We are all painfully aware of the many homes which have gone into foreclosure or are bank owned; it is very upsetting for residents of any neighborhood to see abandoned homes on their street. There are several steps homeowners can take to prevent a vacant home from becoming a blight in their neighborhood which might bring down property values.
A good place to start is to be specific about what kind of unsightliness or damage is evident, such as trash lying all over the place, broken windows, etc. Some of the issues might involve public safety, such as tree limbs on power lines, deserted and untended backyard pools, or abandoned animals. Enforcement of any type of ordinance or rule regarding abandoned properties is usually easier if the home is in a homeowners’ association, since property owners give the association a number of rights.
If the county or city you reside in does not have any ordinance that deals specifically with abandoned homes, the best way to get some action is to contact Code Enforcement who will then contact different city or county offices who deal with specific problems. These departments can include the Planning Department, Environmental Health or the Building Department.
January 2010
REAL ESTATE OUTLOOK FOR 2010
Although many of us have become somewhat disillusioned with the housing picture in general, we have to admit that the outlook for 2010 is a great deal more positive for real estate than it was for the same time period last year.
There seems to be a fairly bright outlook for the months ahead: thanks in part to the federal tax credit programs home sales have been steadily rising for several months and in many parts of the country prices are trending up in most of the major markets and sales figures for these areas are encouraging.
One of the most important trends affecting the housing market and consumer buying decisions nationwide is that vital ingredient: consumer confidence which has gone up nationwide by roughly 7.5 percent during the month of December.
There is however one sobering subject looming on the horizon: mortgage money is getting more expensive and Freddie Mac is projecting that rates might move from just over five percent today for a 30-year loan to 6 percent or higher later in the year.
So, one thing is quite clear: Anyone who is considering buying should carefully review prevailing rates and nail down financing as soon as feasible.
February 2010
HOLDING ON TO YOUR HOME DURING TOUGH TIMES
We have all read and heard about homeowners whose homes went into foreclosure because of the owner’s inability to continue the mortgage payment. For many people this is a hard decision to make although for many it is also a relief from a very trying situation.
There are many homeowners, however, who simply cannot part with their home under any circumstances. They are willing to do anything to keep that home which means so much more: they have lived here for many, many years, raised their families, celebrated those special events. Many homeowners moved into their parents’ or grandparents’ homes and they simply cannot imagine living anywhere else.
So, what can you do during these tough times when money is so tight? This is probably the time to do two things at the same time: You need to simplify your life and at the same time make at least the minimum of repairs to keep that precious home in reasonably good repair.
A good start is to “live beneath your means” - it also means uncluttering your house. We have touched on cost cutting measures before but this time we want to make sure we can free up some funds to make the absolutely minimum amount of repairs to that home we love so much. Many people spend more time tuning up their car than their home.
So, start by tracking every expense, donating items you no longer need or even selling them. If you cannot give the lavish parties of two years ago, arrange to have your friends come over for a potluck. Meticulously go over each expense: phone service, food, transportation, eating out, vacations, purchases for your wardrobe, gifts, charitable giving, etc. Once you have determined where you can truly cut back set up a fund which you can dip into for much needed home maintenance. We are not talking costly home improvements just upkeep that will keep your precious home from falling into disrepair.
Check for peeling paint, dripping faucets, a deck or fence that need attention or failing weather stripping around windows and doors. Home maintenance requires a little bit of time to identify problems and small amounts of money so that you won’t have to replace an expensive item sooner than expected.
Whether you consider building a new structure or adding to an existing one it is very important to choose the right construction materials. It is wise to invest some time to research the various materials before you start your project. If you will be employing a licensed contractor, spend some time with him/her to get inputs on what can be called “eco-sensible” building products. It is far better to make an informed choice up front than later when changes cannot be implemented. We need to spend some extra time and effort to find out if any given building product is sustainable, renewable and healthy.
“Eco-sensible” extends not only to the finished product but includes areas such as raw materials used, manufacturing processes, methods of installation, durability, possible effects on air quality and the health of the indoor environment.
One item often overlooked in construction projects is whether or not the material used is suitable for intended application. Let me give you an example: when our home was constructed, the contractor used foam (brick type) insulation in our entry area under the tongue and groove knotty pine we love so much. Several years ago we discovered some “cotton candy” type of material dropping down from the ceiling. Upon further inspection it turned out that we had a severe infestation of odorous ants. They love the stuff! They built nests up there and what we noticed coming down from the ceiling was the residue of their activities. After having several ant treatments that proved to be unsuccessful we had the grooves in the ceiling sealed. Well, the ants are surely still active but we do not have to look at the mess any more. Nobody among our construction crew told us about this potential problem – and we feel they probably did not know.
So, do your homework as you may find that a little extra time spent on investigating the construction materials you are planning on using might pay off handsomely in every respect.
May 2010
LEASE OPTION AGREEMENTS
Let’s say that you are ready to buy a home but you have not saved up enough for a down payment or your credit is not as stellar as it needs to be. A “lease with option to buy” might just help you move into a house you really want to make your home. With this agreement you have the option to buy the home at the end of the lease term while you enjoy living in the home of your choice and build up your reserves. It will also give you extra time to repair or improve your credit score which will in turn help you to obtain a more favorable mortgage rate.
As with any other of life’s decisions, there are several things to consider carefully before you enter into a lease option agreement:
1. Are you able to pay the option money? This sum could be as high as 3 – 5% of the home’s purchase price or it may just be equal to two monthly rent payments. Typically, the option money is applied to the purchase price if you decide to go ahead with the option to buy at the end of the lease term but if you decide not to purchase the home you will not get your option money back.
2. Make sure that you can obtain the necessary financing to purchase the home at the end of your lease term.
3. Can you afford the monthly payments? Often the rental amount will be increased by some option money that will be applied toward the purchase of the home.
4. Arrange up front how long a lease option period is best for you. There are no set rules as to how long the option period should be.
5. Be sure to maintain the home so that it shows you really care and at the same time it will keep its value.
6. Apply for a loan at least 60 to 90 days before the option agreement ends. This way you will avoid disappointments and achieve the status of a proud homeowner.
June 2010
TITLE INSURANCE ON YOUR HOME
When you are buying a home the things that are foremost on your mind are finding just the right home and procuring the best possible financing. Title insurance is usually something you do not encounter until you are several weeks into your purchase transaction. However, researching the legal title of the property you are buying is of utmost importance. Many buyers assume that they can do anything they want to do to and around the home and the land the home sits on.
It may greatly surprise the buyer that there could be title restrictions that limit how a property can be used and that these restrictions may dictate how the appearance of the home may be regulated.
Some of the most common restrictions mentioned in a title report are: Liens, Easements and Covenants & Conditions. It is very important to go over your title report way ahead of the close of escrow date to find out what these restrictions may mean to your enjoyment of your new property.
LIENS on a property are debts or other obligations such as a mortgage, unpaid federal and/or state taxes, unpaid child support (in some states), unpaid homeowners’ association fees or a mechanic’s lien.
EASEMENTS give the right to one party to use someone else’s land for a specific purpose. There are many types of easements and in general a property owner cannot interfere with their intended use. One of the most common easements is a utility company easement. An owner cannot interfere with the utility’s running new power lines or repairing broken pipes even if these actions might impact the property owner’s landscaping.
COVENANTS & CONDITIONS (CC&R’s) are often put in place by developers of new subdivisions and these CC&R’s require property owners to maintain their properties according to specified guidelines.
So, it is prudent to obtain a preliminary title report at the beginning of your purchase transaction, to read it carefully and to contact the issuing title company right away if there are title restrictions you need to have clarified.
July 2010
REAL ESTATE CORNER (Part I of II Parts)
During these times of sharply lower property values it appears that many real estate clients are rediscovering the benefits of a 1031 tax deferred exchange. There is quite a bit of specialized terminology used in these exchanges, so I thought I would list a glossary of related terms (courtesy of First American Exchange Company):
ADJUSTED BASIS
The cost of the property adjusted for any capital improvements or depreciation. Original cost of property + improvements – depreciation = Adjusted Basis.
BASIS
The starting point for determining gain or loss in any transaction. In general, basis is the cost of the taxpayer’s property.
Transactions involving exchanges, gifts, probates, and receiving property from a trust can have an impact on calculating the property’s adjusted basis.
BOOT
Cash or non-cash consideration, including any property that is not “like-kind,” promissory notes, or debt relief (mortgage boot). If you receive boot in an exchange, it is likely that all or some portion of the boot will be taxed.
BUILD-TO-SUIT EXCHANGE
(Also known as Construction Exchange): The build-to-suit exchange allows an owner to use the proceeds from the sale of the relinquished property not only to acquire replacement property, but also to make improvements to the property.
How this works: A built-to-suit exchange is accomplished by having a holding entity (called an “exchange accommodation titleholder” or ‘EAT’) temporarily hold title to the replacement property while the improvements are being made.
DEFERRED or DELAYED EXCHANGE
(Also known as a Forward Exchange): This is when the Relinquished property is sold and the Replacement property is purchased within 180 days following the sale of the Relinquished property.
August 2010
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SOLAR ENERGY – IS IT FOR YOU?
The use of solar energy is not new but there is certainly a renewed interest in it now. The reason is that the fuels we burn in our furnaces are very expensive and supplies are diminishing. They are not renewable like solar energy is. They are also responsible for pollution which harms the environment, including the air we breathe.
Our homes can use passive solar or active solar heating. Homes that are referred to as passive solar homes do not use any special equipment, such as panels, pipes or ducts. Most of the passive solar homes are constructed so that most of the windows face south and they have just a few windows on the north side. Passive solar houses use floors and walls to absorb energy from the sun and turn it into heat. If a homeowner can incorporate using passive solar heating during the design phase before the home is built the savings on energy can be substantial.
But what can a homeowner do who has lived in his/her home for a few years and wants to take advantage of the sun’s energy? In this case the house would have to have an active solar heating system. Active systems use panels which can be placed on the roof or they can be freestanding if that would ensure better sunlight absorption.
One of the biggest drawbacks to using active solar energy is the cost involved. I have often heard the comment: “The savings will quickly pay for themselves.” That may be so but many homeowners simply cannot come up with $20,000 to $30,000 to have a solar electric system installed. However, the homeowner can zero in on one area of the home which would benefit from solar energy without spending too much. Say, one wants to use solar energy to reduce the cost to heat a swimming pool or lower one’s hot water heating bill. There are special systems available for each of these applications and they are far less costly than a whole house system. There are many reputable contractors specializing in solar energy systems. One of these experts can give the homeowner a complete evaluation of their current heating systems and how to best utilize the sun’s energy to lower ongoing heating costs.
