“When you analyze those successful homebuyers who have the experience to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge.”

If you’re like most homebuyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and secondly, you want to purchase this home for the lowest possible price.

When you analyze those successful homebuyers who have been able to purchase the home they want for thousands of dollars below a seller’s asking price, some common denominators emerge. Although your agents negotiating skills are important, there are three additional key factors that must come into play long before you ever submit an offer.

These Steps Will Help You Save Thousands When You Buy a Home

Make sure you know what you want . . . As simple as this sounds, many home buyers don’t have a firm idea in their heads before they go out searching for a home. In fact, when you go shopping for a place to live, there are actually two homes competing for your attention: the one that meets your needs, and the one that fulfills your desires. Obviously, your goal is to find one home that does both. But in the real world, this situation doesn’t always occur.

When you’re looking at homes, you’ll find that you fall in love with one or another home for entirely different reasons. Is it better to buy the 4 bedroom home with room for your family to grow, or the one with the big eat in kitchen that romances you with thoughts of big weekend family brunches? What’s more important: a big backyard, or proximity to your child’s school? Far too often people buy a home for the wrong reasons, and then regret their decision when the home doesn’t meet their needs.

Don’t shop with stars in your eyes: satisfy your needs first. If you’re lucky, you’ll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.

Find out if your agent offers a “Buyer Profile System” or “Househunting Service”, which takes the guesswork out of finding just the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed information on an ongoing basis. A program like this helps homeowners take off their rose colored glasses and, affordably, move into the home of their dreams.

To help you develop your homebuying strategy, use this form:

What do I absolutely NEED in my next home:

1. ______________________________

2. ______________________________

3. ______________________________

4. ______________________________

5. ______________________________

What would I absolutely LOVE in my next home:

1. _______________________________

2. _______________________________

3. _______________________________

4. _______________________________

5. _______________________________

How Sellers Set Their Asking Price

For you to understand how much to offer for a home you’re interested in, it’s important for you to know how sellers price their homes. Here are 4 common strategies you’ll start to recognize when you begin to view homes:

1. Clearly Overpriced:

Every seller wants to realize the most amount of money they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to over inflate the value of your home. This is done far too often, with many homes that are priced 10- 20% over their true market value.

This is not in your best interest, because in most cases the market won’t be fooled. As a result, your home could languish on the market for months, leaving you with a couple of important drawbacks:

• your home is likely to be labelled as a “troubled” house by other agents, leading to a lower than fair market price when an offer is finally made

• you have been greatly inconvenienced with having to constantly have your home in “showing” condition . . . for nothing. These homes often expire off the market, forcing you to go through the listing process all over again.

2. Somewhat Overpriced:

About 3/4 of the homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: either you believe in your heart that your home is really worth this much despite what the market has indicated (after all, there’s a lot of emotion caught up in this issue), OR you’ve left some room for negotiating. Either way, this strategy will cost you both in terms of time on the market and ultimate price received

3. Priced Correctly at Market Value

Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively priced homes usually sell within a reasonable time frame and very close to the asking price.

4. Priced Below the Fair Market Value

Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast – usually in a few days – at, or above, the asking price. Be cautious that the agent suggesting this method is doing so with your best interest in mind.

George and Paule Olsher have owned their 60-space mobile-home park since 1991. One of their residents, Ernest Castaneda, 17, returned about 1 a.m. to the mobile home where he lived with his sister and grandmother, Joyce Trow.

After letting his sister know he was home, Castaneda went outside on the front porch. Shots were fired by alleged gang member Manuel Viloria from mobile-home space 23 across the street. Castaneda was hit in the back and severely injured.

PurchaseBob Bruss reports online.

Several months before the shooting, Joyce Trow had complained to the park manager, Beverly Rogers, about the occupants of space 23, including Viloria. Rogers said she talked to owner George Olsher about these gang-related problems and was told, “Their money is as good as yours.”

When Castaneda later sued Olsher for damages, he alleged Olsher should have refused to rent space to gang members and he should have evicted gang members living in the park.

Evidence was presented at the trial that there had been two prior incidents. One was a gang confrontation with shots fired on a property contiguous to the park. The other incident was a bullet fired from outside the park that shot through a mobile home, although nobody was injured.

Castaneda’s attorney argued at the trial that Olsher should have hired security guards and replaced the street lights, which had been shot out.

If you were the judge would you rule the park owner had a duty to his tenants to evict gang members and not to rent to them?

The judge said no!

A landlord owes a tenant a duty, arising out of their special relationship, to take reasonable measures to secure areas under the landlord’s control against foreseeable criminal acts of third parties, the judge began. But in this situation, he continued, the foreseeability had not been proven with evidence of similar violent acts within the mobile-home park, which would require the owner to take action.

Unless there is evidence of foreseeability of harm to other tenants and guests, the judge explained, a landlord does not have a duty to refuse to rent to gang members. To do so could be illegal discrimination, the judge noted.

Nor does a landlord have a duty to evict known gang members, the judge emphasized, unless there was evidence such individuals are likely to harm other residents.

“In these circumstances, a shootout between two rival gangs was not highly foreseeable, and Olsher did not have a tort duty to prevent it by evicting the alleged gang members,” the judge ruled. Although Castaneda’s injury was unfortunate, the landlord is not liable to him for damages, the judge concluded.

Based on the 2007 California Supreme Court decision in Castaneda v. Olsher, 63 Cal.Rptr.3d 99.

(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

DEAR BOB: A friend of mine was going to purchase a house. She signed a contract agreeing to move forward with the closing procedures. She had put $500 down and had a professional home inspection completed. Her mother was battling cancer and died. She then contacted the Realtor and backed out of buying the house. Now the seller and his Realtor are threatening to sue her for not buying the house. Is it true she can be sued? –Jenna B.

DEAR JENNA: Yes. When you sign a contract to buy real estate that agreement is binding on both the seller and buyer. If the seller had changed his mind about selling, your buyer friend could have sued for specific performance of the sales contract to force the seller to deliver the deed.

PurchaseBob Bruss reports online.

But the seller is unlikely to sue the buyer for specific performance to force the buyer to buy. Instead, the seller might sue the defaulting buyer for breach-of-contract damages, namely the monetary loss the seller takes if the house is sold to another buyer for less money.

The buyer’s personal problem with her mother’s illness and death is not a valid reason to cancel the purchase contract. She should consult a local real estate attorney.

CAN INVESTOR DEDUCT LOSS ON INCOME-TAX RETURNS?

DEAR BOB: I bought the house next door to rent to tenants. My mortgage costs $641 a month, plus an escrow account for the property taxes. I am getting $600 per month rent. Can I show this as a loss on my income-tax returns? My closing costs were about $7,000. Are they tax-deductible? The house was empty for about six months while I remodeled it, but I had to make the mortgage payments. Are they deductible? –Robert G.

DEAR ROBERT: Your rental income is reported on Schedule E of your income-tax returns. This is the same place you deduct mortgage interest (but not principal) payments and the property taxes paid to the tax collector. You can also deduct other applicable expenses, such as repairs, insurance and depreciation (a noncash expense for estimated wear, tear and obsolescence).

If your annual gross income (AGI) is less than $100,000, you can deduct up to $25,000 of passive losses from your rental property each year.

As for your closing costs when you bought the rental house, you may be able to deduct some expenses such as prorated property taxes and mortgage interest. But other closing costs, such as title insurance, recording fees, etc., are not deductible and must be capitalized as part of your purchase-price cost basis. For full details, please consult your tax adviser.

CAN SISTER ADD NAME TO HOUSE TITLE FOR $1?

DEAR BOB: Because my sister was a caregiver for two years, she was able to have our mother’s home put into her name when we had to put mother into a nursing home. There are three of us siblings. But we could not have our names put on the deed. Now that the home is in our sister’s name, is it true my sister and I can get our names on the deed for $1? –Cheryl S.

DEAR CHERYL: I am not aware of any method by which your names can be added to the title for $1.

Because the house is now owned by your sister, the only way to add your names to the title would be if she signs a quitclaim deed giving you partial interests in the house. I suspect she is unlikely to do that. For details, please consult a local real estate attorney.

The new Robert Bruss special report, “How to Profit from Lease-Options (Rent to Own) Whether You are a Property Buyer, Seller or Realty Agent,” 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).

***

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

Copyright 2007 Inman News

Q: In an article on restoring a Victorian, you mentioned exterior painting using three coats: a coat of primer, a second coat of one-half primer and one-half coat of finish paint, and a final coat of finish paint. Is this your suggestion for all exterior painting?

A: Yes, especially on older wood homes. We also recommend the three-coat approach when painting trouble spots — such as windowsills — that are subject to the ravages of sun, wind and rain.

Wood siding on Victorian houses in the San Francisco Bay Area is usually clear heart redwood. A century ago, when the siding was applied, building paper and insulation were unknown. As a result, the wood dried from both sides. Even if the house was painted regularly, today the siding is as dry as a bone. A paint job on this type of house has to be done right to get the longest possible life from the new paint. It’s time consuming if you do it yourself or very expensive if done by a professional.

From time to time we’ve described the painting process in varying levels of detail. Now it’s time to go through it step by step. The painting process can be broken down into three basic steps: preparation, priming (including caulking and filling voids) and finish painting.

A paint job is only as good as the preparation. Prep is a boring process, but if you invest the time and effort, a good prep job will pay lasting dividends. Usually, the first step is to clean the surface to be painted by pressure washing. However, sometimes an older home’s buildup of multiple layers of paint requires stripping the paint to the bare wood. If this is the case, use a propane torch or electric heat gun to strip the old paint before pressure washing.

If you use a propane torch, also use extreme caution. Dry wood and open flame do not get along well. Kevin spent a month or so burning the paint off one side of his Alameda Victorian. Good thing he did, too; the paint lasted at least 10 years before the new owners needed to repaint.

Let the building dry out a full week after pressure washing to ensure that any excess water evaporates. The next step is to use a disc or belt sander to feather the edges of the remaining paint. This way the transition from paint to bare wood is less noticeable. Be certain to dust away any residue after sanding.

Now it’s time to paint. To spray or not to spray? An airless sprayer gets the material on quickly but is susceptible to leaving thin spots and to overspray. There’s nothing quite as tacky as overspray on a roof. But brushes and rollers are slow. We’ve always compromised. We use the sprayer to get the material on the siding, then back brush or roll to ensure an even coat. This method works for all three coats of paint.

Whatever application method you choose, the next step is to apply the primer coat. Use a high-quality primer. We’ve always used an oil-based primer for exterior work. We recommend that you purchase the paint at a paint store rather than at one of the big box stores. Salespeople at paint stores cater to the trade and generally are very knowledgeable and ready with helpful tips. Ask about adding extra linseed oil to the primer to replace some of the moisture lost in the wood over the years. Also ask them to tint the primer toward the finish color for a finish that fully hides the undercoats.

Allow the primer to dry thoroughly. Then caulk and fill all voids in the building. This is critical. The better the caulking, the less chance of moisture penetration and of the paint failing. Joints should be caulked using an acrylic latex caulk. Nail holes and small divots in the siding should be filled with a good-quality exterior Spackle. For more extensive repairs, Bondo works well.

The split coat is next. Back in the day, when all paint was oil-based, painters mixed equal parts primer and finish material to get the “split” coat. Today, if the primer and the finish are compatible (oil and oil or water and water), this is the way to go. If not, apply a second coat of primer and have the paint store tint it a shade lighter than the finish coat.

The primary purposes of the split coat are to add an extra coat of protection and to eliminate “holidays” visible in the final coat. Depending on the color, even a full finish coat can show impressions through a white primer. After the split coat dries, inspect the job for any defects. Now is the time to fix them. Perhaps a little more caulk is required or a nail hole needs to be touched up.

Finally, apply a full finish coat. Follow these steps and you should have a handsome and long-lasting paint job.

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

Copyright 2007 Bill and Kevin Burnett

(This is Part 2 of a two-part series. Read Part 1, “Mortgage-interest tax break lacking in benefits.”)

When the last week of August quickly slipped into Labor Day weekend, the Cashen kids decided the time had come to take over the loan payments of the family cabin from their parents.

Each of the three kids and their families had enjoyed their allotted time at the lakeside retreat fishing, water skiing, sailing and visiting with longtime lake families who, like them, had children of their own.

The financial shift had been in the works for some time, yet was brought to a head when the folks refinanced the place on a 30-year, fixed-rate loan (“I’m not gambling on those ARMs,” said Grandpa Gene) and had taken the $300,000 in funds to buy a condo in Tucson, Ariz.

It was not the first time the lake place had been refinanced. Gene pulled out cash for two college tuitions and years ago plunked down $7,000 to secure a spot for his mom at a popular nursing home. The lake home has been more than a coveted gathering spot — it’s been a consistently appreciating asset.

The Cashen situation was truly amazing — all of the three grown children wanted to keep the lake home and planned to use it; all of them got along and their kids were best-friend cousins; and all of them, bolstered by their spouses, earned a family income that could handle their share of the cabin payment.

Irene, the oldest, suggested a biweekly payment option. She got the idea from a solicitation that arrived in the mail. It suggested the family could save thousands in interest dollars by paying off the mortgage sooner via two payments a month rather than the single monthly payment. A total of 26 biweekly payments would be made instead of the usual 12 monthly payments, amounting to an “extra” month’s payment every year. This conversion could be done for “free,” according to the offer.

Solicitations for biweekly payment plans have become common as borrowers look to counter the recent “foreclosure” buzz by taking a shot at paying off their homes faster. Instead of the standard one-payment-per-month schedule, some companies specializing in accelerated payoff programs solicit mortgage brokers with a custom option for their loan customers. For a one-time fee of $395, the borrower can have a tailor-made plan written for their loan. The mortgage broker is offered an incentive, typically $300, to “sell” the program to his customers.

The sales pitch typically focuses on the ability to accrue equity faster, saving thousands of interest dollars, maintaining a better credit rating because electronic transfers are rarely late and a hassle-free prepayment amortization schedule generated by the lender.

Sometimes, the original lender will offer a biweekly program at no cost to the borrower. To qualify, borrowers usually are required to authorize an electronic transfer of half the monthly payment every two weeks. The extra money is then applied to the principal of the loan. Interest savings can differ depending upon when the payment is applied to the principal.

Let’s look at a basic prepayment schedule. Rather than 12 monthly payments of $2,097.65 on a 30-year, $300,000 mortgage at 7.5 percent, a borrower would make 26 biweekly payments of $1,048.93. As a result, total interest would shrink by $114,715 from $455,145.45, and the loan term would shorten to 283 months from 360 months, a savings of six years and five months.

If the biweekly payments were applied precisely at mid-month and not at the end of the month, the borrowers would save even more interest dollars — a total of $120,299.42 and about 80 months of payments rather than 77. This savings can go to the lender (one of the ways the program comes “free” to the borrower) unless clearly stated in the agreement.

The Cashens eventually elected to make extra payments to the 30-year, fixed-rate loan that amortized the loan over 20 years, saving the children $175,118.51 in interest over the term of the loan. The extra monthly payment that reduced the loan term was $319.13, bringing each child’s share to $806 a month ($2,097.65 plus $319.13, divided by 3).

It’s true — anybody can prepay a loan. Any additional money added to the monthly payment almost always goes to the principal automatically. If you are aiming at reducing your loan term, consider a 15-year fixed-rate loan because it usually comes with a 0.35-0.4 of a percentage point discount from the 30-year fixed. While the Cashen’s will save money by prepaying, their interest rate will remain the same.

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

If you are involved with buying, selling or brokering houses and condominiums but you don’t enjoy getting involved in lawsuits, “The No-Lawsuit Guide to Real Estate” by Realtor Barbara Nichols will show you how to stay out of court. The author has been involved with hundreds of real estate cases, primarily as a consultant and expert witness, so she is well-qualified to advise how to prevent realty lawsuits.

This new book explains virtually every aspect of home sales, what can go wrong from a legal viewpoint, and how to prevent lawsuits. Nichols cautions realty agents to strongly recommend that buyers always hire a professional home inspector and attend that inspection along with the real estate agents. “The real estate agent for the seller should advise clients to never accept a no-inspection-contingency offer,” she advises.

PurchaseBob Bruss reports online.

Heavy emphasis is placed throughout the book on getting everything in writing, including contract changes that occur after the original agreement is signed. Modification examples include a seller’s repair credit if the professional home inspector reveals unexpected defects and “as is” sales terms.

In addition to discussing how home buyers, sellers and their realty agents should handle disclosures of known structural defects, the author thoroughly explains the fiduciary duties of the realty agents to their sellers and buyers. Attention is drawn to the dangers of dual agency (which the author obviously dislikes) and clarifications of who represents whom in the home sales transaction.

The book’s most confusing chapter is about building permits. Without explaining what she means, Nichols begins by asking, “Why is getting the permits so important to avoiding liability?” It took me several pages to understand that she’s not talking about actually applying for new building permits for remodeling or room additions but about getting copies of all building permits affecting a home.

After the initial confusion, she then does an admirable job of explaining the bad consequences for home sellers who failed to obtain required building permits, such as having appraisers not include square footage that was added without a proper permit or a certificate of occupancy.

Throughout the book Nichols refers to many examples from court decisions and her personal experiences as a consultant or expert witness. Although I recognized some of the well-known cases, the book would have been more far valuable if it gave the case names and citations so readers or their lawyers can read the actual court reports for more details.

The book is filled with practical advice, primarily for real estate agents, but also for home sellers and buyers. For example, the author shares her personal experiences regarding dealing with relatives and friends, documentation of home sales transactions, and even injuries and safety when showing a property to prospective buyers. Legal liability is lurking everywhere, according to Nichols.

Chapter topics include “The Liability Problem”; “Misrepresentation and Fraud”; “The Real Estate Agents’ Visual Inspection and Disclosures”; “The Seller’s Property Disclosure”; “The Buyer’s Property Inspections (Due Diligence)”; “The General Property Inspection”; “Mold, Mildew, Lead Paint, and Other Environmental Hazards”; “Material Facts”; “Property Stigmas”; “Standard of Care”; “Seller Repairs and Credits”; “Property History”; “Rental Property Transactions”; “Title and Encroachments”; “Appraisals”; and “Excuses That Won’t Work in Court.”

This nontechnical book is ideal for those who want awareness of the potential legal problem areas in residential sales without getting bogged down in legalities. At times the text seems to result in “overkill” documentation, probably because Nichols has seen so many court room situations of inadequate paperwork. On my scale of one to 10, this excellent new book about a difficult subject rates a solid 10.

“The No-Lawsuit Guide to Real Estate Transactions,” by Barbara Nichols (McGraw-Hill, New York), 2007, $29.95, 290 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

DEAR BOB: About six months ago, I completed an Internal Revenue Code 1031 tax-deferred exchange, but I have not been able to rent the acquired house due to an oversupply of rentals in my area. Homeowners are having difficulty selling and are trying to rent while waiting for the sales market to improve. I am running out of money for my mortgage payments. Can I move into the house and rent my old home, which I can rent cheaply and still have a positive cash flow? Would I lose my IRC 1031 tax savings? –Dee D.

DEAR DEE: If you are audited by the IRS and have zero rental income to report from the newly acquired rental house on Schedule E of your income-tax returns, it looks like you did not have any rental intent at the time of the exchange. Instead, it would look to the IRS like you acquired the house with intent to make it your personal residence, thus disqualifying the tax-deferred exchange.

PurchaseBob Bruss reports online.

Maybe the rent you are asking for the house is too high. Even if you have a negative cash flow for a while, that would be better than losing the tax deferral on the sale of your prior investment property.

What efforts have you made to rent the house? Do you have receipts for newspaper ads and other rental marketing efforts? That evidence could be important to the IRS.

Moving into the house and renting your current residence won’t look good if you are audited by the IRS. Also, you will be losing out on deducting applicable expenses for the rental house, including depreciation. For full details, please consult your tax adviser.

IF LENDER FORECLOSES, WILL OTHER PROPERTIES BE AFFECTED?

DEAR BOB: I own two properties. If the bank forecloses on one property, will it impact my other property or my principal residence? –Ramesh A.

DEAR RAMESH: If you lose any property by foreclosure, your credit will be ruined. Mortgage lenders don’t like to see a foreclosure on your credit reports.

However, unless you have a blanket mortgage on all your properties (very rare), loss of one property by foreclosure won’t affect your other properties. For more details, please consult a local real estate attorney.

MUST POWER COMPANY MOVE OVERHEAD ELECTRIC LINES?

DEAR BOB: I want to install a swimming pool in my backyard, but there are electric power lines above the area and a power pole on my property. Can I sue the electric company because I cannot build my pool due to their encroachment over my yard and above my home? –Manda B.

DEAR MANDA: When you purchased your home, you were obviously aware of the overhead electric power lines and the easement (not encroachment) over your property. The power company is not liable to you for damages, nor can you force the removal of the wires that are involved in the easement.

However, you could offer to pay the power company to move their wires so you can build the swimming pool.

The new Robert Bruss special report, “How to Profit from Lease-Options (Rent to Own) Whether You are a Property Buyer, Seller or Realty Agent,” 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).

***

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

Copyright 2007 Inman News

Dear Barry,

I’m considering the purchase of a home that was built in 1951, and I have two questions:

1. Are plumbing systems from that era consistent with today’s standards? (I think the pipes are steel.)

2. Are electrical systems of that age safe, and are they capable of providing enough power for today’s electrical needs? –David

Dear David,

Construction standards have changed considerably in the past half century, especially with regard to plumbing and electrical systems. The use of galvanized steel water piping was abandoned in favor of copper in the late 1960s, and now the plumbing industry has moved from copper to PEX (cross-link polyethylene). The problem with old galvanized pipes is that they usually have internal rust build-up, which reduces water volume. The most obvious symptom of corroded water lines would be changes in shower flow when other plumbing fixtures are operated.

Electrical systems in the early 1950s had much less capacity than today’s systems because there were fewer electrical uses at that time. Typical breaker panels from that period provided from 50 to 70 amps, and some systems were still equipped with old-fashioned fuses. Today, the minimum service size is 100 amps, and homes are wired with many more circuits than they were in the early 1950s.

Many aspects of a 1950s home are obsolete by today’s standards. Therefore, be sure to hire a highly qualified home inspector before closing escrow on this property.

Dear Barry,

Our homeowners insurance company recently sent an inspector to our home to make sure the value of our policy covered replacement costs for the building. They now say the property value has increased by about $75,000, so they are raising the premium to pay for the additional coverage. Are insurance companies allowed to do this, or do I have recourse? It seems to me that the increased value is largely due to inflated land costs, not increased value of the building. What can we do? –Nicole

Dear Nicole,

There is a modern-day proverb, often quoted with bitter irony. The “golden rule,” they say, is that whoever owns the gold rules. And who, after all, is more heavily laden with golden wealth than insurance companies? Hence, they lay the rules, and we pay the jewels. Nevertheless, you may still retain a small voice in the conversation.

The state agencies that govern the operations of insurance companies often have review processes whereby complaints can be considered. You should check to see if such recourse is available to you. Inflated land costs, as you’ve said, should not increase the cost of replacing a home. On the other hand, the significant rise of construction costs in recent years may weigh in favor of the proposed premium increase.

Aside from these conflicting considerations, insurance costs should always be expected to rise. It’s one of the immutable constants of worldly existence, as inevitable as death and taxes.

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

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

Copyright 2007 Barry Stone

DEAR BOB: As a Realtor for 19 years, I do not agree with your comment that a listing agent who refuses to hold open houses is lazy. A more appropriate response would have been for the home seller to ask that agent to prove by his success record he can sell property of that type without open houses. I have sold hundreds of condos and I never hold open houses. I feel they are an imposition on the neighbors, especially within gated communities. I work with clients who are often elderly widows, single women, and mothers with newborns. These clients are rarely comfortable with public open houses. But I always conduct office and MLS (multiple listing service) tours. Then I advertise like crazy on the Internet and in print media. Your response? –Beth B.

DEAR BETH: Congratulations if you are successful without open houses, especially in a buyer’s market.

PurchaseBob Bruss reports online.

As a real estate broker for 39 years, I’ve held my share of open houses. We agree they don’t always work. But they work often enough — especially to meet prospective buyers and sellers for other properties — to make them worthwhile. Unless you have a more profitable use for your Saturday and Sunday afternoons, give open houses a try.

$500,000 HOME-SALE EXEMPTION REQUIRES JUST ONE SPOUSE ON THE TITLE

DEAR BOB: My husband and I have been married and filing joint income-tax returns for the 10 years we have lived in the house that I purchased in my name alone. His name is not on the title or the mortgage. We continue to live in the home and plan to sell it within the next year. Are we eligible for the $500,000 tax exemption? –Nancy V.

DEAR NANCY: Yes. Although the title is in your name alone, if both you and your husband have occupied the house as your principal residence for at least 24 of the last 60 months before its sale, then you qualify for up to $500,000 tax-free capital gains.

Internal Revenue Code 121 does not require the names of both spouses on the title or on the mortgage obligation. For more details, please consult your tax adviser.

LIFE ESTATE OR PURCHASE OPTION CAN TIE UP NEIGHBOR’S HOME

DEAR BOB: I would like to acquire my elderly neighbor’s house so I can build a large new home across his lot and mine. But he refuses to sell to me. I want to present him with an offer for an open-ended purchase option or a right of first refusal. His health is deteriorating. I am willing to wait for the property to become available as part of his estate. He has no children and is unmarried. What strategy can I suggest without being perceived as the grim reaper? –Allan G.

DEAR ALLAN: If the neighbor needs money, perhaps he will sell you an option to buy his property at a time to be determined by him within the next 10 years. Nonrefundable option money, applicable to the purchase price, is negotiable. Customarily, it is 1 to 3 percent of the option purchase price.

However, you do not want a right of first refusal. That gives you the right only to match any purchase offer the neighbor receives from another buyer. It ties up the property but doesn’t give you the right to acquire the property until someone else offers to buy it. Rights of first refusal create messy situations and are not recommended.

Or you could buy the property now, giving the neighbor a life estate so he can remain in his home as long as he wishes, or until he dies. A local real estate attorney can explain further.

TOO MANY RENTERS MAKE A BAD CONDO COMPLEX

DEAR BOB: We are considering the purchase of a three-year-old condo in a building that has a 48 percent rental population. The homeowners association has no rental restrictions other than a six-month minimum lease. There are 334 units in the building. We plan to live in our condo for a long time, want a stable living environment in a well-maintained building, and are interested in making a solid investment. Do you recommend we proceed with this purchase? –Kathleen L.

DEAR KATHLEEN: No. Forty-eight percent renters is extremely high for a fairly new condominium. That is a very bad sign because there are too many absentee owners.

Your interest rate, if you can obtain a mortgage in that building, will probably be much higher than for a condominium complex where there are few renters. Because there are more than 20 percent renters, my best advice is keep looking for a better condo complex.

A high percentage of renters shows that owner-occupants steer clear of that property. When the building was constructed, maybe the developer couldn’t find enough owner-occupants and he had to sell to absentee investors who want to keep maintenance expenses as low as possible. Also, renters tend to cause behavior problems whereas owner-occupants want to maintain the property to higher standards.

TRUSTEE NEED NOT CONSULT BENEFICIARIES ABOUT HOUSE SALE

DEAR BOB: My mother died. She had a trust. My sister is now trustee of the estate. I also have a brother. Who decides the sales price for the house when a purchase offer comes in? Is it my sister alone or all three of us? –Joe S.

DEAR JOE: If your sister is the only trustee, she alone can make important decisions such as the acceptable sales price for the house. Although you and your brother are also beneficiaries of the trust, she is the one who makes the decisions.

However, as a beneficiary of the trust, you are entitled to an accounting if you suspect anything improper.

Frankly, your mother made a wise decision to have just one trustee. When two or more co-trustees get involved, if they don’t all agree, trouble can result. For more details, please consult a local trusts and estates attorney.

HOW MUCH SHOULD HOME BUILDER DROP THE PRICE?

DEAR BOB: I have a contract to buy a brand-new house that is under construction with completion planned for next month. I put down $76,000 to begin construction. At the time, the base price of the house was $697,900. Now, because of housing woes, the base price in the development has dropped to $556,900 for similar houses, a difference of $141,000. How much reduction in the base price should I expect the builder to offer? –Joseph A.

DEAR JOSEPH: Ask for as much as you can get. It sounds like the builder should drop your base price by $141,000 if that is the lower price he is now offering on his similar nearby new houses.

Unfortunately, the builder has your large $76,000 deposit so he has some negotiation power over you. That was an abnormally large deposit. If you can’t negotiate a satisfactory price reduction in the current buyer’s market, don’t hesitate to hire a local real estate attorney to assist with your negotiations. A key tactic to emphasize is the house probably will appraise only for the lower amount so he should reduce his base price.

MUST LISTING AGENT COOPERATE WITH HOME BUYER’S AGENT?

DEAR BOB: We have a buyer’s agent to help us find a home to purchase. On our own, we found a new-home community we like very much. When we told our buyer’s agent, she was informed it was a “family affair” with the father, daughter and son-in-law representing the builder. They refuse to split the 6 percent sales commission with our buyer’s agent. Is this illegal or just unethical? –Maureen R.

DEAR MAUREEN: Unless a property is listed in the local MLS (multiple listing service), real estate listing agents do not have to cooperate with other agents who represent home buyers. There is nothing you or your buyer’s agent can do to force the listing agent to cooperate.

Frankly, in the current buyer’s market in most cities, it is foolish for a home builder’s real estate agent to refuse to cooperate with your buyer’s agent. Most home builders would be thrilled to pay a 3 percent sales commission to your buyer’s agent.

CAN HOME BUYER REFUSE TO PAY MORTGAGE JUNK FEES?

DEAR BOB: After reading your recent article about mortgage junk fees, my question is can my son, who is buying a new home, refuse to pay a $495 processing fee and a $350 underwriting junk fee? Also, why is he being asked to pay three months of “hazard insurance” at the closing and monthly thereafter? –Chris K.

DEAR CHRIS: The $495 processing fee and $350 underwriting fee are classic examples of unnecessary mortgage junk fees. If your son refuses to pay them, the lender might waive them or at least reduce them.

Remember the definition of a mortgage junk fee is a charge that does not give the borrower any direct benefit. Examples of valid mortgage fees include appraisal fee, credit report fee, title insurance fee, and recording fee. Junk fee examples that confer no borrower benefit include loan application fee, administration fee, documentation fee, warehousing fee and miscellaneous fee.

As for the hazard insurance, that is another name for a homeowner’s insurance policy. The mortgage probably includes an escrow impound account for property taxes and hazard insurance. The lender usually requires one-twelfth of these charges to be paid each month, with three months of prepaid charges at the time of loan origination.

The new Robert Bruss special report, “How to Profit from Lease-Options (Rent to Own) If You are a Property Buyer, Seller, or Realty Agent,” 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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