Ask Realty Times - May 20, 2005 - 5/20/2005 - Real Estate Home House Condo

Ask Realty Times - May 20, 2005
by Peter G. Miller

Answer: Debt is debt, interest is interest and in both cases your interest should be tax deductible. Thus instead of considering which house to make debt free, look at such factors as which debt has the higher interest rate, which loan is adjustable (if any), and which has the higher monthly cost. If you have a loan which is both high interest and high cost, or a loan which is adjustable and likely to become more costly over time, then those would be the prime candidates for instant repayment.

Question: We are about to purchase a recreation home. From what information we've seen, the market is hot for these type of properties. Is there a clause we can have inserted by our broker whereby we would have the right, or privilege, to tender another bid in the event that an offer with a higher price and similar conditions is received by the Seller?

Answer: Most probably you're thinking of an "escalator" clause. However, have your broker or attorney review the pros and cons of such contract language to assure that you don't overpay. For example, will you have a bidding cap? How much is each automatic rise? How many automatic increases will you allow? Etc.

Question: I just signed a 240-day listing contract to sell my home. I signed yesterday but now wish to cancel. What is my liability?

Answer: In theory you have an agreement and the broker could insist on the right to market your home for the next eight months. Or, the broker could ask for compensation because a valid business opportunity is being lost. The broker might also ask for compensation to recover advertising and marketing expenses to date.

However, the broker is a local business person. He or she has a local reputation which is enormously valuable. The broker has common sense. In such circumstances it's not wise to antagonize an area homeowner who no doubt has friends, co-workers and neighbors.

Go to the broker, ask to cancel and offer to pay expenses to date -- given that the home has only been listed a day, the broker may graciously ask for a release and nothing more.

Question: We have a home that has been on the market for five months. It's over 3,000 square feet and only four years old. It's in great shape, has a great location on a quiet street and we had the rooms repainted back to builder white so that the house looks clean and fresh. We have lowered our price as far as it can go without giving it away. Is there another way to sell, such an auction?

Answer: All homes have a selling price. That price is not determined by sellers alone, by what the house cost, or by the need to obtain a certain financial result.

You have a nice home which has not sold. The question ought to be: Why not? Is price an issue? Location? Is the local economy soft? Before going further, ask your broker to review recent sales in your community. How long is the typical house on the market? How does your home compare with those that have sold in terms of pricing, location and condition? What is the broker's marketing plan? Should it be changed? What more can be done? What are the pros and cons of renting rather than selling? Etc.

Question: We're selling our home "as is." Who is obligated to pay for home inspection, the termite inspection, etc. -- us or the buyers?

Answer: You could accept an offer which requires you to pay such costs, however in most cases both expenses are paid by purchasers. Take a look at local purchase agreements and speak with area brokers for details.

As to selling the home "as is," that does not impact the question of who pays for the inspections.

Question: My husband owns a vacant lot in Queens, New York. He receives numerous letters from investors and developers wanting to purchase the lot. The area is in development and they have built new one-family and two-family homes across the street from his lot. Last week he received a call from someone asking to purchase for $325,000. When I told him we were not selling below $410,000 he came back with an offer of $385,000. I suggested to my husband that we have the lot appraised, but he did not think that was necessary given the prices of the new homes across the street. What do you think?

Answer: I think property worth several hundred thousand dollars is likely an important asset in most households and that it's in your best interest to assure that you're getting full value. Get an appraisal -- and make sure you have an attorney review all paperwork before you sign anything.

Question: I paid off my home eight years ago. When I went to refinance I was told that I needed a reconveyance. Now the bail bondsmen wants $200 to do the reconveyance. Can I get my property released without paying them?

Answer: Apparently your loan was in the form of a deed of trust. Once paid off, the trustee who acts for the lender then reconveys the property back to the borrower. In this situation it appears that title was not returned to you.

As a first step, why not contact the trustee and see if they will issue an appropriate reconveyance. Otherwise, you may need to pay the $200 to go forward on a timely basis with your new loan.

Question: I am a real estate agent. I helped sell my girlfriend's house with a land contract to a distant friend. I did not involve my license in this transaction. I was just acting as a selling party. Buyer liked the property and wanted to go for it. I did not disclose it was my girlfriend's property until contract signing day, then I told just before signing. It did not make any difference and buyer still went for it. At the time I suggested to the buyer that if the market goes well, the property may generate about $20,000 equity in three months when he sells. The land contract time limit was six months. No written promises were given. Now six months after the contract, I was wrong and the property did not appreciate as much as I expected.

Maybe with creative selling he can generate that amount if he offers financing or a lease option kind of deal. Now the buyer is suing me for big money and telling me that he has an attorney and that I will loose my license. They say I misrepresented, lied about the value of the property and did not disclose my relationship to the seller even though I did. What claims might they make against me?

Answer: Judging from your letter, they may first say that under state licensure rules you were required to disclose your licensure status early in a sale situation, whether or not you acted as a broker.

Second, they may say that guaranteeing future profits is commonly prohibited under state licensure rules.

Third, given that both the buyer and the seller were your friends, they may both have felt they could rely on you, confide in you and that you were acting in their individual best interests. In effect, one or both may claim that you were acting as an undisclosed dual agent.

For specifics, speak with your broker as well as a real estate attorney.

Question: I want to modify my mortgage, however my loan officer says that can't be done. Is this true?

Answer: Here's what's true: A mortgage can only be modified when both parties agree to change the loan arrangement. There is no requirement for a lender, or a borrower, to modify mortgage terms.

However, it should be said that loans are routinely modified -- think of adjustable-rate mortgages or loan terms that are changed when natural disasters strike.

Question: I have a $110,000 mortgage. I'm in the second year of the loan and the balance is now $107,000. The current interest rate is 5.375 percent.

The lender has just told me that my monthly escrow payment is rising from $226 a month to $302. How do I get rid of private mortgage insurance to lower my monthly payments?

Answer: As your loan balance declines so will private mortgage insurance cost (MI) in most cases.

The reason your escrow payments have steeply risen almost surely concerns local taxes and insurance. Both may have grown substantially, especially if the value of your home has increased greatly during the past two years.

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.