Ask Realty Times - December 10, 2004 - 12/10/2004 - Home Exterior Pets Termites Insects

Ask Realty Times - December 10, 2004
by Peter G. Miller

I realize termites can come at any time, but the dry rot had to take a long time to develop. Does the seller have any recourse against the company who inspected the home when they purchased over a year ago?

Answer: The answer depends where the property is located because the scope of a termite inspection will vary from state to state. For example, in Maryland, DC, and Virginia termite inspectors are not required to inspect for or disclose the existence of anything but wood destroying insects. The reason? Wood rot, decay, fungus, and dry rot are considered to be caused by wood destroying organisms.

Most Southern, Gulf Coast states, and California do include wood destroying organisms in the scope of an inspection.

Termite inspections show conditions at the time of the report only, and unless specifically stated by the inspecting firm there is no guarantee against future infestations.

Most reputable firms carry errors-and-omissions insurance, so a first step is to contact the original inspection company. If the inspecting firm feels that they may have overlooked something during the inspection, often they will correct the problem at not cost or at a reduced cost, even when no warranty issued was issued.

Also, finding damage worth $12,000 surely requires a second and independent inspection as well as repair bids by someone other than the firm that found the damage.

Question: We are buying a home. The sale agreement says that the sellers need to give us 30-day notice of moving and that they can only stay up to two months after closing. What should we include in the rent-back contract to protect us from damages incurred after closing but while the sellers are renting back? We have also already agreed upon the rent-back price -- they are covering our mortgage payment. We are first-time home buyers and need details as to how we get the rent, security deposit, etc.

Answer: What you are looking for is a "post-settlement occupancy agreement." This is a complex document with lots of clauses and sub-paragraphs because renting back raises a host of issues.

For instance, how do you know damages have occurred during the occupancy and not before without an inspection and a photographic record? Who is paying for utilities? Insurance? Does the lender know the property is being rented for as long as two months -- many loan agreements require purchasers to occupy a property within 30 days. And does your community have rent control? If yes, by renting you may give certain rights to your tenants.

Question: We have rented an older home for several years and worry about the condition of the property. Some floors slant and the wall is separating from the bathtub. I'm scared the floor and tub might cave in. What if this whole setup is a hazard? What can we do?

Answer: Landlords have an obligation to provide safe and habitable quarters -- and no landlord wants the local government to issue citations or even close a property. Slanting floors and walls separating may be evidence of structural movement, a serious matter but one that can usually be resolved. Ask the owner to have a licensed engineer immediately look at the property.

Question: I'm interested in buying a house at a sheriff sale. If I bid on the house and purchase it for $100,000 and its appraised value is $160,000, would that mean I would have $60,000 in equity, and if so could I use that $60,000 in an equity loan to pay on the first mortgage to make the payments smaller? How likely is it that I could get the equity if I tell the second lender I will put their money toward the first mortgage?

Answer: Stop. Bid on nothing. You need to know more about real estate before going further.

Real estate "equity" is generally seen as the market value of a property less mortgage debt. Some people have a more conservative view and see real estate equity as the market value of a home less mortgage debt and marketing costs.

Lenders will finance real estate on the basis of its sale price or its appraised value, whichever is less. For this reason, a lender will make a loan to you based on the $100,000 purchase price.

As to getting a second loan in addition to the first, the second loan is debt which also has to be re-paid. Because a second loan represents more risk, a lender will want a higher rate of interest, thus you are not ahead paying off a first loan with a second.

Question: When we signed a listing agreement with a broker, my husband was drunk and I was under the influence of a prescription medicine. I told my broker about all this and the day after we signed the contract she had the signs put in my yard. Someone drove by and agreed to our price. My broker said there was nothing that I could do but sell to them. The buyer's agent threatened me with a lawsuit. Is there anything I can do to keep my home right now?

Answer: It may be that because of your husband's condition he lacked the "capacity" to enter into a listing agreement or any other form of contract.

Did you and your husband accept the buyer's offer? That a buyer made a full-price offer does not necessarily mean that it meet all terms and conditions of a listing agreement.

Please see an attorney. This will cost a bundle to get straight.

Question: I just bought a 1.25 acre residence. Besides the home where I live, the property has about one acre planted with avocados which are harvested and sold commercially.

I'd like to explore the tax benefits (property tax and other) of converting the property from a residence to a farm.

Answer: You could certainly call the local government, anonymously, and speak to someone in the property tax office.

What you now have is a home-based business. If the property's zoning status is converted from "residential" to "agricultural" you may well have a lower property tax rate in some jurisdictions. However, it may also be more difficult to refinance the property and tougher for future buyers to obtain financing.

Speak with local real estate brokers and ask which is easier to sell: A home in your community on 1.25 acres or a farm of the same size?

Question: We have bought a new house and have been working on the grading of our yard with our builder. We have had standing water in our backyard for months. After two failed attempts to fix it they are re-grading yet again.

My husband and I have missed two weeks of work for repairs to the inside of the house. We have told our warranty person that they will need to come on a Saturday to complete the work. This is because almost everything on our list to be fixed has been on our list three or more times.

Is there any hope? Is there anything we can do?

Answer: You can look at this two ways. You could say there are some items which should have been done right initially, or you can say that a house is a hugely complex product and you have a builder who is following-up and trying to make repairs.

Your situation would be disturbing if you had problems and the builder made no effort to fix them. Here at least you have a builder trying to do the right thing even though the home has been sold and money collected.

The suggestion here is to work with the builder, stay home if need be during the week (perhaps telecommute if possible) and get the repairs done.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.