advice from Tom, visit his Second Home Center.

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

Copyright 2007 Tom Kelly

Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

DEAR BOB: Last fall my husband and I moved from out-of-state and purchased a home. The sellers accepted our offer with no contingencies. All the papers were signed; we even had the movers all arranged. A week later, our Realtor called to say the sellers “changed their minds.” Since we had already accepted a good offer on our old house and had to move, this put us in an extremely stressful situation. We ended up making another trip to the area and purchasing another home, which we don’t like as well. I think the sellers should pay us the cost of our second trip and our cost of having their house professionally inspected. Should I contact a lawyer or at least go to Small Claims Court? –Joyce B.

DEAR JOYCE: Unless there was a legal loophole in your home purchase contract allowing the sellers to cancel the sale, you should not have allowed them to cancel just because they “changed their minds.” At the very least, you should have been well compensated for agreeing to cancel the purchase.

Purchase Bob Bruss reports online.

Your legal recourse was to hire a local real estate attorney, file a specific-performance lawsuit to force the sellers to complete the sale as agreed, and record a “lis pendens” against the title to effectively prevent them from selling to another buyer or refinancing the property. Shame on your Realtor for not advising you to consult an attorney.

However, if you cancelled the purchase contract and accepted a refund of your good-faith deposit, the sellers probably have no further obligation to you unless they agreed in writing to compensate you for your additional costs.

Just because you think the sellers should pay for your extra expenses doesn’t mean they are legally obligated to do so. If you really wanted that house, you shouldn’t have agreed to cancel the sale.

EVEN IF YOU NEVER SAW THE CONDO RULES, YOU MUST COMPLY

DEAR BOB: I just received notice from my condo homeowner’s association that I am in violation of the CC&Rs (covenants, conditions and restrictions) for having red window treatments. I looked in the CC&Rs and there is no such mention of that rule. I never received a copy of the CC&Rs before I purchased. The window treatment has been up for over 13 months. Is there any way I can fight this? –Kimberlee K.

DEAR KIMBERLEE: Just because you didn’t ask for — and receive — a copy of the homeowner association by-laws, CC&Rs, and rules doesn’t mean you are excused. Your real estate agent should have provided these important documents before you took title.

I suggest you comply by having your red drapes or window coverings lined with a white material. The cost will be far less than fighting your homeowner’s association if you are in violation of their rules.

TAX SALE PURCHASE SHOULDN’T REQUIRE LEGAL EXPENSES

DEAR BOB: Thank you for recommending the excellent book, “Profit by Investing in Real Estate Tax Liens,” by Larry Loftis. My question is, how easy is it to clear a title for resale after a tax deed is purchased at a property tax auction? –Jan C.

DEAR JAN: Property taxes are first priority in the title chain. If you acquire a property title at a tax lien sale, that sale wipes out any junior encumbrances such as a mortgage or judgment lien.

The exact answer to your question depends on whether you acquired a tax lien certificate or a tax deed. The state law where the property is located determines what you own.

If you just have a tax lien certificate, you do not yet own the property until the owner fails to redeem your certificate. However, if you bought a tax deed, that sale should have wiped out any other encumbrances on the property. For full details, please consult a real estate attorney in the county where the property is located.

The new Robert Bruss special report, “2006 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com. Questions for this column are welcome at either address.

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

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

Copyright 2007 Inman News

Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

In their unique book, “Outside the Not So Big House; Creating the Landscape of Home,” best-seller author Sarah Susanka and noted landscape designer Julie Moir Messervy team up to show landscape ideas for “completing” modest-sized homes. Along the way, they share the benefits of sound landscape techniques to create enjoyable outdoor spaces that are both attractive and practical.

A special feature is the authors explain how they created the landscaping, often to meet the special requests of the homeowners. In other homes, Susanka and Messervy share how they combine landscape methods to accomplish a goal.

Purchase Bob Bruss reports online.

My favorite is “blurring the boundary,” where Susanka’s home architecture is blended with Messervy’s landscape design.

As usual with the beautiful Taunton Press books, the color photos make this “coffee table”-quality book come to life to illustrate the thoughts of the authors. Photographer Grey Crawford did a superb job of showing what is explained in the text.

Unfortunately, not much attention is paid to the unique, interestingly designed homes that could have been the topic of an accompanying book. Frankly, the homes shown only from the outside look as interesting as their landscaping.

Most of the homes, and their landscaping, appear to be several years old so the landscaping has “matured” and is virtually full-grown. What makes the narrative explanation so valuable is that the authors share what they tried to accomplish to blend landscaping with the house.

To give the reader a perspective, each house shown includes a landscape design plan that reveals the overall yard landscaping in relation to the house. Both old and new houses are shown, often with updated landscaping to bring out the strong points of the older houses.

Although emphasis is on homes located on larger parcels, many houses shown are on city sidewalks with attractive landscaping used to accomplish specific goals, such as privacy. However, usually the backyards are shown, where landscaping adds special benefits, like a joining of the house to the outdoors.

This is one of the very few home design books to emphasize the importance of landscaping to enhance a home’s atmosphere both inside and outside. Most of the homes are not brand-new, showing what can be done with modest-sized older houses to make them more attractive with landscape techniques.

Chapter topics include: “Playing Up the Corners”; “The Attraction of Opposites”; “Variation on a Theme”; “The World Behind the Walls”; “A Landscape of Stone”; “Good Fences”; “Rooms Inside and Out”; “Garden of Earthly Delights”; “Three Cabins in a Forest”; “At Home on the Range”; and “A Cottage in the City.” The Appendix includes a house-by-house list of the architects and landscape designers.

Just as every house is unique, the premise of this book is that home landscaping should also be special to bring out the residence’s best features (or hide its drawbacks). The authors share what their goals were and in most cases they appear to have used effective landscaping to bring out the best features of each home. On my scale of one to 10, this outstanding new book rates a solid 10.

“Outside the Not So Big House; Creating the Landscape Architecture of Home,” by Sarah Susanka and Julie Moir Messervy (The Taunton Press, Newtown, CT), 2006, $34.95, 209 pages; available in stock or by special order at local bookstores, public libraries, and www.amazon.com.

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

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

Copyright 2007 Inman News