Ask Realty Times - April 22, 2005
by Peter G. Miller
Question: I'm buying a new house and it looks as though the builder will not have the house completed by, or on, the closing date. I had a 60 day lock-in on a good mortgage rate, it now looks as though I will be paying a higher rate because of the contractor's delay. Do I have any recourse with this? Answer: Please review your purchase agreement. If it's in the builder's usual form -- a form which will favor the builder -- there is likely to be language which both sets a closing date and then gives the builder the right to delay closing because of labor shortages, weather problems, a materials deficit, golf outings, the start of the fishing season, Yeti sightings, etc. Question: I am attempting to buy my first house. I am buying into a sellers market, so I am told, and every day that passes I pray for the market to fall, and not just fall but crash. Local sellers constantly ask for $20,000 -- $50,000 over their homes appraised value. Is it smart to wait this out, and if so how long will this keep up? Answer: Local markets are, well, local. Sellers can only get high prices if buyers are willing to pay premiums, and that's plainly the case in your area. How long will the seller's market continue? No one knows. But a better approach is to look at your income and determine how much you want to pay and what you need. That way, if the market falls you'll won't be overextended. Question: We're getting ready to buy a house. This is a gorgeous home in terms of design and space. However, the hardwood floors are badly damaged and need replacing and several repairs need to be done. This will cost us a huge amount of money, at least 10 percent of list price. We're trying to negotiate so that these damages are taken into account to bring the price down. If the sellers agree to this lower price, how does this impact the future resale value of the house? Answer: It doesn't. Homes are for sale at today's market values. What someone paid in the past is irrelevant. No buyer would pay a higher price because the seller overpaid, and in the same manner no buyer will get a discount because a seller bought many years ago at a low price. Example: A local property is for sale at $500,000+. The owner paid $45,000 many year ago. Does anyone believe the seller should get less than market value? Does the seller believe that? Question: How can we negotiate so we get cash at closing. Turns out our lender won't allow this. Answer: To a lender a house is security for a loan. If a house is worth $300,000 a lender would be elated if you borrowed 80 percent, or $240,000. However, there are loans out there equal to 100 percent of the sale price or the appraised value, which ever is less. Indeed, there are loans out there for more than 100 percent. Naturally, such mortgages represent more lender risk and thus have higher rates. Many lenders refuse to make such loans precisely because they are so risky. If you need funds for repairs and upgrades after purchase, then consider the FHA 203k rehab loan program. With this loan you receive money to acquire a property plus additional money for repairs. Speak with loan officers for details. Question: We need help finding a home. How does the HUD program work and how do you apply or get started? We have till August to renew our rental agreement, but we really need to find a home closer to work and schools. Our credit is not the greatest, in fact it's bad and I don't know where to go for help. Answer: You can find information regarding HUD homes from local real estate brokers. However, why limit your choices and look only at HUD homes? Instead, meet with lenders and have your credit situation reviewed: What is your credit score, how much borrowing ability do you have and do you qualify for any state or local loan programs? Speak with neighborhood and community groups to see if there is any grant money or other financing that can help you. Once you know what's affordable, then speak with brokers about all homes that might meet your criteria. If a HUD home works, that's fine, but there may be other properties out there which you should also consider. Question: Because of several claims my homeowners insurance has been canceled. The claims involved a stolen truck and, separately, items stolen from my home. The police were called and people will go to jail. The claim on the truck was not made on my homeowners policy and yet my insurer says that with it I have "too many" claims and has canceled my policy. I have no mortgage but I want coverage. What can I do? Answer: A basic standard for mortgage lenders is that borrowers must have fire, theft, and liability protection. That you do not have a mortgage means there is no lender to enforce such a requirement, however you are right to want coverage. Also, you have a right to make claims -- that is the purpose of insurance. It is surely not your fault that someone stole a truck or removed items from your home. You're the victim of theft and there is no reason for you to suffer additionally. Please contact an insurance broker to see if a policy is available from an alternative company. Also see if your state has an insurance pool of some type that might provide coverage. Lastly, contact the consumer affairs office with your state attorney general and ask if your current insurer is following all state requirements. Question: We're in escrow. The two-story house is a fixer upper next to my parent's house. The seller discounted the house by $35,000 because the roof has holes, none of the appliances work, the yard is a mess and... How do I put a roof on a house when I don't own it? How do I get home insurance when I don't have a roof? Answer: You can't get homeowner's insurance without title. The current owner must have such insurance (or face the possibility of claims without it). As to doing repairs prior to closing, that's a risky idea. What happens if you place a new roof on the home and the sale does not close? Have you made a gift to the owner? I can imagine an agreement with the seller, for you to roof the property now if the owner will agree to be responsible for the cost in case the sale falls through. However, this is not something to casually write -- imagine if a worker gets hurt fixing the roof. Are you responsible or is the seller? Get an attorney or legal clinic to draft a proper agreement. Question: We have a situation which makes us uncomfortable. We are told that a home sale was lost because the paperwork was in English, a language not spoken the buyer. Where can we find more information about anti-discrimination rules? Answer: The federal Fair Housing Amendments Act of 1988 prohibits discrimination on the basis of "national origin." Consumer groups make anti-discrimination information available in English, Spanish, Chinese, Korean, and Vietnamese, among other languages. Anyone with a question can call HUD, toll-free, at 1-800-424-8590. Question: I had a home built two years ago. Six months after moving in, we found that the condensation overflow pipes had been sealed within the stucco of the outside wall during construction of our house. This oversight then manifested itself into a mold problem, which the builder has since repaired. My question is this: When we go to sell our home will we have to disclose this problem in the purchase contract? We have the mold report stating that everything was taken care of. Answer: One disclosure theory goes like this: If a home has a problem and the problem has been fixed, then the problem does not exist so there is nothing to disclose. Another theory takes this approach: If a home had a problem, the problem was repaired and thus not disclosed -- but the same problem or a like problem shows up after closing, then the seller might face a claim of some sort, whether justified or not. The best answer is this: You're actually in a wonderful position -- you have every reason to disclose. You had the problem resolved and you have a report from a professional showing that the matter is no longer a concern. Thus, when you sell, disclose the problem, provide a copy of the report and get a receipt showing that the report was received and accepted by the purchasers. As well, make sure the buyers get a home inspection satisfactory to them.
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. | 
