Before buying, it pays to know property's condition

Paul Bianchina
Inman News

Q: In as much as there are a great number of current issues regarding disclosure to the purchaser of real property, when, if ever, is it going to be the responsibility of the purchaser to investigate particular items of relevance to them? --George D.

A: Great question! In today's day and age of people expecting "someone" to look after them and protect them from anything and everything, and with each succeeding generation seeming to develop more of that attitude than the previous one, it's unlikely that you are going to see the burden of responsibility shifting back onto home buyers anytime soon.

Don't get me wrong. I have always been an advocate of people looking after themselves, especially with a purchase as huge as a home. I am all in favor of disclosure laws, since only the seller knows where the leaks or other problems are (or were), but buyers also need to take the time to inspect and understand the house for themselves. There's a lot more to home than whether or not is has granite countertops!

The current trend is to entrust the responsibility of inspecting a house to a home inspector. That's fine, because a home is a big and complex structure and you can't expect every buyer to have the necessary expertise to do their own inspections. However, I have seen good inspectors that really understand homes and know what does and doesn't constitute a genuine problem that a buyer should be concerned about, and I have also seen bad inspectors that rely on checklists and limited knowledge and handing out a bunch of printed information they downloaded from the Internet, as though an inspection report that's loaded with unimportant paper makes up for one that really delves into the inner workings of the home.

Hiring a home inspector is fine, and I fully encourage it. But remember that if the seller is paying the fee, they're probably going to go for the lowest bidder. So buyers should hire their own inspector as well, and be prepared to put on their coveralls and follow the inspector around -- on the roof, in the attic, under the house -- everywhere their physical abilities will allow them to go. Ask questions. Then when you have the results of both inspections, compare the results closely and ask more questions.

I have noticed that people are more concerned with all the details of the purchase of a $20,000 car than they are with the purchase of a $500,000 home, and then when things go wrong they want to know whom to point the finger at.

So, home buyers everywhere, get involved with your purchase, learn about how it works, understand what's broken and what it's going to take to fix it -- and then sleep a little better at night.

Q: I have never seen anywhere information on cleaning and putting a preservative on a deck that is over water. We have lived in our home on the lake for three years and would like to clean and preserve our deck but can find nothing that states that it can be used where a deck is over the water. With a few really hard rains our lower deck ends up underwater until the water recedes, and I know this can't be good for the wood. Any suggestions? --Penny V.

A: I didn't have a good answer for you, so I contacted the technical people at Wolman Wood Care Products, a company that makes a very good line of deck products. Their recommendation is as follows:

"The best product for this type of application is Wolman Copper Coat, as it is a water-based product so it is safe to apply over a dock, and also it is typically used for dock structures."

I have used Wolman products with great success in the past, so I would consider taking a look at their recommendation. You can get more information about this and other Wolman products on the Web at www.wolman.com.

Q: What is the proper way to clean up stains on Trex decking? --Bob F.

A: Typically, all that's required for normal dirt is to first sweep the deck off, then clean it with hot water, soap, and a stiff nylon scrub brush or stiff push broom. For grease stains, use a household degreaser such as Formula 409, then soap and water.

Incidentally, there's a great cleaning and stain removal chart on the Trex Web site, at www.trex.com.

Remodeling and repair questions? E-mail Paul at paulbianchina@inman.com.

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History suggests gas-powered transport cannot last

Arrol Gellner
Inman News

What's an architect doing writing about cars, anyway?

I always get indignant e-mails asking me this whenever I criticize some aspect of our autocentric society -- whether it's our parking-obsessed city planning, our mania for fruitless road widening and freeway building, or our laughably primitive traffic control systems.

The answer is simple. We inhabit an era -- a very fleeting one, in historical terms -- that's all but predicated on the automobile. Hence, architecture and cars are as inextricably linked for modern builders as architecture and defense were for the castle builders of the Middle Ages. You simply can't design on an urban scale without cars being an integral and often overriding element of what you're planning.

To see how inseparable the automobile is from contemporary design, stroll down most any suburban street, where the most prominent design feature will be a phalanx of garage doors in all shapes and sizes. Or take a look at your typical shopping mall -- an inward-looking huddle of buildings adrift in a vast sea of parking spaces. Talk about the tail wagging the dog.

Municipal zoning codes have institutionalized the fact that cars rule the land, because parking requirements quite often dictate all other aspects of a project. There are exceptions, of course. A few audaciously forward-looking cities have actually made their downtowns less car-friendly in order to encourage other kinds of locomotion, including -- gasp! -- people using their own two feet. Yet for the most part, city planners have meekly and uncritically knuckled under to the assumed primacy of the automobile.

That's a pity, because cars in their present form are no more a permanent fixture of our built environment than were the oxcart, the chariot, or the horse and buggy. We happen to live in the historical apogee of the internal-combustion automobile, but even the smallest degree of historical perspective makes plain that it's merely a temporary visitor -- and an increasingly troublesome one -- on planet Earth.

Now, for those staunch car defenders getting ready to fire off e-mails calling me a deluded idealist, a car hater or a clueless academic -- don't bother. The fact is I've been an incurable gearhead since childhood. I can still happily spend a long evening jabbering about cam grinds and axle ratios with my car-crazy buddies, and I still own a number of Detroit's most venerable old gas guzzlers in honor of a grand old era that's now passed into history. If anything, though, this personal obsession makes it all the more obvious to me that our autocentric society, and the vast traffic and petroleum supply infrastructure that goes along with it, will one day be no more than a curiosity to future historians.

What does that mean for us today? For one thing, it suggests we shouldn't regard our cars -- not to speak of the oil they run on -- as the be-all and end-all of American society. We should also recognize that history has a way of casually demolishing institutions that seem impregnable, and the internal combustion automobile is surely one of these. Something better, simpler and kinder to the earth is no doubt on the way, assuming that we're smart enough to welcome it.

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If declaration is silent on issue, think before bringing lawsuit

Ilyce Glink
Co-written by Samuel J. Tamkin
Inman News

Q: If a condominium declaration does not expressly disallow restrictions on the rental of units, can an association pass rules and regulations restricting the right to rent units? The declaration is silent on the matter. We live in Chicago.

A: If a condominium declaration is silent as to a specific right that homeowners have in the condominium association, the board of directors generally can't arbitrarily remove a right that some or all of the members have in the association.

The right in this case is the right to lease the unit. If the condominium declaration does not prohibit the leasing of units and is silent on the issue, the unit owners should have the right to lease their units.

The fallback position for the unit owners or the board of directors of the condominium association is to see what state statute may apply to this particular case. Most states have statutes that regulate condominium associations. You would be wise to review the statute regulating condominiums in your state to determine whether there is any right given to a board of directors to remove the owners' rights to lease their condominium units.

In the absence of a state law allowing the condominium board to remove that right, the only way the board can regulate leases in the condominium would be to amend the condominium declaration to prohibit leases or to restrict leases.

In your case, if the board of directors does not have the right to restrict the leasing of units and the enactment of a rule prohibiting leases might be invalid, that does not mean the condominium board may not try to proceed as if the rule were valid. The forces of a condominium association may come into play as might the personalities involved.

You may want to address this issue with the condominium board by requesting that it obtain a legal opinion from an attorney who concentrates his or her practice in condominium law. That attorney may confirm your suspicion that the board did not have the right to regulate leasing in your building.

But that attorney may also find other language in the condominium declaration that gives the board the right to restrict leases. You'll have to wait and see what comes up from those discussions or you'll have to bring the battle to them and sue them to stop them from enforcing the rule. Before you decide to sue them, you then would have to bear the burden of hiring an attorney to review your documentation to determine whether you should sue the board.

Certainly, suing your neighbors is not a good proposition. It can make life difficult and unpleasant for you. So before you sue, you should first try to work it out or find out where your neighbors stand on this issue.

If all of your neighbors are in agreement with the rule restricting leases, you might be out of luck. All of the other unit owners could get together to amend the declaration to prohibit leases in the building or restrict them.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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Rent it Right

Janet Portman
Inman News

Q: Recently, my apartment building management decided to replace the pipes with new copper piping. Upon completion of the job, my apartment was a mess. There was plaster everywhere and some personal items in my apartment were damaged. What is the responsibility of the building management for cleanup inside an apartment on this type of repair, and for the loss of a tenant's property? --Michael G.

A: When a landlord needs to make repairs or improvements to a tenant's rented space, it's up to the landlord to properly clean up afterward. Your landlord may not even know that his workers left a mess, so having a word with the owner would be the place to start. Hopefully, you have some evidence of what it looked like when you got home (if you're like most of us, you probably got to work right away and cleaned it up, but maybe you took the time to snap a few pictures).

Talk to other tenants to see if they had a similar experience. If they have, you will have the added advantage of strength in numbers when you approach management. Doubtless you have all cleaned up by now, so your request should be for reimbursement for the value of your time, plus cleaning materials. Set the hourly rate by finding out how much a cleaning service would have charged to clean the mess (resist the temptation to use your own hourly rate, even if it's considerably higher -- you could have hired that cleaning service, after all).

Your damaged belongings merit a slightly different approach. If management used a reputable contractor, that contractor should have insurance or a bond that will cover him in the event of a claim like yours. The landlord's liability insurance should also cover it. Write letters to both the landlord and the contractor, describing what was damaged, the extent of the damage, and what it will cost to repair or replace the items. From that point, your chances of collecting will depend on the amount in question. The landlord and the contractor (or more properly, their insurance companies) will be more willing to settle with you when the amount is relatively low. If you're claiming that a piece of priceless heirloom furniture was broken, you may be in for a fight. You can also make a claim on your renters' insurance, if you have it.

Q: When we moved in, our landlord gave us a one-page, yearlong lease that had just the basics (apartment number, rent, move-in date). It also had a paragraph saying that we agreed to abide by the "House Rules," which could be changed at any time. The rules covered who could park in the lot; use of the laundry and other facilities; fees for late rent; and charges for replacing lost keys.

Last week, our landlord gave us a new set of rules. They've drastically reduced the pool hours (no weekday hours, which is the only time we can swim), are charging for parking and have doubled the late fees. We feel that the landlord shouldn't be able to impose these significant changes mid-lease. --Walter and Dot H.

A: House rules are meant to be the place where landlords explain the details of living on their property. Properly used, house rules cover "housekeeping" issues such as the use of the laundry room, how to pick up packages, where to place recyclables, and proper etiquette when using common areas, such as the pool.

Leases and rental agreements typically refer to house rules in a clause saying only that the tenant will abide by them, and that they can be changed without notice. Because the rules cover rather mundane and relatively unimportant issues, most tenants wouldn't consider it "unfair" for the landlord to revise them. Whether you have to put your recycling in the basement or on the curb probably doesn't matter much to you, for example, as long as it gets hauled away.

But house rules are not the place to set and change major policies. A major policy is one that most tenants would consider when deciding whether to rent the property in the first place. Put another way, if a policy covers something that most tenants and landlords would expect to find in a lease, it doesn't belong in the house rules.

Placed against this standard, how do your landlord's rules measure up? It appears that he is taking advantage of the inherent flexibility of house rules to make changes to policies that properly belong in an amended rental agreement (for tenants renting month to month) or in a new lease (for tenants like you who have the protection of a stated rental term). For example, if the pool hours have been cut back so much that you can't realistically use it, that's about the same as renting at a property without a pool -- something you would have considered before committing to this property. Most tenants would also factor in parking fees when deciding where to live; if the fees are too high, tenants might look elsewhere. A late-fee policy definitely doesn't belong in house rules, because these policies can cost tenants plenty. Tenants need to have advance warning of the consequences of late rent before they sign on the dotted line. A judge probably would not enforce a late-fee policy that a landlord tried to sneak into a set of house rules.

Q: I had a person renting a room in my home for eight months. She gave me a $100 deposit and her rent was due on the first of each month. On the last day of the month she just up and moved out without any notice or reason and left me a note directing me to mail her the deposit back. Do I owe her the deposit, when she gave me no notice that she was moving out? We had no lease or rental agreement. --Marilyn N.

A: Although you have nothing in writing, you had a month-to-month rental agreement with your roomer. It's always better for landlords and tenants (and roomers) to have a written document that recites the key terms of the rental, but oral understandings are legal and enforceable. In order to properly terminate her tenancy, she needed to give you the legally required amount of notice (30 days in California and many states).

When tenants move out without giving the required amount of notice, they remain liable for rent for the notice period, measured from the date they left. You are entitled to use the deposit to cover unpaid rent, so you may apply the deposit to the number of days' notice your tenant should have given you.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com.

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New book provides tips on transferring money, property after death

Ilyce Glink
Inman News

Consumer and bankruptcy attorney John Ventura begins his newest book talking about how we spend most of our waking hours either working to earn money or thinking about what we'll do with it: spend it, save it or invest it.

And then there are those folks who dream about it as well.

But Ventura also notes that few people give more than a passing thought to what happens to our money and our property after we die. Estate planning isn't high on most people's lists, perhaps because they don't believe they have that much to leave to their heirs. Or, perhaps because it's not really an "upper" to spend time thinking about death and what happens after.

In fact, Ventura cites a 2007 Harris Interactive survey that found more than half of all adult Americans don't even have a will, a basic estate-planning document used to transfer assets after death.

The point he makes is simple: If you don't plan your estate, a judge will make the decision for you. The likelihood that the judge will make the same decision you would about who should get your house, your retirement account assets and your other worldly possessions is remote.

If you don't own any real estate, and you don't have that much in the way of cash and investments, your estate planning can be fairly simple: If you remember to name beneficiaries on your IRAs, 401(k)s and any insurance policies you own, then most of your estate planning will take care of itself.

But if you do own real estate, and have assets that exceed the lifetime credit exemption (the amount you can pass down to your heirs estate tax-free, which for 2008 and 2009 is $3.5 million), some estate planning is in order.

Ventura divides the book into four different parts: the hows and whys of estate planning; estate-planning tools; estate planning for your family; and what to do when you can no longer make decisions for yourself. The book is laid out in a way that is easy to understand and helps you build on your knowledge from chapter to chapter.

For most people, Chapter 5 "Your Will, Your Executor, and the Probate Process," will be the key to unlocking the mysteries behind the probate process, which many homeowners fear.

Ventura walks the reader through the probate process, which begins with locating the deceased person's will. The executor will represent the probate estate in probate court, and act as the point person when the estate's assets are ready to be distributors.

After the will is found, Ventura writes, the executor will have to complete and file a special petition form with the probate court asking it to formally accept the deceased's will. The executor will have to create a written inventory of the estate and determine the current value for each asset. Creditors will have to be notified of the death and of their right to file a claim against the probate estate, so any debts that are owed can be paid.

The executor will have to fill out and file a federal and state tax return; pay any estate taxes the estate owes; try to collect any money owed to the estate; manage any investment property in the probate estate; pay the estate's financial obligations; defend the will against contests; transfer the appropriate assets to the testamentary trust (if one was included in the will); prepare a final written report for the probate court; distribute your assets according to the terms of the will; and close the estate.

If there aren't enough assets in the estate to pay the debts that are owed, the executor will have to participate in an abatement process, governed by state law, in which the available assets will be used to pay various creditors of the estate.

While the book isn't state-specific, Ventura does provide general answers to many of the questions homeowners and real estate investors have about real estate, such as, "What happens to my estate if I own property in two different states when I die?"

According to Ventura, the probate process typically takes place in the state in which you're legally residing at the time of death, even if you wrote your will when you were living in another state. However, if you own real estate in several different states, those assets may be probated in those states. The executor of your estate will have to deal with two different probate courts, or hire a local probate attorney to help out.

The book also provides good information about living trusts, as well as basic information about various types of trusts that might be helpful to property owners in a variety of situations, including a special needs trust, spendthrift trusts, qualified terminable interest property (QTIP) trusts, irrevocable life insurance trusts, A/B trusts (also known as a marital trust or second-to-die trust, charitable trusts, educational trusts, generation-skipping trusts, and grantor-retained trusts. These trusts are discussed in more detail in the book.

While the book could be more comprehensive in its discussion about how these trusts could be implemented and the costs of setting them up, it provides a starting point for those who don't know how to take their first estate-planning step.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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What's a 'reasonable' fee to pay landlord?

Robert Griswold
Inman News

Q: I have a tenant who recently signed a two-year lease for my rental home. She just contacted me indicating that she has been approached by her employer about transferring to another city for a promotion with the company. She wanted me to voluntarily let her out of the lease, but I declined, as the rental market here is not that strong and it took me three months to rent the house.

I don't want to be difficult, but I hate to lose a good tenant when I spent so much money upgrading the rental unit and marketing the property. She has now come back to me with the proposal that the employer will pay me a "reasonable" amount to break the lease. I don't have any idea on what is an appropriate charge. Am I limited to a certain amount? What if I ask for three months' rent and end up renting the house in two months?

A: Your tenant is approaching you about breaking the lease so you have the option of simply declining and holding her to the lease. Of course, in most states if the tenant does vacate your rental home you are obligated to re-rent the property and can't just let it sit empty and expect the tenant to pay the rent for the balance of remaining months on the two-year lease. On the other hand, you could agree to unilaterally release your tenant from any further obligation under the lease for nothing.

I would recommend a middle-ground response that is calculated based on a conservative estimate of the most likely costs you will incur in re-leasing the property. That includes the cost of cleaning and preparing the home to be rented, the advertising, and the length of time you will not collect rent. Based on the soft rental market you may want to propose a lease cancellation fee that includes your out-of-pocket expenses plus four or five months of rent. The factor you want to keep in mind is how long it will take you to re-lease the unit and whether it would be at least at the rent level you were to receive under the lease if the tenant weren't leaving. If it is likely that you will not be able to get the same rental rate as the current tenant is paying or if you will have to offer some concessions (like free rent), then you should include that as well.

So while you could play hard ball and demand the full remaining balance of all the lease payments to the end of the lease, the reality is that you and your tenant's employer will probably reach a compromise. Once the amount has been mutually agreed, be sure to prepare a basic written agreement that indicates it is a full and final settlement and that you will not seek any further payments -- but that you will not pay back any funds even if you are able to re-lease the property in less than the agreed time.

Q: I ran a search on Google to try to determine what laws exist regarding how often an apartment unit must be repainted, but had no luck. Can you help me? My landlord told me that because I have lived in the unit for at least 18 months, he would be required to paint the unit anyway and therefore the minor wear-and-tear damage I did to the walls was not relevant.

However, when I received the accounting for my security deposit today from the property manager, I was amazed to discover that they had deducted $570 out of my $800 deposit for "paint and material." They also charged me $45 for carpet cleaning even though I saw them move entirely new carpet in. Does any law exist to determine how often an apartment must be repainted and what factors are considered to determine who is ultimately responsible for the costs incurred?

A: I am not aware of any state law specifically designating a requirement that landlords must repaint the interior of a rental property based on a certain number of months. While there are laws concerning lead-based-paint hazards in the event the paint is chipping or deteriorating, the determination of repainting for non-lead-based paint is more a function of the normal wear and tear and an evaluation of any damage to the paint by the tenant.

Of course, the paint will eventually wear out and the timing of the need to repaint the rental property is based on a multitude of factors besides just the treatment by the occupants. Other factors include the original quality of the paint, the quality of the application, the location (i.e. weather, climate), and the care and maintenance during the tenancy. It has been my experience (25-plus years and 40,000-plus apartments managed) that a typical paint job should definitely last more than 18 months if the paint quality and application are decent in most residential circumstances. Thus, if the landlord had to completely repaint the rental unit in less than 18 months then it is very likely the result of damage beyond ordinary wear and tear.

You could send your landlord a written demand to document their determination of the condition of the rental unit that necessitated the complete repainting as well as invoices supporting the costs for painting deducted from your security deposit. I don't think it is appropriate that your former landlord deducted $45 for cleaning the carpet if they didn't actually clean anything. It is possible that they tried to clean the carpet but had unsatisfactory results so they needed to replace the carpet. But you should contact them and ask for proof of payment, or I would agree the charge is not proper.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and co-author of "Real Estate Investing for Dummies."

E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com.

Questions should be brief and cannot be answered individually.

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REThink Real Estate

Tara-Nicholle Nelson
Inman News

Q: I have always wanted to own my own home. I have been saving money for five years toward a down payment and I have worked hard to maintain excellent credit, with the idea that I would buy a home when I got married. I got married last year, and my husband and I together can well afford to buy a nice home in our area. Part of the time, we're excited about buying because it seems like prices are really good right now. The other part of the time, though, we watch the news and it seems like the whole world is falling apart. Now we're sort of stuck -- we're not sure what to do.

A: Real estate decision-making has always been one of the most critical exercises that a household must undertake. Home ownership impacts not only your emotional well-being and lifestyle on a very large scale, but also your family's personal financial wellness, both monthly and lifelong. A generation ago, people treated decisions such as the one you are currently facing with a deliberateness and gravity appropriate to the importance of the subject matter, but over the past decade or so -- not so much.

The recent foreclosure crisis, in addition to creating opportunities for buyers, has also had the silver lining of creating a national-level consciousness of what can happen when real estate decisions are not made with sufficient information, long-term lifestyle and financing planning, or attention to detail. You, like many smart home buyers, are doing the right thing by trying to educate yourself about the home-buying process and the real estate market before you jump in. The problem is that because real estate is such a hot topic in the media right now, the volume of information to sort through is totally overwhelming, and it is difficult to impossible to know how to sort the wheat from the chaff, much less to know how to make real use of the real estate information out there to improve your own personal decision-making.

Mindset Management

You don't have to be a conspiracy theorist to know that the mainstream media is in the business of getting you to keep watching the news, reading the paper, etc., and not to provide you with real estate advice. In fact, most of the TV news commentators I see doling out real estate dos and don'ts are not actually real estate professionals, with noteworthy exceptions like Barbara Corcoran. Unfortunately, studies have shown that we humans are more apt to stay interested in information that provokes fear, rather than the warm and fuzzy. The alarming headlines you've seen for the last two years have served their purpose of keeping you hooked in, but may also have infected you with a dream-zapping syndrome I call "buyer's block" (kinda like writer's block -- you get the picture).

Let me just say this: Real estate is an asset class. We're talking about money and buildings here, not your ability to obtain food or basic shelter from the rain. So, ditch the fear -- it is a totally unproductive emotion, and even causes people to make worse decisions than they would have if they weren't so afraid. In fact, what we fear we often create: The more petrified you are that you'll end up in foreclosure, the more your fear will interfere with your decision-making, making foreclosure more likely than it otherwise would have been.

To get rid of the fear, just get clear on the fact that bad real estate decisions can be a huge downer, but they won't kill you. So rather than approaching this home-buying experience from a place of fear and paralysis, approach it as a project. Your task is simply to gather the specific information you need to equip yourself to make the right decisions throughout your home-buying process, not to take in and sort out every real estate headline under the sun. No one has the mental bandwidth to perform such a feat, and it is simply not necessary to do so to make smart real estate decisions.

Keep in mind that there is a flip side to every story you see reported in the real estate news. While headlines have been screaming about how bad the market is, I, as a buyer's broker, have been seeing clients who never would have been able to afford a home two years ago break into the market, and start accessing the tax and other advantages of home ownership. Our country's most brilliant investor, Warren Buffett, advised an audience to "look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." Decide right now not to participate in the folly of buyer's block, and to take on the project of figuring out how you can benefit from the current market "crisis," assuming that your family is currently in a good place -- financially and lifestylewise -- to be purchasing a home.

Need-to-Knows

Real estate markets, values, negotiating practices and transactional procedures are very local -- many real estate news reports that confuse people are not. Unless you live in New York City, it is not a good idea to base your personal real estate decision-making 100 percent on the information provided from an NYC-based expert on the national news. For example, last quarter, both home values and the number of purchase transactions were down severely, nationwide. However, in San Francisco, there was a dramatic 22 percent increase in purchase transactions from March to April, and a 3 percent increase in values. If you looked closer and broke it down by ZIP code, some ZIP codes showed major appreciation, while others were negative.

You see, you simply cannot know what the market is like in your state, county, city or even neighborhood unless and until you obtain specific information from a local real estate professional.

Similarly, the very brief amount of time allotted to TV and radio experts to dole out advice makes it difficult for them to give an appropriate amount of nuance in the information they present. So much of whether and when is the right time to buy is based on your personal finances, lifestyle and life plans, and no one in the news can analyze that for you. There is no blanket advice about whether to buy a home at any given time that will be right for every single individual or family. For example, lots of folks have been heeding national commentators' blanket admonitions not to buy. In addition to the fact that in some areas, this will unfortunately result in currently qualified buyers waiting until a seller's market to buy, there are high-income prospective buyers who are forgoing tens of thousands of dollars in much-needed tax deductions based on this impersonal and inapplicable advice.

Bottom line: A decision of this magnitude truly warrants a custom analysis of your personal finances and family's needs, by a local professional. It may even make sense to speak with several different types of professionals: a Realtor, a mortgage professional, a CPA, a financial planner, etc., depending on your situation, to determine whether now is the right time for you to buy, and how to harness current market conditions to make the best buy possible.

Action Plan

• Decide to make your decision whether to buy or sell based on your lifestyle and life plans. If you want to buy and are qualified to do so, don't cheat yourself out of moving forward and obtaining the professional advice you deserve because of what you see on the news. However, you should get educated about your local market and make decisions about how to best execute your plan of buying in a way that takes advantage of current conditions.

• Get your own team of professional advisors, by referral. At the very least, talk with a CPA about the tax implications of home ownership; a mortgage broker regarding the mortgage rates, terms and price you can qualify for; and a Realtor about current, local market conditions and what sort of home you can expect to find at your price range.

• Go on a selective information diet. The recent book, "The Four Hour Work-Week," sets out a very extreme version, but try to at least limit your intake of real estate information -- which can be habit-forming! -- to questions you need answered about your home-buying project.

• Ask your professionals where they get their real estate news/information.

• Build a repertoire of reliable sources of unbiased real estate information, rather than opinion. Then, stay very answer-oriented when you consult these sources. Don't look for news articles to tell you whether to buy or when -- look for answers to concrete questions, like how long the average home in your area is staying on the market, common concessions currently being offered by sellers, etc.

As you go through this process of preparing to buy a home, use the real estate news to find strategies and solutions to questions and obstacles that come up, rather than allowing fear to shatter your life goal of home ownership.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook," and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online.

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Why installing batt insulation is recommended over foam

Bill and Kevin Burnett
Inman News

Q: We have a frame house with a stucco exterior. Part of it is over a crawl space about 3 feet high. The house is bolted to the foundation and the exterior stucco covers the walls down to the ground. On the inside of the crawl space, I can see the 1-by-8 redwood backing for the stucco and we have no problems with termites.

I'd like to improve the insulation and make the house more earthquake-safe. Would it be better to insulate under the floor that is accessible from the crawl space or insulate the short exposed walls in the crawl space? Is it a good idea to put plywood as shear-wall bracing over the short exposed walls inside of the crawl space, which would then cover the insulation? Must I drill any holes for ventilation in the plywood? There are vents for the crawl space that I'd leave open by not covering them.

A: Good for you. Increasing the energy efficiency and earthquake resistance of your home is time and money well spent. It won't hurt the value either.

The short answers to your question are: Creating a sheer wall by attaching plywood panels to the short wall, known as a "cripple wall," is a great idea; insulating between the floor joists rather than the stud bays in the perimeter "cripple wall" is the way to go (it's thermally more efficient to insulate the floors rather than insulate the perimeter walls of the crawl space); and, yes, you will need to drill holes in the plywood panels for ventilation.

This is a three-part job. Phase one is to insulate the floors. Phase two is to reinforce the cripple walls with plywood. We also recommend (phase three) that you install a plastic vapor barrier over the dirt in the crawl space. A vapor barrier impedes any dampness that might come from the soil and reduces the risk of moisture taking up residence in the insulation.

We'll divide our answer into two parts. This week we'll give you the "how-tos" for insulating the floor. Next week we'll tackle reinforcing the cripple walls.

Floors over unconditioned crawl spaces are often neglected when insulating. Lack of insulation results in heat loss from the warmer confines of the house to the crawl space. We all know that heat rises. But we're less familiar with the fact that the temperature in a conditioned space always tries to reach a state of equilibrium with unconditioned ambient air outside the conditioned space.

During the winter months heat migrates through an uninsulated floor to a relatively cooler crawl space. Installing insulation in the bays between the floor joists impedes the migration of heat from the warm house to a relatively cooler crawl space.

There are two ways to insulate a floor. The first, installing batt insulation, is definitely a do-it-yourself job. The second, spraying expanding foam insulation between the joists, is a job best left to the pros. We recommend going with the batts. It's less costly and your 3-foot crawl space gives you enough room to do the job. The pros will tell you that foam provides better insulation. While that is true, when the added cost is weighed against the benefit the difference is insignificant in our view.

The 1-by-8-inch wall sheeting you see behind the exterior stucco tells us you have an older home. The floor joists are most likely dimensional lumber rather than engineered I-beams. Measure the width of the floor joists. Our guess is that they are 2-by-8s measuring approximately 7 1/2 inches wide. The joists should be set either 16 inches or 24 inches apart.

If this is the case, R-25 batt insulation in the right width will fit neatly and snuggly between the joists. Place the craft paper face against the bottom of the subfloor as it acts as a vapor retarder. If the joists are wider, use thicker insulation.

Do not compress the insulation. This will reduce its efficiency. The idea is to fully fill the gap between the floor and the bottom of the joists. It's OK to use two layers of batts to fill the space. If you go this route, only the layer adjacent to the heated surface should have the vapor retarder. A vapor retarder sandwich in the middle of layered insulation is an invitation for moisture condensation and the problems it can cause.

Batts are sold in pieces or in a continuous roll. Use the rolls to minimize the number of joints to increase the efficiency of the insulation. With a sharp utility knife, cut each batt the length of a joist bay. Push one end of the batt into a bay and work the remaining insulation into the rest of the cavity. Fluff out the insulation so that it's even with the bottom of the joists. The final step is to nail pieces of wood lath perpendicularly across the joists every 2 feet to provide support for the insulation. Without these supports, gravity will do its work and the insulation will work its way out. That's all there is to it.

Here are three tips that will make the job go more smoothly:

• Dress appropriately. A dust mask or respirator, a hat, eye protection (goggles that cover all of the eye), long pants and a long-sleeve shirt are all musts when installing batt insulation. There are few things that burn and itch more than these spun glass fibers.

• Cutting batt insulation is easier if you compress the insulation by pressing down with a metal bar (a framing square works well) to provide a straight edge to guide the utility knife.

• If there are any heating ducts, electrical wire or pipes penetrating the floor into the house, seal them with a spritz of expanding foam insulation. One brand that comes to mind is Dow's Great Stuff.

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Homeowner says paying appraisal fee is unfair

Ilyce Glink
Inman News

Q: I was going to refinance the loan on my house. The day I was going to go to the office to sign the closing papers, I asked again what the loan amount and monthly payment would be. Well, it had changed and was higher than what I was told originally. So, I cancelled the refinance.

My appraisal fee was going to be free, but now they're saying I have to pay it because the loan was not closed. But the only reason I did not close was because the figures changed. Do I have to pay it?

A: You may have to. Often, when you sign an application to do a loan, you agree (in the fine print) to pay any out-of-pocket costs associated with underwriting the loan if you don't wind up closing.

Typically, an out-of-pocket appraisal fee would fall under the category of "out-of-pocket costs," as might the cost of pulling your credit history and credit score. Please go back and look at your application to see what it says about out-of-pocket costs.

However, I'm troubled by the fact that your numbers were different at the closing table than what you had been promised. Do you have the Truth in Lending statement that the lender should have given you when you applied for the loan or within a couple of days from that date? Did you lock in your interest rate when you applied for the loan or sometime after you applied for the loan?

Did your monthly payment change or did the closing fees change? If your closing fees changed, do you know why those fees changed? If your monthly payment changed, do you know why the payment changed?

If you have answers to these questions, you are better able to determine whether you should or should not pay for the lender expenses.

If you failed to lock in the interest rate for your loan and interest rates went up, your lender would not have done anything wrong, and you would have been entitled to not close but might be responsible for the lender's out-of-pocket expenses.

But if you locked in your interest rate, did everything you were supposed to do, and the lender changed the loan amount, interest rate or added fees, you might not have to pay those fees and in addition may have a claim against the lender for violating the terms of your loan and the terms given to you under the Good Faith Estimate of fees.

If nothing changed on your end and you did what you were supposed to do, and the lender increased your interest rate without disclosing it to you well in advance of your closing, your lender might have been trying to pull a classic bait-and-switch on you. This occurs when you apply for a loan at an advertised rate only to find out at the closing that the lender offers you a higher rate to close.

If you know for certain that the lender has not been honest with you, you can file a complaint with the Better Business Bureau or with the agency that regulates mortgage lenders in your state. Depending if the lender is a mortgage broker or mortgage banker, there are national organizations with which you can file other complaints. They are the Mortgage Bankers Association and the National Association of Mortgage Brokers.

But if the loan or the interest rate changed because your credit changed at the last minute, or because you hadn't locked in your loan, or you failed to close before the rate lock expired, then you may have to pony up for these out-of-pocket costs and fees.

If you aren't sure of what your application says, a real estate attorney may be able to help you parse the legalese. Good luck.

Q: I am currently in default on the first mortgage for my condo. I bought a one-bedroom condo for $220,000 in 2005, and recently married and moved out of state.

The decision to allow the condo to go into foreclosure was not one that was made lightly, but was the only option for me. There's another unit in the building that was foreclosed on last October. It is listed for $89,000 and has not yet sold.

In my ZIP code, there are multiple foreclosures for sale at rock-bottom prices and excess new inventory that has been sitting vacant for more than three years. The developers are offering no homeowners association fees for the first year. My monthly homeowners association fee is $364.

My question is this: What will the ramifications be if I choose to default on my home equity line of credit (HELOC)? I'm already taking the credit hit for the foreclosure. How much worse can it be if I default on the HELOC?

A: It sounds as though you're in quite a difficult situation. To buy a condominium for $220,000 and have it be worth less than $89,000 now (I'm assuming less than that since the other condo at that price hasn't sold) is an extremely tough blow.

I suppose the silver lining is that if you also default on your HELOC, your credit history and score won't be much worse than where they are right now. You will probably have to wait another five years to buy something new, due to the new rules from Fannie Mae and Freddie Mac about people who have had a foreclosure.

The concern I have for you now is how you wind down your relationship with the lenders. You must make certain that your primary lender takes back the house as the sum total of what you owe. Once you do that, you will have to negotiate with the home equity lender to make sure that this debt is forgiven.

What you don't want is for these lenders, or perhaps the private mortgage insurance company that insured the top 20 percent of your loan (if you didn't have a 20 percent down payment), to come after you several years from now demanding repayment.

In some states the lender can't go after the borrower for the difference between the loan amount and what the lender got paid, while in others the lender can.

If you lived in a state that allows the lender to come after you for the money the lender lost in connection with the loan on your home, you might then decide to pay off the equity lender, if you can afford to do that.

If both lenders decide that you are gone for good and have decided against pursuing any action against you for the losses on the condominium, the foreclosure on the primary loan on your home and, thereafter, the foreclosure or write-off of the value of the equity line of credit, might hurt your credit to an equal degree.

These are possible complications you would be well-served to settle now. I suggest strongly that you hire a real estate attorney to make sure that all of your loose ends are tied up, so that you can begin your new life without worrying about them.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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In slow market, buyer's best interest may be compromised

Tom Kelly
Inman News

Real estate agents are clearly the most influential persons in every real estate transaction and their power is not reserved for buyers and sellers -- it extends to all professionals involved.

That position of influence becomes magnified in a slower housing market. Everybody is desperate for deals. And, while Realtors typically offer beneficial referrals, consumers should always remember that they have a choice when picking the various players in the home-buying process -- appraisal, credit report, title report, escrow company, mortgage company, etc. These choices often start with the selection of a title company in the standard purchase and sale agreement. This may seem like a "who cares?" decision, but the competition is fierce.

How much do title companies want to be the company of choice in your purchase and sale agreement, commonly known as an earnest money agreement? A few years ago a title insurance company offered to furnish a real estate broker's office if all of the agents in that office wrote in the title insurance company's name in the appropriate spot in the earnest-money agreement. Another company offered a broker the use of billboards in public places for carrying the company's name atop preprinted earnest-money agreements. A third company offered all-expenses-paid fishing trips.

As a result, many states have passed laws in an attempt to curtail gifts to people who have considerable control over the selection of persons involved in a real estate transaction. The total value of allowable annual gifts to "producers" typically is about $25.

The intent of the regulation is to safeguard a choice for consumers. Consumers have a right to choose escrow and title companies and to know why lenders prefer certain appraisers and credit companies. And all reps -- agents, loan, escrow, title -- should choose services in the best interest of their customers and not themselves.

"I don't think the abuses are as rampant as they used to be," said Joe DiPaola, real estate attorney, broker and former in-house litigation counsel for Coldwell Banker. "But it's impossible to monitor everything that's going on. Everyone accuses the other guy, but there really are no white hats out there."

Obviously, competent representatives will ship their business to the company that can get the job done. It's a tough, competitive and highly lucrative business that often continues to snowball. Real estate brokers say third-party providers constantly are offering goodies, while the providers contend that they will quickly be dropped if they don't continually offer incentives.

The heat clearly is on around the country. For example, the Washington state insurance commissioner's office investigated 12 title companies. Its report found "all the major players in the greater Seattle title insurance market were routinely breaking state laws that limit and restrict the use of incentives and giveaways to steer business."

One company spent $11,000 on tickets and expenses at two Seattle Sonics basketball games, investigators said. One agent spent $6,000 for cocktails during the 18-month period under investigation, and another company picked up a single restaurant tab for more than $3,300.

A more glaring example of how bold third-party providers can be in capturing the business of productive real estate agents occurred in California. The California Department of Insurance uncovered numerous instances of suspected illegal rebates by Southland Title Corp. and its subsidiaries, Southland Title of Orange County and Southland Title of San Diego.

The investigation found fraudulent and/or fabricated invoices and expense reports in excess of $47,000; providing food, beverages and entertainment in excess of $174,000; providing gifts and gift certificates in excess of $62,000; and providing business support services in excess of $218,000, all to benefit real estate agents and brokers. And -- get this -- the firm was fined $1.5 million for similar violations just two years earlier.

A few years ago, when residential real estate was the only shining light in our economy, I received a call from a national title insurance company asking about advertising rates for my nationally syndicated radio show.

Before I could refer the call to an account executive, the title representative said, "We don't have much money left in the budget because our main target is Realtors and not consumers."

Consumers still have a choice, even though third-party providers continue to jockey for the agents' attention.

To get even more valuable advice from Tom, visit his Second Home Center.

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