Ask Realty Times March 16, 2007 by Peter G. Miller
Question: My buyer broker placed an offer on a house with a pre-approval and 20 percent down. The selling agent called my loan officer to asked for my FICO score, how much money I have in the bank and other personal questions so she can run the info with her broker. My loan officer did not give any info except that I am a serious buyer with A+ credit. Was the listing agent out of bounds with such questions? Answer: There's a complexity within your question that needs to be addressed. The listing agent wants to assure that any would-be purchaser is financially qualified to buy the property. The reason is that the owner (and the agent) do not want the property tied up for weeks with a buyer who is ultimately unable to close. Such a delay might mean the loss of a qualified buyer. Also, there may be competing offers for the property so the owner will want to consider the financial strength of the bidders since it does no good to accept a high offer from someone who cannot complete the sale. In the usual case the buyer's agent provides a financial qualification statement or a letter from a lender. Neither is an absolute guarantee of financing, but both are useful. (The ability of the owner to sell a property is not absolute either -- that's why there are surveys, title checks and home inspections.) Your loan officer in this matter did the right thing -- he or she did not disclose your personal financial information. For instance, suppose you need an $80,000 income to qualify for financing and you actually earn $100,000. If the seller knows all the details about your income he might hold out for a higher price or different terms. What the lender could have said is that his judgment was based on your ability to put down 20 percent plus his review of your credit report. In other words, the lender cannot reveal the contents of the credit report but he can at least say that his analysis is not based on fantasy. Question: I'm planning to buy my mother's house. No real estate broker is involved. Should I pay the full appraised amount or less since there is no commission to be paid? Answer: This is not an arms-length transaction so review the property's appraised value and then consider the needs of both your mother and yourself. If your mother's need for cash is greater than your need, then pay the full amount or more. If your mother is trying to reduce the price to help you out, then a discount can be appropriate. By any chance, would it be better for tax purposes to inherit the property rather than buy it now? Be sure to get proper legal and tax advice before going further and make certain you have a written agreement between you and your mother for tax and estate purposes. Question: My family just arrived in the U.S. in September 2006 because my wife got a job as a therapist in a local school. She is an H-1B visa holder with a two year contract (renewable) and I and our two kids have H4 visas. Will there be problems with regard to our status when we finally decide to buy a house? Answer: The H-IB visa program allows an individual to stay in the U.S. up to six years (it has a three-year term and can be renewed once). The program is designed to bring skilled professionals with guaranteed jobs to the United States. Florida-based immigration attorney R. Sam Levine says under the H-1B visa program you can obtain lawful employment in the U.S. Such employment means you will be paid and when you're paid you must pay appropriate taxes, including social security taxes. To pay social security taxes you must have a social security number and with a social security number you have an identifier that can be used to obtain a mortgage. Before looking at properties please speak with mortgage lenders first so that financing is in place before you go house hunting. Question: In November 2005, we purchased a five-year-old home. Prior to closing, our broker informed us that there was now (after the inspection) a leak in the dining room, but that if we agreed to proceed with closing the owners would "repair" it. This understanding was written as part of our purchasing agreement that the sellers would make repairs. Well, here it is approximately one year later and the roof in the same spot is now leaking again. Due to it being in writing as part of our "purchasing agreement" are the sellers still obligated to repair the roof? Answer: You're not going to like my answer: The owners repaired the roof. They did not warrant that the repair would last eternally. You could have complained about the repairs at the time they were made if they were inadequate but apparently did not. Why? The repairs fixed the problem. In the year that's passed since the repair was made there could well be new causes for the current leak. It doesn't seem fair to blame that on the sellers. However, there may be other ways to approach this problem: First, you have a five-year-old house. By any chance, does your state require new home builders to warrant their work? Would a leaky roof be covered after five years? Could the leak be a result of structural problems? Second, was the repair made by a professional roofer? Did you get a written warranty? Does coverage still apply? Third, by any chance do you have coverage against water damage in your homeowner's insurance policy? Question: Is the week before March Break a good time to list a home for sale? Are agents and buyers generally out there looking or off doing other things? Would it be best to wait for March Break to end before listing? Answer: "March break" is generally a period in Canada which relates to a school intercession, what those in the U.S. would call a "spring break." Given that breaks tend to be short, and given that actual calendar dates vary, it's not much of a factor in the real estate marketplace. Instead, speak with local brokers and list in advance of when you want the property to sell. Question: Can I have a tax-deferred exchange of rental property for a restaurant? Answer: To have a tax-free exchange you must swap property used in business or trade for a property which will also be used in business or trade. Thus you could trade a rental property for a restaurant building (real property) but not a restaurant business (recipes, a liquor license, tables, etc.). For details, speak with an exchange specialist. Question: I bought this house nine years ago. The title insurance report mentioned nothing about a city easement on the back slope for landscape maintenance. There are several eucalyptus trees growing on this back slope which constantly shed leaves and mess up my swimming pool. I was not aware of the city's easement rights. After I trimmed one tree and deposited some surplus rocks on the slope, I received a nasty letter from the city. The title company admits that they missed the easement and they ordered an appraisal. Based on this report, the title company says that the easement does not affect the market value. The appraisal does not take into account that the property owner has lost control over the slope and use rights due to sloppy title search by the title company. How should I deal with the title company? Answer: You need to review your title insurance policy to see what is covered and what is not covered. Typically you would expect to find that a recorded easement or use restriction would be covered. Appraisals represent judgments and one question to be asked is whether another appraiser -- say someone you selected -- would have a different answer. Surely the full enjoyment of your property depends on your ability to use all the property you bought and all the property on which you pay taxes. You might not even have bought the property had the easement been originally disclosed. It may be more difficult to sell since you must now disclose the easement -- thereby potentially reducing market value. You might want to continue your dialog with the title insurance company. If not satisfied, speak with a local real estate attorney. Question: We have lived in a house for more than 20 years. The house was built in 1926, but has been upgraded several times. It has three structures including the main house: a converted garage that is a rental cottage and a storage/artist's studio building. In the inspection process I discovered that the work needed on the house (foundation -- $100,000, roof -- $3,000 or $4,000 chimney --$4,000. and heating -- $3,500) was much more costly and serious than I had even dreamed. Should we sell "as is"? Take out a home improvement loan and fix the house, then either sell it, or keep it and rent it? Answer: None of the above. The first thing that should be done is to speak with several local contractors who do foundation work. It may be that the repairs you require will cost substantially less than $100,000. When you get estimates from other foundation contractors do not reveal the current estimate, instead let them work from their experience and expertise. As to what to do with the house that depends on such factors as its market value, your finances and your personal preferences. The repairs you're considering may make absolute sense in the context of a property with a substantial market value -- and no sense for a property where your improvements cannot be recovered. Speak with local brokers -- and ask if selling the home with an escrow account for repairs would be a good strategy to limit costs in your situation.
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