Ask Realty Times - December 31, 2004
by Peter G. Miller
Question: I'm planning to buy a couple of houses in a new development with a group of individuals. We put together an investment club and we are looking for hot markets. Our general idea is to get in on the beginning stages of a new development, probably before the house is even built, with hopes that the later phases will have gone up considerably in price. Our venture is in little more than the planning stages, but is something we all see as a great idea. What do you think? Answer: Investment clubs for real estate and stock are a common way for people to pool their money, share risks and rewards and to benefit from a variety of ideas. Buying in the early phase of a new home development, in some communities, has often been profitable. In my area, for example, new townhouses near subway stops have increased in value by 15 or 20 percent within a matter of months. That said there are some steps to take to help your group: Speak with an attorney about the pros and cons of becoming a limited liability corporation rather than a partnership or association. Establish an escrow fund to hold money and require at least two signatures for withdrawal. Ask local brokers and builders to speak before your group. Question: My partner and I own a bar & grill as equal partners. We recently listed the business and property for sale with a real estate firm. Now we have agreed that I will buy out my partner. Do we owe a real estate commission? Answer: Your first step is to see what type of listing agreement you have with the broker. Is it an "open" or "general" listing which allows you both to use brokers and sell by yourself? Is it an "exclusive agency" agreement which means that only one broker can list the property during the listing period and that you still have the right to sell independently? Or, is it an "exclusive right to sell" which essentially means the listing broker is entitled to a fee if anyone -- including you -- sells the property? The first two listing formats mean you can directly sell without paying a brokerage fee -- but the third form of listing is the most common. You could have negotiated an "exclusive right to sell" listing agreement which specifically excludes the payment of a fee in the event of a sale to a current part owner, what I call a "non-exclusive exclusive." Speak with the broker and see what seems reasonable. Perhaps it would make sense to take the property off the market and compensate the broker for the cost of advertising and other expenses plus a reasonable fee for professional time. Question: We are selling our home and have been given a pamphlet for insurance which covers us from a lawsuit in case hidden damage is discovered within a year after the sale. Is it necessary to have this insurance or is it a waste of money? Answer: Does the policy cover all damage or is there a deductible? How much? Does it cover all claims? Who is offering this policy? Does the policy apply if fraud is claimed? Of 1,000 policies in your state, how many result in the payment of claims? If a listing broker believes such coverage is a good idea perhaps he or she will agree in writing to pay for it at closing. As an alternative, why not get a re-sale warranty which provides for certain repairs? Such coverage removes much of the financial incentive for a suit. Also, be sure your buyer has an independent home inspection before being obligated to close the sale. Speak with a real estate broker for details. Question: Can a landlord require a tenant to have the carpets professionally cleaned upon move out? Answer: Yes. If such a requirement is in the lease then it's part of the rental agreement. Question: My girlfriend and I are buying a house. The mortgage is in her name due to my bad credit. If my name is put on the title and deed of the house, am I responsible for the loan if she defaults? If I am added to the title and deed and our relationship ends are we both still responsible for the loan? Answer: If the property is being purchased in her name alone and you add your name to the deed without the benefit of marriage, then the lender is likely to feel that the home has been "sold" and that the loan is immediately due and payable. If your name is added to the deed after you marry, then your situation falls under the 1982 Garn St. Germain Act. It says a lender may not enforce a due-on-sale clause "where the spouse or children of the borrower become an owner of the property." However, if your girlfriend defaults on the loan the lender will foreclose. As you are not now a cosigner you are not responsible for repaying the debt -- but credit records may show that you were the co-owner of a property that was foreclosed. Whether married or not, you and your girlfriend need to plan with care. If your name is added to the title and you separate, who gets the house? Do you both have wills and living wills? Would adding your name to the title reduce her ability to deduct interest and property taxes? Etc. Question: What can be done to prevent problems with dishwashers left unused for months at a time? We have a place in Florida and the dishwasher is leaking. Neighbors tell us that dishwashers don't last very long for us snowbirds. Answer: When you leave for the summer keep the dishwasher door open so the interior can air out. As to the leak, this is likely the by-product of a faulty hose connection rather than non-use. Have a plumber take a look. Question: I purchased a 250-year-old home and had an all-around home inspection including termites, power post beetles etc. The house passed. The home was inspected in May and by mid-September I saw a white ant walking across my dining room floor next to my fireplace. I called a pest control company and they collected samples. The samples confirmed that we have termites. Who is ultimately responsible for taking care of this? Answer: Do you have actual termite damage or just a few bugs hopping around? A change in the weather could drive insects indoors, thus there may not have been termites in the house during the warm months when the house was first inspected. You say you had a "home inspection." Was the inspector a licensed pest controller or a general structural inspector? If there is termite damage that was missed, then speak with the inspector about such warranties as they may provide. As to the current infestation, it should be treated by a licensed pest controller.
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