Move My Realty - Real Estate News

Here’s the ORIGINAL text, from M. Anthony Carr: Condo Trends: Tampa Pendings Up for 2nd Month

Condo Trends: Tampa Pendings Up for 2nd Month

Buyers on Florida's Gulf Coast are coming out of the woodwork to grab up condominiums left over from the Sunshine State's housing boom of years past. While prices have dropped year over year by 13 percent, pending sales have outpaced 2007's rate for two consecutive quarters. The latest jump was by 4 percent for condo sellers in the Tampa/Petersburg area.

Senate to vote on rescue plan with added tax cut

"The bill's defeat in the House came despite furious personal lobbying by Bush and support from House leaders of both parties. But ideological groups on the left and the right organized against it. Even pressure in favor of the bill from some of the biggest special interests in Washington, including the U.S. Chamber of Commerce and the National Association of Realtors, could not sway enough votes."

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Multiple refis has homeowner itching to declutter

September 29, 2008

By Benny Kass
Inman News

DEAR BENNY: We have owned our home since 1998 and have refinanced twice since that time. I still have the original mortgage papers along with the twice-refinanced papers. I am afraid to throw anything out but they are quite bulky and take up a lot of room. Do I really need to keep all three or can I toss the original papers when we bought the home and the second refinance papers and just keep the most recent refinance mortgage papers? --Ann

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Reader looks for leverage based on home's condition

September 26, 2008

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

Q: I have a legal question concerning buying a property that is about to be foreclosed.

A major concern when bidding on a foreclosed home is that you can't examine the inside of the property and determine what needs to be fixed. When trying to buy a property during the pre-foreclosure process can you contact the owner directly? If the owner agrees to let you examine the inside of the property, is it legal to offer the owner the amount they owe to the creditors in addition to an amount of extra cash that they will directly receive?

Then after the owner lets you in, if you are not satisfied with the home's condition, can you wait for the auction to get the property for an amount that will be lower than the debts to create a solid investment?

A: In this market, you can try anything to see if you can buy a property that is being foreclosed. If the owner of the home is available to talk to and wants to entertain a discussion with you, the owner is free to do so. However, many foreclosed homes are vacant. The owners have abandoned the homes and the homes have been boarded up and are not accessible.

For homes that are bank-owned and marketed through real estate agents, you can see those homes by calling the listing broker. Sometimes you can call the bank's REO (real estate-owned) department directly to request a showing.

While your question seems somewhat harmless, if you are using the pretext of trying to buy the home from the current owner and occupant of the home for the sole purpose of getting in but you have no real interest in making a deal with that person, I would advise against it.

If the current owner does not have the home for sale, does not have the home listed with a real estate broker and is not advertising the home, it seems improbable that they are going to see you as a white knight that will save them from the foreclosure process.

It's more likely that they will ignore your calls. They probably are so far down the foreclosure process that they won't deal with you at all. If your motives are genuine and you might buy the home directly from the owner and take over the responsibility of dealing with the lenders, go for it. Otherwise, in dealing with foreclosure properties, you will need to deal with them as all other buyers are doing in the market.

Q: My parents bought a home through a "contract for deed." My sister's name was put on the deed, but the seller is carrying the loan through a mortgage company. My parents have been paying the loan to the mortgage company with their checks for the last 10 years.

My dad died, and my mother wants to sell the house. Who will get any profit from the sale: my sister or the person who is carrying the loan through the mortgage company?

A: When you buy a home using a contract for deed -- also called an installment contract -- the buyer becomes the "owner" of the property. This buyer -- in your case, your parents and your sister -- receives all the benefits of ownership of the home. When they satisfy the terms of the contract for deed with the seller, your parents and sister become the owners of the property free and clear of any interest of the seller.

I'm sorry for your loss. If your mom and dad signed the contract for the purchase of the home, it's probable that your mom became the sole owner of the contract for deed and thereby holds the rights to the property. If your sister was named on the deed, then she and your parents probably each owned a third of the property, and now she and your mom each own half or your mom has two-thirds ownership of the property.

If your dad had a will and gave his share of the property in the will to your mom, the terms of the will would make it even clearer who owns the home. But let's assume that your sister is a co-owner of some share of the property.

When your mom and sister sell the home, they should be entitled to the profits, which is the increase in the difference between the original sales price of the home and the price you ultimately get for the home.

Certainly, if your mom and sister satisfy the terms of the contract for deed, the seller would not be entitled to any money other than what is required to pay off the seller under the original contract. If for some reason the original contract has a provision that requires your mom and sister to share in any gain from the sale, the prior owner would get what he or she is entitled to under the contract. Absent that profit sharing term in the contract, sellers usually never get the profit from the sale of the home as you describe it.

For more information, you should sit down with a real estate attorney.

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

Quest for energy efficiency fuels innovation

September 26, 2008

By Arrol Gellner
Inman News

Nowadays, when you're feeling chilly, you just nudge your thermostat up a few degrees. Not too long ago, you'd have been in for a lot more effort: Until the 1880s, most American houses were still heated by an open fire.

In those days, any room you wanted to keep tolerably warm had to have its own fireplace and chimney. This is one reason houses had such boxy, compact floor plans -- the idea was to have as few of those expensive fireplaces as possible. Often, they were placed back to back so they could share a chimney. All this finally changed in the late 19th century, when the innovation of central heating made it possible to warm every room in the house with a single source of heat.

Of course, Americans were hardly the first to have central heating. As early as 100 A.D., the Romans used the hypocaust system, which conducted warm air from a fire into hollow spaces beneath a tiled floor. Ancient Korea may have used a similar system, called ondal, even earlier. By the 12th century, Muslim engineers had improved the hypocaust by using pipes -- our modern heating ducts -- which did away with the need for hollow floors.

The English had an early version of central steam heating as early as the 1830s, though it was of course limited to the fabulously wealthy. It took another 50 years for a proper central heating system to make it across the ocean and into ordinary Yankee homes.

Some central heating used steam or hot water piped to radiators, but most heated the air directly. Early systems burned wood or coal, which meant you were still liable to freeze unless you kept the furnace stoked. Later on oil and natural gas prevailed as fuel, since they could be fed automatically.

All of these early "gravity" heating systems relied on the fact that hot air tends to rise (or more accurately, that gravity makes the denser cold air sink). Of course, since warm air just wafted its way into each room through big ducts, the furnace had to be located below the living space -- one reason older houses had basements even on the West Coast.

Once individual rooms no longer needed a bulky and expensive fireplace for heat, houses could be laid out much more freely. The characteristic rambling floor plans of late Victorian houses such as Queen Annes -- among the first adopters of central heating -- were a direct outgrowth of their liberation from the fireplace.

After World War II, central heating systems began using a fan to actively push warm air through the ductwork. These so-called forced-air units could use smaller ducts than the old gravity furnaces, and could be located anywhere in the house, even in the attic.

Thanks to our increasingly urgent quest for energy efficiency, today's central heating systems make even those postwar units look antiquated. Gone forever is that consummate energy-waster, the standing pilot light, and many forced-air units now boast efficiencies in the high 90s -- about double that of old gravity furnaces. Electronic burner controls and programmable thermostats make it easy to forget that your furnace is even working. But don't: Next time you turn up the heat, think about how far we've come in just 120 years.

Tenant who left on bad terms seeks to use good referral to his advantage

September 25, 2008

By Robert Griswold
Inman News

Q: I lived at an apartment community for many years, but my lease was not renewed because I was falsely accused of breaching my lease. I have found another rental home that is OK, but I miss my neighbors and regret that I had to move. Recently in a casual conversation with my new landlord I was surprised to learn that my prior landlord actually gave me a good reference. I would really rather live at my original community with all my friends. It was only a verbal reference, but can I use that positive referral and go back to the prior apartment community? Wouldn't the fact that my old landlord told my new landlord that I was a good tenant require him to rent to me again?

A: I don't think that your former landlord is required to re-rent to you based solely on the positive verbal reference he gave to your new landlord. Remember that there is no requirement that he give a reference in the first place so I don't agree that you can use his positive recommendation against him. He actually has done you a favor by not bringing up any negative issues concerning your former tenancy. Some landlords will give every former tenant a positive reference as they are concerned that providing negative information could lead to problems. Of course, some tenants will have their family or friends pose as landlords and call the prior landlord to see what he or she is saying about the former tenant. There are many games played by both tenants and landlords when it comes to references on rental history.

I would suggest you simply contact the apartment community and see if they are willing to re-rent to you. Maybe the rental market is weak and they have more vacancies and you can reassure them that you will not breach your lease again. However, I don't think your best strategy would be to demand that a positive verbal reference to your new landlord is grounds that they must re-rent to you. While I think that may be a good argument I don't believe that you can establish any basis that would require them to take you back or negate any prior reasons they had for the nonrenewal of your lease. In other words, just because someone didn't bring up the reasons your lease wasn't renewed doesn't mean that they are precluded from considering that information if you reapply as a prospective tenant. If you really want to pursue this, I think you should contact your original apartment community in a nonconfrontational way and explain exactly what happened and inquire if they will give you a second chance. Of course, if they are willing to let you move back, then be sure to leave your current rental home on good terms.

Q: I recently bought a home after having been a tenant at my local senior citizen apartment community for many years. The new home is fine, but I miss the great activities that they have for their residents and I want to know if I can find a way to still attend these parties and use their facilities. I have some friends there, but I have to admit that I did not get along with some residents and there were a few times that the police were called. What are a prior tenant's rights to being invited back to the facility by friends as a guest of same for various functions?

A: When you moved to your new home you no longer have the use of the apartment community facilities or the right to attend parties that are designed for their residents. The concept of "rights" doesn't really apply to former tenants when it comes to events or functions after they leave the property. The landlord is entitled to set certain rules for the use of common areas, but they should apply to all guests of all residents. However, if the landlord can show that a particular guest (in this case a former tenant) is disruptive or would be a problem for either the landlord or the other residents, then I think they may have a legitimate business reason for excluding certain guests. The real issue is whether a current resident can have a guest at a given function who was a former resident and whether the landlord or management is willing to allow that. I think they should if there have been no problems with this former resident in the past, but they retain the right (just like any restaurant or business) to limit potential problems that could be caused by former tenants continuing to be involved in functions designed for the current residents.

The problem may not even be the landlord but with other current tenants who complain to the landlord or manager. In these circumstances, I think it would be appropriate for the landlord or manager to exclude former tenants.

In general terms, why would a former tenant be allowed to continue to participate in all of the functions designed for the current residents anyway? Should a former tenant be allowed to routinely continue to use the swimming pool and tennis courts or fitness facilities? Personally, I don't think so and likely the claim that they are coming back to the property as a "guest" is just an excuse or they are abusing the situation to the detriment of the current tenants. My suggestion is the former tenant should not regularly be on the property for any functions, but visiting their friends and associates in their own apartment is totally fine.

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.

***

What could buyers have done to avoid getting stuck with major repairs?

September 23, 2008

By Ilyce Glink
Inman News

Q: We closed on our new house just two weeks ago and we already have a huge problem. When we had the house inspected in May, the professional home inspector we hired told us to ask the seller for a written disclosure about the water issues in the basement.

The seller wrote that there had been a one-time water event and that he fixed the problem. When we moved in on Aug. 1, we noticed a strong mold odor from the basement and the area was crawling with insects. Clearly, the problem wasn't resolved.

We now have a huge problem because I became sick and we have 2-year-old twins who also got sick. What recourse do we have? It will cost many thousands to make the house livable, as the basement and attic have mold that must be cleared out.

A: In addition to the problem of cleaning up from this mess, another issue you have to face is proving that the sellers knew this was an ongoing issue. The fact that your inspector called your attention to it and told you to ask for a written disclosure about water issues may help you going forward.

However, you also have to be prepared for the fact that this is the result of a major one-time water issue that just wasn't fixed. It's possible the seller thought he had repaired the problem, but didn't. It's also possible he never cleaned up after the mess happened.

Did you get a copy of a receipt from the company that the seller hired to make the repairs? You might want to call and ask for this, and then follow up with the company to find out what was actually done.

Did you do a final walk-through of the property before closing? If you did, did you notice the mold or insect issue? If so, you should have brought up the issue again, at the closing. You could have delayed the closing or held back monies until you had a chance to look further into the issue.

In addition to chatting with the seller and securing the phone number of the company that assisted him, you should also talk to a real estate attorney or a real estate litigator who specializes in disclosure issues who can help you figure out your legal options.

Finally, many home inspectors will suggest to their buyers that they should investigate certain issues further. In some cases, an inspector's recommendation can be ignored, but in others it's essential. But in any case, when an inspector raises the issue, it should be a huge red flag for the potential buyer.

Certainly, if the inspector saw a problem, the inspector should have told you about the problem in addition to telling you to get more information about it.

As a suggestion for other buyers that may face a similar recommendation in a home inspection, the buyer should stop at that point and ask more questions. What problem has the inspector spotted? What raised the red flag? What could be the cause of the problem? What's the worst-case scenario caused by that potential problem? What's the worst-case scenario for the cost to repair that problem?

If the buyer has that information, he or she can at least have a better understanding as to the issue involved. Some inspectors flag these comments in bold letters; others mark these items as urgent; and still others merely make a passing reference to the potential problem.

In some inspections, it can be difficult or impossible to find the cause of a problem without cutting into walls or performing other invasive tests on a home. Once the inspector has flagged a potential problem, the potential buyer should be on notice that the problem could end up being minor, or it could be a major headache and money-pit issue.

If your seller knew of the water problem, failed to disclose the problem to you but was required under your state laws to disclose this type of problem, you might have a case against him. But it will be up to you, in many cases, to prove that the seller knew of the problem, failed to fix it, failed to disclose it to you, and it was a big deal.

Once you know what the costs to repair the issue are and if you sit down with an attorney to explore your options, you will have a better idea as to whether you can expect to go after the seller or not.

Q: Five years ago I bought my first property. It was a single-family home with a studio apartment attached. I have just been notified by code enforcement that the previous owner never pulled permits for the studio.

Can I sue him for the costs I will incur in rectifying the situation? Also, I noticed on all of his real estate deeds he uses an incorrect address. Does this affect the validity of the transaction?

A: In most states, you have a certain number of years to sue the seller for failing to make accurate disclosures or for breach of contract issues. Since you bought the property five years ago, it's likely that the statutory period expired. You should discuss your legal options with a litigator who has experience in real estate and seller disclosure law.

In terms of the transaction being valid, you should go back to the title company or escrow company that helped you close your deal and discuss the "inaccurate" address issue with them. However, the address of a home is usually not as important when you buy and sell real estate as the legal description of the property. If the legal description is correct but the address is wrong, you are probably fine -- but a real estate attorney could verify that for you.

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

How capital improvements help reduce burden

September 18, 2008

By Ilyce Glink
Inman News

Q: My mother built a house in 1960 for about $12,000. She used a quitclaim deed to gift the property to my two siblings and me. But now she needs to go into a nursing home and we need to sell the house to pay for her care.

We were told that because we own the property and don't live there, that we will have a large tax bill on our hands.

Could the house be gifted back to my mother for her to sell? It would still count as her primary residence, I think, as she moved into the nursing home in March 2007. She would have lived in her house the requisite two of the past five years.

If she were to sell it then, she could accrue all gain tax-free, and we would be free of tax burden. It might play havoc with Medicaid if she is eventually forced into public care, because $200,000 doesn't go far in those places. But I doubt she would outlive the money, and we could inherit any remainder and just pay estate tax.

Sometimes I think we little people without many assets have bigger headaches with them than the multimillionaires.

A: The problem with doing estate planning on the fly, without the benefit of a professional estate planner or estate attorney, is that sometimes you don't think about the long-term consequences and what might happen if something bad occurs.

Rarely is death the worst thing that can happen to someone who is a senior and has lived an active and good life. What terrifies the many seniors I've spoken with is the idea of dying slowly, painfully and expensively in a place that isn't your own. That's why financial planners recommend that people in their 50s buy long-term care insurance. Of course, that option isn't available to your mother at this point in her life.

You and your mother have limited options at this point. You and your siblings can gift the house back to your mother, but I don't know if she would qualify to keep up to $250,000 in profits tax-free.

The question is, when did she gift the property to you? Even though she has lived in the house for a long time, she actually would have to own the property and live there as her primary residence for two of the past five years in order for the IRS rule to work. If she gave you the house more than four years ago, you may be out of luck.

One thing to keep in mind is that if you can't transfer back the property to your mother but instead you have to sell the property and pay taxes, your tax bill this year will be approximately 15 percent of the profits from the sale of the home plus any state taxes owed.

How can you reduce that amount? While your mother may have built the home for $12,000, she may have made capital improvements (including any structural improvements, replacement of the roof, additions, etc.) to the home over the years and you might have made your own improvements to the home. All of these capital improvements would reduce the amount you might have to pay in taxes when you sell the home. You may also deduct from the sales price the cost of selling the home (including the agent's commission) and the cost of purchase.

If your mom built the home for $12,000 and she invested $50,000 in capital improvements to the home over the years and you have $13,000 in closing costs to sell the home, your tax bill might be less than you otherwise might think. If you were to sell the home for $150,000, the capital improvements and closing costs would increase the basis for the home up to $75,000. You would have to pay capital gains taxes on the difference of $75,000. At a 15 percent capital gains tax rate, you could expect to pay about $11,250 in capital gains taxes, plus any state taxes owed. Depending on your circumstances, the rate might even be less as you and your two siblings split up the gain.

But now it's time to bring in the professionals. Please contact an estate attorney immediately for a discussion with him or her to determine your options.

Q: My mother has just been diagnosed with IBC (breast cancer) and is afraid that she will lose her house due to medical expenses. Can she use a quitclaim deed to give the house to a family member now and will that prevent hospitals or her medical providers from attaching liens to her house?

Her new job's health insurance probationary period is not up yet. Does this make sense?

A: I'm sorry about your mother's illness. I hope she is successful in her quest to fight this dreadful disease.

Unfortunately, here's some additional unpleasant news: If your mother quitclaims her ownership interest in her house to a family member, knowing that she has breast cancer and is trying to avoid paying medical expenses, the creditors could sue her and ask a judge to unwind the transfer. The house would then be sold and the proceeds attached.

Instead, you or your mother should spend an hour with an estate planner who can give her a sense of what options she does have in the face of this terrible news.

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

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Having second thoughts? Beware of lawsuit

September 19, 2008

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

Q: My son signed a contract to buy a home and put down $600. The real estate company found a bank who approved him for the loan (over the phone), but he did not sign any paperwork with the bank.

Later that night, after he had had time to think about it, he decided the costs would be too much and he wasn't sure he could make the payments. He tried to withdraw from the offer, but the sellers say they will sue him to make him buy the home.

I realized he shouldn't have signed anything, but in this case, would the sellers win such a case? Does he have other options?

A: Your son may have many options and would be wise to review the contract immediately with a real estate attorney. The contract may give him the right to have the document reviewed by an attorney and during that review he might be entitled to terminate the contract.

The contract may, and should, give him the right to inspect the property to determine whether the property has any major defects. Upon such inspection, if your son finds major defects, the contract might give him the right to terminate the contract.

In some states, if the seller has not given the buyer the proper disclosure documents for the home, the buyer has the right to terminate the contract at any time up until those disclosures have been delivered and the buyer has had time to review the documentation.

Finally, if the buyer doesn't go through with the purchase, the contract may limit the seller's damages to the amount he deposited under the contract. In other words, it's possible that your son's maximum exposure to the sellers could be the $600 he put down.

With so many options, you can see why it would be helpful to have your son sit down as soon as possible with a real estate attorney who can guide him through the process. If you live in a state where buyers and sellers do not customarily use real estate attorneys for the purchase and sale of homes, he should still seek one out that can help him.

While it would be highly unusual that a seller would be able to force a buyer to close on the purchase of the home, if the contract does not limit the seller's damages in case the buyer fails to close, the seller could sue the buyer for the losses and expenses the seller incurs as a result of the failed deal.

The big lesson, of course, is to think first and sign later.

Q: There is a quitclaim deed that was signed and notarized. The deed states that the notary witnessed a certain person who stood before him and signed the deed.

Here's the problem: I have in my possession a death certificate that shows this person (not the notary) was dead one year before supposedly signing the quitclaim deed.

Did the notary do something wrong and what happens now?

A: It's possible that the notary did not do his duty as a notary. A notary is required to review some form of identification that verifies that a person signing a document matches the identification.

If a notary fails in his or her job as a notary and does not take the required precautions to make sure the proper person is signing a document, the notary may be liable for his failure to properly verify the identity of the person that signed a document.

In some states the notary's liability may be limited and may not be nearly enough to cover the expenses and costs that someone else might incur as a result of the notary's failure to properly confirm the identity of the person signing a document.

But a notary may not have a duty to ascertain whether the identification presented is not a forgery. Generally, if a person comes before the notary and presents identification that the notary believes to be accurate, the notary has probably satisfied his or her duties as a notary.

Some states are requiring more and more of notaries. Some states now require notaries to not only review the person's identification but also fingerprint the person signing the document. While notaries are the first line of defense against fraud, it's not a foolproof system.

Your case isn't unique. There have been many cases of fraudulent transactions involving quitclaim deeds. If the quitclaim deed purportedly transferred title to a property that you had an interest in or would have had an interest in, you might have to take legal action to protect the property or to protect any interest you might have had in that property.

If you are in a position that your interests in the property could have been compromised, please consult with a real estate attorney.

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

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What buyers can do to ensure successful mortgage application

September 17, 2008

By Ilyce Glink
Inman News

When it comes to getting a home loan, today's game has dramatically changed.

A year or two ago, it would have been easy as pie to get any kind of home loan offered -- or be creative and basically invent your own terms.

Want an interest-only loan? No problem. Pay-option adjustable-rate mortgage, where you choose how much you pay? Done deal. Didn't want to provide any documentation? That works. You could sign up for a super-low teaser rate or choose a loan where you'd make no payments for the first six months to a year just for asking.

While mortgage lenders still pulled your credit history and credit score, no one said "no." So, even if you had a credit score in the low 500s, you could still get a loan. You might pay a higher interest rate and maybe even a couple of points (a point is 1 percent of the loan amount) in fees, but someone would say "Yes, sign here please."

Today, home buyers and homeowners are having a lot of trouble getting a home loan. Lenders are saying "no" even when buyers and owners have good credit scores and credit histories.

What has changed is how much risk some mortgage investors are willing to accept in the face of mounting real estate loan losses in the billions of dollars. Unfortunately, you can't kickstart the real estate market until the panic in the credit markets has abated.

What can you do to increase the likelihood you'll get the home loan you need? Start with getting your documentation together.

Mortgage lenders aren't in the tree-saving business. They like paper and use a lot of it. To apply successfully for a home loan, start by gathering together the following information:

• all W-2 forms for each person who will be a co-borrower on the loan. You'll also want to provide the contact information for the human resources manager or your direct bosses, so the mortgage lender can verify your income.

• copies of completed federal tax forms for the last two or three years, including any schedules or attachments. These will be required primarily of self-employed individuals or those who are claiming a history of rental income. Either way, you won't need your state returns.

• copies of one month's worth of pay stubs.

• copies of the last two or three bank statements for every bank account, IRA, 401(k), Keogh, other retirement account or brokerage account the co-borrowers own. Bring a copy of your most recent statement for any other assets you have.

• a copy of the back and front of your canceled earnest money check plus the escrow deposit receipt. If you don't get your canceled checks back, then access the electronic version on your account and print it out.

• a copy of the fully executed sales contract and all riders. You'll need both brokers' names, addresses and phone numbers (if you're using a broker or agent), and the same information for both your attorney and the sellers' attorney (if you're living in a state where real estate attorneys are used to close residential sales).

• If you're selling a residence at the same time you're buying it, you'll need a copy of the listing agreement and, if the home is under contract, a copy of the fully executed sales contract. (Be prepared to provide the contact information for the brokers and attorneys for your sale as well, if you're far enough down the line for that.) When the property closes, you may be asked to provide a copy of the actual disposition of funds from the escrow account.

• If gift or grant funds are involved, the giver (or grantor) must provide proof that he or she had that money to give, such as a copy of the giver's recent bank statement. If you're receiving a grant, the grantor should provide you with a letter outlining the grant and stating that the funds do not need to be repaid. Be prepared to show the paper trail for the money, including a deposit slip. The giver will have to fill out a gift letter affidavit, available from the loan officer, indicating that the funds were a gift and the gift giver does not expect repayment. In short, you'll need a copy of the check, deposit receipt and a bank statement verifying the deposit.

• copies of all divorce decrees and property settlement agreements.

• copies of a survey or title insurance commitment for the home you're buying, if available when you apply for the mortgage, or when it becomes available during the purchase process. In most states, the preliminary title report takes the place of a survey, lenders say. But a survey may be required in states like New Mexico.

• If you're self-employed, prepare complete copies of the last two years' federal business tax returns and a year-to-date profit-and-loss statement and balance sheet with the original signatures. Some lenders will agree to use a letter from your CPA stating that you are self-employed or a copy of your business license, but have your tax returns and profit-and-loss handy.

• a list of your addresses in the last two years.

• If you've made any large deposits ("large" means anything larger than your monthly salary) into your bank accounts in the last three months, be prepared to provide an explanation with proof as to where the funds came from.

• If you've opened a new bank account in the last six months, write a letter explaining where the money came from to open this new account.

• addresses and account numbers for every form of credit you have. Or alternatively, many lenders will use your credit history. Be sure to pull a copy from each of the credit reporting bureaus before you apply at AnnualCreditReport.com. Pay for a copy of your credit score while you're there (approximately $7) so you know what you're facing.

• documentation to verify additional information, such as Social Security, child support and alimony.

• If you've had a previous bankruptcy or foreclosure, make sure you have a complete copy of the proceedings, including all schedules, and a letter explaining the circumstances for the bankruptcy or foreclosure and the discharge certificate.

• For most loans these days, you'll need a photocopy of a picture ID (usually your driver's license or U.S. passport) and in some cases a copy of your Social Security card. Also, for VA loans you will need to bring proof of enlistment (your DD214) and Certificate of Eligibility for a VA loan (details for this are available at www.va.gov.)

• If you have any judgments against you that have been paid in full, bring a copy of the recorded satisfaction of judgment. But if you have a judgment against you or are involved in litigation, you will need copies of documents describing any lawsuits and may expect to have to settle and pay off any judgments prior to closing on the loan.

• If you are buying a new primary residence and turning your existing home into a rental property, you'll need to show a signed lease agreement as well as proof of receiving the security deposit from the new renter. You should also be prepared to prove that you have at least 30 percent equity in the existing property.

This seems like an incredibly long and detailed list, and your mortgage lender may not ask for everything on it or may ask for other documentation. But if you want your home loan application process to go smoothly, it pays to get your documentation in order, before you ever apply for a single loan.

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

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With chain stores taking over, it's not just economic value that's lost

September 12, 2008

By Arrol Gellner
Inman News

For some years now, my favorite place to find a big old homemade slab of pie has been an unassuming mom-and-pop restaurant called Walker's Pie Shop, not far from where I live. It's the sort of place that hasn't changed in decades. Its decor, such as it is, evokes the home-improvement hit parade of another era: asphalt tile, Formica-topped tables, Masonite paneling, and glossy oil paint.

Oddly enough, this very lack of pretense is what makes Walker's stand apart. It's quite clear that no corporate consultants came up with its cheerfully jarring vanilla-orange-vanilla color scheme. There are no fake old books on high shelves, no copper muffin pans or reprints of old French bicycle posters hanging on the walls. In short, there's none of the strained quirkiness that comes from decor specified down to the last jot by some corporate guidebook. Instead -- now here's a concept -- there's plain old good eating: a whole roster of big, old-fashioned pies baked up each morning right in the back of the shop.

Sad to say, unassuming mom-and-pop establishments such as Walker's are increasingly rare these days. Some are, of course, being squeezed out by corporate chains with more sophisticated business models. While it's pointless to denigrate this kind of success, its economic downside is well known: Profits that used to stay in the community instead go flitting to some distant headquarters, to be divvied up among faceless investors instead of by the family down the street.

But there's another, more tangible problem with the steady corporate takeover of Main Street business. Beholden as they are to shareholders, the chains are all but obligated to repeat ad nauseum the formula that's brought them success. This robotic repetition of a profitable concept, regardless of regional setting, is among the main culprits behind the increasing sameness of America's built environment, whether urban or suburban.

Retail chains of one sort or another are nothing new, of course. Among the first businesses widely built to a corporate template were gasoline filling stations, whose highly specialized architecture and signage were already being standardized well before World War II. But the real juggernaut of corporate standardization was the McDonald's hamburger empire, founded by Ray Kroc in 1955, and now operating more than 31,000 restaurants in 119 countries.

The phenomenal success of McDonald's has since been the model for countless food, retail and service chains -- good news for shareholders, so-so news for consumers, but generally bad news for the American landscape. Today, pretty much every shopping center across the nation contains some musical-chairs variant of the same familiar chain outlets, whether they sell food, clothing or coffee. Ironically, some genuinely local establishments now feel pressure to adopt the same slick corporate atmosphere just to remain competitive.

As for Walker's Pie House, alas, it too is closing its doors -- a victim, perhaps, of economic times, or simply of its more calibrated competition. A new restaurant calling itself a "bistro" is slated to replace it. Let's hope it doesn't serve up another trendy helping of "Anywhere U.S.A."

Why replacing with reinforced concrete is worth the cost

September 10, 2008

By Bill and Kevin Burnett
Inman News

Q: My two-story, Berkeley, Calif., home, built in 1905, is very close to the Hayward Fault. It is lath and plaster with a stucco exterior. The house is U-shaped around a courtyard. There is only one area -- about 20 feet by 10 feet -- under the house that you could call a basement. The rest is crawlspace.

The foundation is mostly brick except for the 10-by-20-foot section of the house where the space between the earth and the floor joists is tall enough to stand in. In this area the foundation is concrete, which, I think, was poured over brick. In this area the mudsill is bolted to the foundation but nowhere else. A few years ago I had a plywood shear wall installed in this section. The footprint of the house is just under 2,000 square feet. There are cracks visible on the outside where the house meets the foundation.

What do you think I should do to be safer and to protect the value of my house? Could you also provide a ballpark estimate of costs for the answer?

A: We can only imagine the jewel you have -- classic details such as quarter-sawn oak floors, natural wood wainscoting, plate rails, coved ceilings and built-in hutches. The courtyard sounds charming, the perfect place for a cup of afternoon tea (or a beer) on a summer day. Preservation and protection of this asset should be the order of the day.

The brick foundation offers little, if any, protection in the event the Hayward Fault slips. It should be replaced with a modern reinforced concrete foundation. We'd also suggest you investigate going at least one step further and shear-panel the cripple walls.

The cost of replacing the brick foundation will be dear, but it will provide the protection you need. In our view, the money would be well spent.

During a major quake, two very bad things can happen to houses that rest on a brick foundation. First, the lateral forces of the quake can cause the house to slide off the foundation. The other is that those same lateral forces can cause the cripple walls to buckle, collapsing the house. The horizontal cracks you mention along the foundation line may be the result of the lateral movement of previous quakes. They may also be the result of the bricks settling.

Around the turn of the 20th century, brick foundations were common. Homes were constructed on what were essentially wide brick-and-mortar walls dug into the ground. Over time, moisture caused the mortar to fail. At best, mudsills were mortared in place. There were no mechanical fasteners to secure the mudsill to the foundation.

We suspect that on a close inspection of your foundation you'll find sand where solid mortar used to be.

Modern foundations are made of reinforced concrete. They take the form of an inverted "T" with the base of the "T" called the footing. The footing provides a wide base to accept the forces from the walls and roof above. The taller the building, the wider the footing.

The Uniform Building Code provides the minimum specifications for footing widths for buildings of various heights. Resting on the footing is the stem wall. The purpose of the stem wall is to raise the height of the foundation above the exterior grade to keep the wood members out of the dirt.

Mudsills are bolted to the foundation using J-bolts (named for their shape), which are placed no more than 6 feet apart and 1 foot from every corner. Steel reinforcing bar "rebar" is placed in the wet concrete to increase the tensile strength of the foundation. Rebar helps prevent the concrete from developing vertical cracks.

The portion of your foundation that appears to be concrete is probably a "cap and saddle." In this process, the brick foundation is encased with concrete. Rebar is added for rigidity and the mudsill is secured by J-bolts imbedded in the concrete cap. Although it provides a bit more structural support, the core of the foundation is still old brick and should be replaced.

The process for replacing a brick foundation with a reinforced concrete foundation is conceptually simple. The first step is to construct a temporary wall close to the perimeter of the house to support the structure. Next, remove the bricks. Finally form and pour the new foundation. It's a good time to replace the 100-plus-year-old mudsill with a new pressure-treated version the same width as the cripple studs. It will allow a flat surface to attach the shear panels to the cripple wall. The job can be done in stages or all at once. Although when we were younger we replaced a couple of foundations ourselves, these days we'd leave the job to the professionals.

The cost will probably be in the tens of thousands of dollars -- figure a minimum of $200 per foot. To find the perfect contractor, we can suggest a couple of avenues to pursue.

First, because you have a historic home, contact one of the preservation societies in the area for references. We suggest the Alameda Architectural Preservation Society (formerly the Alameda Victorian Preservation Society). The members of these organizations are involved in the renovation of their own homes and generally have a line on contractors who do good work at a fair price.

Our other suggestion is that you try to locate a contractor/engineer who specializes in earthquake retrofits. Local building departments can help with references. Try Berkeley and San Leandro. These contractors may charge for an estimate. If they do, expect a detailed report with the scope of the proposed work outlined as well as a cost estimate. Ask for a sample proposal before agreeing to pay for the estimate.

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Despite cost savings, both buyer and seller could get burned

September 09, 2008

By Barry Stone
Inman News

DEAR BARRY: We're selling our home, and the buyer wants his brother, a contractor, to do the inspection, instead of hiring an actual home inspector. We've never heard of this kind of inspection and are not sure if we should allow it. What do you think? --Amy

DEAR AMY: If your buyer chooses an inspection by someone who is not a professional home inspector, he is the one on the short end of the stick -- not you. Many people assume that home inspectors are merely contractors who inspect homes instead of building them. That idea is about 10 miles short of the truth and needs to be reconsidered.

Those who liken home inspectors to contractors might just as well equate a police detective with a patrolman on the beat. The detective probably began as a patrolman but then attained the specialized skills of a crime investigator. Patrolmen are skilled in law enforcement, not in criminal forensics. In the same way, most home inspectors began their careers in the building trades but then specialized in property defect evaluation. Contractors are skilled in construction techniques, not the discovery of damage, deterioration and other building defects.

When a relative or friend who is a contractor conducts a home inspection, the result is a walkthrough inspection by someone who is not an expert in property evaluation. Construction knowledge is essential when checking the condition of a home, but a comprehensive inspection is much more involved and far more complex than a mere walkthrough overview, even when done by a contractor.

A home inspection, if properly done by a qualified pro, surpasses a contractor's walkthrough inspection in countless ways. Just to list a few: A home inspector removes the covers from breaker panels, tests the grounding and polarity of electrical outlets, verifies GFCI compliance at outlets, and operates and evaluates the plumbing fixtures, drains and supply valves, the heating and cooling equipment, built-in appliances, fireplaces, garage door openers, and more. A home inspector walks on the roof, traverses the attic, belly-crawls the foundation area, and evaluates safety compliance regarding smoke alarms, water heaters, garage firewalls, chimneys, gas piping, railings, decks, stairways, etc., and checks for signs of faulty ground drainage, for general physical damage, and for operation defects affecting doors, windows, foundations and more -- much more.

Contractors typically report conditions that happen to be noticed in passing. A qualified home inspector employs discovery processes specifically developed and refined by home inspection professionals since the 1970s. These methods are the routine, daily practice of home inspectors who have mastered their profession.

Choosing a contractor instead of an experienced home inspector denies a buyer the full benefit of comprehensive defect disclosure. For sellers, the one disadvantage is liability if undisclosed defects are discovered in the future. To lessen that risk, you should recommend in writing that the buyer hire a qualified, full-time home inspector. If you make that recommendation and he fails to heed it, you will have a strong defense if unknown defects are discovered after the close of escrow.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

Tips on properly fastening cripple walls to mudsill, floor joists

September 03, 2008

By Bill and Kevin Burnett
Inman News

Last week, a reader asked our opinion about insulating his crawl space and doing a little earthquake retrofitting under his home. We recommended that he install batt insulation between the floor joists, retrofit the cripple walls with plywood sheathing to make a shear wall, and put down a plastic vapor barrier over the dirt in the crawlspace.

Last week's column addressed insulating the floor. Today's column sets out the reasons to reinforce the cripple walls and the method for doing so.

We've mentioned that we experienced the Loma Prieta earthquake in 1989. Fortunately, our Alameda, Calif., homes suffered no damage. We'd just put a new foundation under Bill's house, and Kevin's "Old Vic" came equipped with a concrete foundation. But Loma Prieta made its impression and convinced Kevin that shear panels under his house were the way to go.

Cripple walls are short wood-framed walls extending from the mudsill resting on the top of the perimeter-raised concrete foundation. Floor joists rest on the top plates of the cripple walls, creating a crawl space. On a flat lot, cripple walls are usually 2 to 3 feet high. On a sloped lot, cripple walls are stepped down, following the slope of the lot. The top plate of the progressively higher walls forms a level platform upon which the floor joists rest.

Unreinforced cripple walls are a weak spot in a structure with a raised concrete foundation. They offer minimal resistance to the side-to-side forces of an earthquake and can buckle. Properly installed plywood sheathing on the cripple walls provides protection against these lateral forces. The side-to-side force is also called "racking" or "shear."

A word of caution is in order here: Properly installed shear panels on cripple walls help stabilize the structure during a seismic event, but they are only a partial fix. Floor levels above the crawl space remain unaddressed.

To explore a full earthquake retrofit, you should consult a structural engineer and/or a company that specializes in earthquake retrofitting. Also, before beginning this job, check with your local building department to see if permits and inspections are required.

Installing shear panels is more than just nailing some plywood to the studs. The goal is to make the foundation, the mudsill, the cripple wall and the floor joists into a monolithic unit by fastening all of the components together. This is accomplished with specialized metal fasteners and a skin of plywood or oriented strand board (OSB).

Just as the hip bone is connected to the thigh bone, etc., the mudsill must be bolted to the raised concrete foundation; cripple studs must be nailed to the mudsill; and floor joists must be secured to the top plate of the cripple wall. The whole is greater than the sum of its parts and provides significant structural defense against earthquakes.

Specialized fasteners are readily and economically available. Simpson Strong-Tie has been providing these connectors to the building industry for as long as we can remember. Simpson also provides a detailed Seismic Retrofit Guide at links.sfgate.com/ZBGA. It's worth the look.

Your job is a bit easier because, as you report, the mudsill is already bolted to the foundation. Check the size, location and condition of the bolts. Current code requires foundation bolts to be 5/8 inches in diameter and located 12 inches from each corner of the house or break in the mudsill, and no more than 6 feet apart.

If you're short on bolts, you should add connectors between the foundation and the mudsill. Simpson makes a "Universal Foundation Plate" to connect the stem wall of the raised concrete foundation to the mudsill. You must rent a hammer drill equipped with a carbide drill bit to drill the holes in the concrete foundation to receive the anchor bolts.

Hopefully, the mudsill is the same width as the studs of the cripple wall. If it's not, no worries. It's just a bit more work. If, for example, a 2-by-4 cripple wall sits on a 2-by-6 mudsill, nail 2-by-4-inch blocking on top of the mudsill between the cripple studs. This allows the shear panel to be nailed on all four edges. Use four ten-penny (10d) nails to secure the blocking to the mudsill. You'll need to block only the stud bays that will be covered by sheathing.

The next step is to secure the floor joists to the top plate of the cripple wall. A 90-degree metal strap (A35 Shear Angle) is available, again through Simpson Strong-Tie, for this purpose. The brackets are nailed to the rim joist all around the perimeter of the house. It's pretty close quarters getting these brackets nailed in place, so we'd suggest you rent a compressor and a palm nailer to make short work of the job and to save your fingers.

With the mudsill secured to the foundation and the cripple wall secured to the rim joists, install the plywood sheathing. Use 1/2-inch plywood or save yourself a buck or two and use OSB.

For a one-story home, 50 percent of the length of each cripple wall should be sheathed. If the home is two stories, 75 percent of the length of each cripple wall should be sheathed. Gaps in the panel are allowed to accommodate pipes and heating ducts. The length of each section must be twice the height of the cripple wall. A little longer is OK; a little shorter is not.

In the case of 3-foot-high cripple walls, each section must be a minimum of 6 feet long. There must be a 6-foot section of sheathing at each corner. Runs of sheathing can be no more than 25 feet apart from center to center.

The edges of the shear panels should be nailed to the top plate of the cripple wall, the mudsill or block, and to the studs with 8d nails 4 inches on center. In addition, nail the panels to the studs in the field every 12 inches. Make sure the edge of each panel begins on a stud and ends on a stud so the panels are fully nailed.

Once the panels are nailed off, use a hole saw attached to a drill motor to drill a 3-inch diameter hole top and bottom through the sheathing at each stud bay for ventilation.

There you have it. It's a lot of work, but well worth the effort. And again, kudos to you for undertaking these projects.

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