Today's Top Real Estate News Provided by Inman News 9/5/2008  4:48:50 PM

Staging home for sale worth the cost Property will often sell more quickly and for higher price Paul Bianchina Inman News If you're selling your home, you obviously want to get it sold quickly and for the highest amount possible. One very important strategy to keep in mind is staging, which is simply the process of arranging the inside of your home so that it shows off to its full potential. Staging plays up your home's good features, such as enhancing a great view or drawing the buyer's eye to some spectacular wood floors. It also helps to minimize some of the home's drawbacks, such as making a small bedroom look larger. But also understand that staging does not in any way mean concealing structural defects, such as hanging a picture over a water stain or putting curtains over a broken window! Staging allows a potential buyer to visualize what can be done with the home, which is especially important with a house that's currently vacant. For example, some carefully arranged furniture in a room that would otherwise be empty can really help the buyer see the room's potential. And if you're in a neighborhood of tract houses that all look pretty much the same inside, good staging will set your home apart from the others for sale in the neighborhood. Finally, good staging makes buyers feel at home. It lets them really imagine themselves in the kitchen with friends, or relaxing in front of the living room fire, or even working on their car in the garage. Remove Clutter There are several things that go into staging a home for sale, and probably the single most important one is getting rid of all the clutter. No one wants to see several days' worth of mail and newspapers on the kitchen counter, or a kid's bedroom crammed with toys and games. The same applies to the garage, basement and even the backyard storage shed. Clutter is not just an overflowing magazine rack. It can be too many pictures on the wall, too many chairs wedged around the dining room table, or an oversized sofa that blocks the living room traffic patterns. It can be too many items of clothing crammed into a closet, or too many of grandma's dishes filling up every inch of a kitchen cabinet. When decluttering the house, stuffing everything into the closet or in boxes in the garage is not the answer. Remember that a potential buyer is looking in every nook and cranny of the house, and an overflowing closet doesn't make much of an impression. Instead, get the clutter completely out of the house. This could be a garage sale, some donations to a local charity, or simply a trip to the landfill. If you still have items that are cluttering up the house but they are things you'll want for your next home, then rent a temporary storage space and move them there. Let Buyers Envision Themselves There In addition to removing the clutter to make the rooms feel more open and the closets and cabinets feel more spacious, you want to always have an eye on what things you can do to help the buyers visualize living there. For example, lots of family photos on the wall will make it hard for the buyers not to feel like they're trespassing in someone else's home. Likewise, while you may be very proud of your religious affiliations, your choice of political ideologies, or your gun collection and the elk head on the wall, remember that not everyone shares your interests. If you can depersonalize the home to some degree, it will make it easier for potential buyers to see themselves making a life there. Your home should also be absolutely immaculate when you have it on the market for sale. Clean the counters and the cabinets and the fixtures and the flooring and every other part of the house until it shines. Wash the windows, let in the light, and make sure that beautiful view or that inviting backyard is clearly visible when a buyer walks through. A clean house also gives potential buyers more confidence that the structure of the house has been properly maintained and cared for as well. Hire professional stager It often makes good financial sense to hire a professional to do the staging for you. A professional home staging company will thoroughly understand the concepts of space and light and color, and they know how to make rooms show off to their full potential. They also don't have the same personal attachment to the home and its furnishings that you do, so they can make practical, impartial suggestions that you might otherwise overlook or simply not want to face. The cost of professional staging varies with the size of the house and amount of work involved, but a well-staged home should sell quicker and for more money, which makes that upfront expense a wise financial investment. Remodeling and repair questions? E-mail Paul at paulbianchina@inman.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Inman News

Two women, one dead lover, and an estate to split 'Dishonest' judge, invalid will cloud issue of who gets what Ilyce Glink Co-written by Samuel J. Tamkin Inman News Q: I am trying to take care of my son's father's estate in a small north Florida town. He had a handwritten will designating me as the personal representative, but with only one witness signature. He was never married but had two illegitimate children: my son and a daughter from another woman. This other woman lives in this small town. All was going well until the other woman would not agree to a 50/50 division of the estate. Not to toot my own horn, but after handling two other estates within the past three years, I was the one who did everything to get the estate this far. We went to court and the judge treated me like a city slicker and made the daughter the personal representative for the estate. My attorney proved in court she thwarted every effort to settle the estate, and she proved this woman was reckless and irresponsible. But her husband's father is a hunting buddy of the judge. One year after the death, she still has not even filed an official inventory of the estate with the court. Is there some way to remove what I consider to be a dishonest judge from a case he has mishandled? Also, is there a way for the children's interest in the property to be protected from anyone living on the property due to liability issues? A: The quick answer to your question is that you can file a motion to have the judge withdraw from the case if there is a conflict of interest or if there is any other valid reason for a judge to be taken off the case. If a judge fails to consider the motion, you can bring the motion before another judge in the jurisdiction or move for appellate review of the order of denial. But getting to that point is getting ahead of ourselves and may not be the right way to do things. While your circumstances are somewhat unique, it seems you have a contested estate, and the legal wheels take time to spin in small towns and large cities. From your question it appears that the handwritten will was probably not valid. You imply that it had only one witness to the will. Some states require two witnesses to sign a will, and still others require three. If the will was not valid, the judge would have discretion in deciding who to appoint to handle the affairs of the estate. The person the judge appointed lives in the town in which the person who died lived, and where most of the assets are located. That information alone may be enough to justify naming the other woman to handle the estate rather than you. The judge may have determined that you live out of state and may not have the same contacts with the family and estate that she has. While she may not be as competent as you, the judge probably has wide latitude in deciding how to handle the estate. That in and of itself would probably not be sufficient grounds to have the judge removed. If the other woman is in fact reckless and irresponsible, you have the right to have the judge reconsider his order to appoint her and to designate somebody else to take care of the estate. But there would be no guaranty that you would get appointed. It could be a local trust officer of the bank, who would then charge the estate for his or her time and costs. While it seems that you want to, and should be, appointed, it doesn't seem that you would have a legal right to be appointed from the facts that you described. While it may be hard, you may be placed in a situation of having to work with this other woman to get the affairs of the estate handled and settled. While she may take you up on your offer to make peace and work with her to get things done, she may decide to ignore you. If she ignores you, the only thing that you will be able to do is make sure that the estate assets do not get misspent and that she reports to the court the assets of the estate and proper disposition of all of the assets. Sometimes the wheels of justice don't work the way you would like, and sometimes the system doesn't lead to the results you would like. But you'll have to work with the system we have in the best way you can to make sure there is a just result. Insofar as liability issues with property that was left behind, you should make sure that the other woman purchases insurance for the real estate involved just in case there is a casualty or someone is injured on the properties. An uninsured casualty or an injury sustained by someone at one of the homes could wipe out any money left in the estate. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink and Samuel J. Tamkin

Landlord fears lawsuit for reporting child porn Rent it Right Janet Portman Inman News Q: I had quite a shock when I entered my tenant's apartment, at his request, to fix the leaking kitchen sink. Usually I encounter damage or a mess, but this was way worse: On the kitchen table were photos of naked children in suggestive poses and situations. It looks like pornography to me, but I'm the first to say, I'm no lawyer. Should I report this? What if I report it and I'm wrong -- can I be sued? --Andrew F. A: You're asking a couple of tough questions -- whether you have a legal duty to contact the police, and whether you can be successfully sued by your tenant for doing so. Let's look at each issue, assuming for the moment that the photos were pornographic images of children (more about why that's an important assumption in a minute). A private person generally has no legal duty to report evidence of a crime. There may be strong practical and moral reasons to report crime, but that's not the same as a legal duty. If you go beyond simply not reporting a crime and take active steps to conceal or prevent disclosure of a felony, however, you're risking prosecution for an age-old crime known as "misprision of a felony." Still on the books at 18 United States Code § 4 (and in many states' criminal codes too), this crime requires someone, not the perpetrator of the crime, to have knowledge of the commission of a felony, and to have taken affirmative steps to conceal it. You probably don't have much to fear because you haven't done anything beyond remaining silent (you've taken no "affirmative steps"). Sharp readers are no doubt wondering how this answer squares with a landlord's duty, in many states, to stop criminal activity on the premises and evict tenants for certain activities, such as drug dealing. Laws in many states require landlords to terminate the tenancies of residents who commit specified crimes on or near the premises (in some situations, the local district attorneys will do the evicting for you if you're lax). In some states, the landlord's duty doesn't kick in until the tenant has been arrested or convicted; others leave it up to the landlord to determine whether the criminal laws have been broken. But all of these laws bear one thing in common -- the offenses for which you must evict are enumerated, and they typically concern drug dealing, prostitution, gang activity, and the like. Even the broadest statutes require that the criminal activity pose a danger or threat of danger to persons on the premises or to the rental property itself. These statutes probably can't be used by a landlord who wants, for example, to evict an otherwise lease- and law-abiding tenant whom he learns has been convicted of tax evasion or bad-check writing, or a host of other crimes that don't threaten other residents or the landlord's property. Let's suppose that you live in a state with broadly written statutes, as described above. Possessing child pornography is a crime against the child depicted in the photo, but it's debatable whether committing this crime in the privacy of one's apartment poses a threat to others on the rental premises. One can imagine arguments in favor (are possessors of such materials likely to target children living on the property?) and against (studies have shown that most criminals do not commit crimes where they live). To know whether you have a duty to terminate in this situation, you'll need to know precisely what your nuisance termination laws say and how they've been interpreted in situations like the one you describe. Your worry about liability for reporting what you saw is understandable, particularly because, as you note, it is not easy to know which visual depictions are criminal. For example, possessing a computer-generated picture of children engaged in sexual activity is not a crime; but just to make matters more confusing, attempting to download or possess computer-generated pictures is a crime! But as long as you have a good faith and reasonable belief that you've witnessed a crime, contacting law enforcement won't expose you to liability, even if the prosecuting attorney declines to pursue the case or prosecutes but loses. The reason for this rule is easy to see -- without it, people would hesitate to cooperate with law enforcement in many situations, fearful that if the defendant is exonerated, they could be successfully sued. This shield is not absolute however. For example, it won't protect you from a defamation lawsuit by your tenant if you spread rumors about what you saw. Q: We live in a 63-unit apartment complex and received a notice on the first of last month telling us that we had to pay $50 for a new remote to open the parking gate, which was getting a new card reader. We were told we could use our old remote until mid-month, but after that date the gate would no longer open with the old device. As of this writing, six weeks after the notice and one month past the cut-off date, the new reader is in place but the old remote still opens the gate. The new remote works too, but my concern is that I paid the $50 in good faith, believing I had to in order to access my parking space. Management has had my money for two weeks and I would like to know your professional feelings and advice on this matter. --Cathy V. A: Two possibilities come to mind: Either the management is running a clumsy scheme to bilk tenants out of $50 each, or they've simply forgotten to disable the old remote. Common sense suggests it's the latter: Management spent your money on a new gate reader and new remotes, rather than a trip to Bermuda or lottery tickets. Probably, your landlords simply forgot to cancel the old devices' ability to open the gate. While this is kind of a bone-headed mistake, it doesn't amount to fraud. Although someone who didn't pay the fee saved 50 bucks, that tenant's luck doesn't translate into a legal beef against management for you. You might, however, give some thought to whether this fee was proper in the first place, in light of your lease and its terms. If your lease or rental agreement gives you parking rights, and says nothing about paying for replacement remotes, then arguably this fee was improper. When mechanical devices fail, as they do from time to time, landlords are supposed to pay for their maintenance and replacement, unless the tenant broke the device or the rental document puts that obligation on the tenant. Check the "Maintenance" or "Parking" clause of your rental document: If it doesn't cover paying for new parking remotes, you may have a viable legal complaint right there. 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. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Janet Portman

Inheritor wants new mortgage, name on deed Must closing costs be paid when transferring title? Ilyce Glink Inman News Q: I am the co-executor of an estate of a relative and was left the house in the will. We have been unable to sell the house. I've been paying the mortgage and costs for a couple of years. I recently decided to move into the house. Will the mortgage companies (original and equity lenders) transfer the home into my name and qualify me for a new mortgage based on my credit? Is it possible to avoid closing costs? What is the best way to approach the mortgage companies? What is the best and easiest way to transfer ownership of the house to me? Is it possible to have more than one principal homestead tax exemption? I already have a home. Can I deduct interest and taxes on the property that I previously paid? A: First, our condolences on your loss. You have quite a few questions on your plate. Let's start with the house you inherited and how to get that home into your name. Your relative gave you her house under her will when she died. If you are probating the will, your state should have a process to allow you to transfer the ownership of the home from your relative's name to yours. The attorney assisting you in the probating of the will can help you with the forms necessary to transfer the title from your relative to you. If you don't have anybody helping you, some court clerks can -- but are not obligated to -- help guide you in the transfer of the property. Generally, the costs of transferring title this way are not the same as in the sale of a home to a purchaser. You should be able to transfer the home by using an "executor's deed" (perhaps even a deed issued by the court) and signing the various transfer tax and other forms required in the location in which the home is located. Frequently, you would not have to pay any transfer taxes on the transfer of title to your name as you are not paying any money for the home. In general, the current lenders would not be involved in transferring the home into your name. In some instances, the transfer of the title to the home to your name would not even trigger what is known as the "due on sale" clause. That provision in most mortgages states that a lender has the right to call the loan due when the property is sold or title to the property is transferred. When a person dies and title is transferred to a spouse or a child, the due-on-sale clause would not apply. If the due-on-sale clause did apply to your situation, it would be at the lender's discretion to exercise it. In the current economic climate it's unlikely the lender would call your loan if you have been prompt and continue to be prompt at making your loan payments. Once title is in your name, you will have the choice to refinance the loan using your own credit and pay off the prior lenders. If you were to own more than one home, you would have to declare one of the homes as your principal residence. You generally can have only one principal residence. That primary residence would receive a benefit (also known as a "homestead" exemption) from the local taxing authorities. You can inquire at your local real estate tax collector's office to determine what are the requirements and limitations on homestead properties where you live. But you'll probably find that you will need to choose one home or the other -- not both. When it comes to the deductibility of real estate taxes and interest payments for the home, the first issue is determining who owned the home and who paid the expenses. If the estate owned the home, the estate should be entitled to deduct the expenses. If you paid for those expenses, you might be entitled to reimbursement from the estate for those expenses. If the title was transferred to you or you are deemed the owner of the home and you paid the interest payments on the loans on the home along with the real estate taxes, you might be entitled to deduct those expenses if the home was your primary residence or if it was your second home, but only in some circumstances. But if you have multiple homes, you may be out of luck. The reason the situation might be more complicated is that other factors might affect your ability to deduct these expenses. Among these issues are the date on which your relative died, how much money you earn, how many homes you own, (including vacation homes) when and how much you paid for these expenses and for what period of time, and, finally, when you took title to the home. For more details, please consult with your tax advisor and the estate or probate attorney who is assisting you. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink

'Termite' inspection is a misnomer REThink Real Estate Tara-Nicholle Nelson Inman News Q: I'm in the middle of house hunting. Some of the houses I look at have a binder with a termite report inside. When I read them, they sometimes mention termites or beetles, but a lot of times they talk about fungus and even the foundation. It's kind of strange for the termite inspector to look at the foundation, isn't it? A: The term "termite report" or "pest report" is a misnomer. In many states the termite report's formal title is the Wood Destroying Organism Report -- a mouthful, which is why people casually call it a termite report. As you have discovered, these inspections are not limited in scope to termites or even pests, but actually search for any organism or condition with the potential to destroy wood members in a home. Mindset Management First of all, pat yourself on the back for even reading the reports! No home buyer can make a fully informed and final decision about what they should pay for a property without knowing as much as possible about the condition of the home. Traditionally, the buyer and seller negotiated a price and terms; then the buyer hired inspectors to ascertain the condition of the home; and then price and terms would need to be renegotiated to resolve any condition issues. In a growing number of geographic areas, smart sellers are providing information like pest reports and even home and roof inspection reports in advance of an offer being made, to avoid surprises and renegotiation during the inspection period. Need-to-Knows A report obtained by the seller prior to your presentation of the offer on a property can provide useful information, but does not necessarily preclude the need for you to obtain your own inspection(s) once you are in contract. There is a legal principle called privity of contract, which basically means that an inspector who is paid by the seller does not actually owe you any legal duties. If you rely on their report to your detriment (e.g., you buy the house and find out the inspection missed an infestation), they owe you nothing, because they had no relationship with you. Basically, under the law, you must contract with an inspector and pay for the report in order to be able to later make a claim against the inspector's warranty for an erroneous report. More importantly, though, there are inspection companies in every market who are known to write "light" reports, which construe everything they see in the direction of the property being more problem-free than it actually is. There are also inspection companies who make most of their money from doing repair work, and so they may have a conflict of interest in the direction of "finding" needed repairs that other inspectors would disagree are actually needed. Then, the majority of reputable inspectors are straight shooters. I mention this here so you will know to ask your Realtor how much credence they assign to the reports the seller has already obtained, depending on the company that performed the inspection. Bottom line: Though it's tempting to forgo additional inspections when the seller has already had some conducted, you may need to spring for another set from a company that is responsible to you during your inspection or contingency period. On occasion, if the seller has used an inspector I strongly trust, I will advise my client to pay the same inspector just to come out and do a site visit and walk them through the report, pointing out all of the findings in person. Many companies will do this, and create a legal relationship with the buyer, for the buyer's protection, without charging the full inspection fee. Wood Destroying Organism (WDO) inspections cover all sorts of things that are not intuitive but are involved in the destruction or decay of wood, including, but not limited to, molds and fungus, plumbing and roof leaks, dry rot, foundation, drainage and grading issues, and, finally, wood-destroying pests. In some areas, a typical WDO report will be formatted as a "Separated Report," and each of the report's findings will be designated as belonging to Section I or Section II. Section I items report active infestation or infection with a WDO or damage that has resulted from WDO activity. Section II items report conditions that are conducive to wood-destroying-organism infestation, where infestation has not yet occurred. Conducive conditions can include everything from excessive moisture and/or drainage problems, too short of a foundation leading to earth-to-wood contact, grading issues, failed gutters and caulking, and even debris in the crawlspace under the house. Traditionally, sellers paid for Section I items (providing what you might hear is called a "Section I clearance") and buyers dealt with Section II items after closing, because they were thought of more as upgrade suggestions than repair items. In today's market, though, the matter of who will pay for what items should be thought of as open to negotiation. Many sellers are disclosing these WDO reports up front by way of expressing that they have already taken the repairs needed into consideration in setting the list price, by way of communicating that they are interested only in as-is offers, and by way of disclosing the full picture of the property's condition to the buyer in advance so that an as-is offer can be made with full information. Other times, sellers are totally open to negotiating the cost of WDO repairs in the course of the contract discussions. The issue of who will pay for what items varies by market, neighborhood and even by property; ask your Realtor for guidance in your specific situation. WDO reports also come with repair bids in most states. Some think it is a conflict of interest for the inspection company to also bid on the work (the idea being that it would incentivize an inspector to "create" findings in order to get work). The reality is that without actual bids for repair, the inspection report would be very abstract and minimally useful. As you review WDO report bids, know that many Realtors advise their clients to use a pest company only to complete actual pest eradication work -- if you buy the place, you may want to get bids from general contractors or even your handyman (or -woman) on things like window frame repairs, leak damage repairs and other things they might do less expensively than the pest specialist. Sellers' advance WDO report bids can be a useful benchmark for comparing the work needed on different properties, but they are not necessarily authoritative on the amount it will actually cost to get work done. Action Plan When you get serious about a property that has a WDO report available for your review: 1. Note the date, scope and any exclusions listed in the report. The seller may or may not have had every fence, outbuilding or deck inspected -- you need to know how thorough the inspection was to start to get an understanding for how seriously you should take the report. 2. Note whether any of the work recommended has already been done. Several times, I've seen buyers look at the dollar amounts of the repair bid on a WDO report and flip all the way out. On further review of the disclosure package, we've found that the sellers have actually already completed most or all of the recommended repairs, and were actually trying to use this fact as a selling point. 3. Note the inspection company. Ask your Realtor if they are familiar with the company who performed the inspection and, if so, whether the inspector has any notorious leanings or a reputation of fairness. 4. Show up to your own inspection and ask questions. Once you are in contract, attend your inspections, in person. Ask the inspector to show you any problem areas on the building. Take the report that the seller had obtained, and ask your inspector to compare and contrast; sometimes your inspector may be tipped to something he didn't see, and sometimes you'll learn that the original inspector missed some things. 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. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Tara-Nicholle Nelson

Earthquake retrofit begins in crawl space Tips on properly fastening cripple walls to mudsill, floor joists 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. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Bill and Kevin Burnett

Rid septic system of tree roots Is copper sulfate both safe and effective? Barry Stone Inman News DEAR BARRY: We moved into our home about three months ago, and this week we had a professional inspection of the septic system. The septic contractor found a large mass of tree roots in the tank and recommended that we flush about 10 pounds of copper sulfate down the toilet. He said this would eventually kill the roots. I'm concerned that the copper sulfate won't get rid of the roots, or that it might harm or kill the two large trees in my front yard. What do you recommend? --James DEAR JAMES: Your septic contractor has advised you correctly. Tree roots can be removed mechanically, but copper sulfate is a lot simpler and much less costly. Copper sulfate crystals can be flushed down the toilet to destroy existing roots or discourage the growth of new ones. The effect is not immediate, but when copper sulfate makes contact with tree roots, it gradually kills them and causes them to break off and decompose. Be aware, however, that this is not a permanent solution. As long as trees are located near the septic system, roots will continue to invade. Therefore, periodic treatment with copper sulfate will be necessary to maintain a root-free septic tank. By the way, trees are not typically harmed by copper sulfate. To protect the bacterial environment in your system, no more than two applications of copper sulfate per year are recommended. For best results, schedule the application to allow minimum dilution and maximum contact time. For example, you could flush the copper sulfate just before leaving on a weekend vacation. The recommended dosage rate for copper sulfate is two pounds per 300 gallons of tank capacity. Since your contractor recommended 10 pounds of material, your tank capacity must be 1,500 gallons. Be sure to confirm this. When using copper sulfate, try to avoid contact with chrome, iron or brass, as it tends to corrode these metals. For further information regarding septic system maintenance, visit the Web site at www.fcs.uga.edu/pubs/current/C819-3.html. DEAR BARRY: I hired a home inspector before buying my condo. He stated that the water heater was in good condition. Two months later, it sprung a major leak, damaging my unit and the one below. Is my home inspector liable for this damage? --Andrea DEAR ANDREA: There are a number of variables that can affect home inspector liability when a water heater leaks. To begin, no one knows for sure when a water heater will eventually fail, although it usually happens when the fixture is 5-10 years old. If your water heater was five or more years old, this should have been pointed out by the inspector as an indication that the fixture might have limited life. If any aspect of the water heater's condition was not optimal or if it was not correctly installed, this should have been disclosed as well. The fact that the leakage caused so much damage indicates that the fixture may not have had an overflow pan. When a water heater is installed in a location that is subject to moisture damage, a pan is required. If a pan had been installed, with an overflow pipe to the exterior, leakage at the water heater might not have damaged the building. The lack of a pan should have been disclosed by your inspector. Regardless of whether the home inspector is liable, your homeowners insurance and your neighbor's insurance will hopefully cover the costs of repairing water damage to the building. To write to Barry Stone, please visit him on the Web at www.housedetective.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Barry Stone

Qualities of a great real estate agent When shopping for a home, matching agent to your needs is vital Ilyce Glink Inman News There are great real estate agents and terrible real estate agents. Within each category are agents whose behavior puts them at the top and bottom of the spectrum. In other words, the best real estate agents are truly stellar. The worst agents? Well, let's just say that if you wind up with a terrible real estate agent you'll probably have war stories to share about your home purchase or sale at the next cocktail party you attend. (Unfortunately, stories about terrible real estate agents are shared more often than stories about great real estate agents.) When hiring a real estate agent to help you buy your next home, the trick is to find one who really listens to what you have to say; who will go the extra mile to help make your purchase a little less stressful; who will help you be objective when you become emotional about plunking down the single biggest chunk of cash ever; and who can help you understand and work with local market conditions. I suspect that most buyers spend more time thinking about the curtains they'll hang, the granite countertops they'll install, or the boxes they'll need for their move than the agent they'll hire to help with the purchase of the property itself. Why is that? Why isn't creating a home-buying team the top priority when beginning the process of buying a home? Perhaps it is because going through the process isn't perceived as being that much fun. But that's where hiring a great real estate agent can make all the difference. What qualities should you look for? The real estate agent you hire should have an intimate knowledge with your neighborhood of choice. The agent should have worked in a neighborhood for awhile, seen a lot of the housing stock, and know the history of the neighborhood, trends associated with it and where the locals hang out. The agent should know about home values and should have the ability to come to you and tell you what other homes have sold for in the neighborhood and what other homes are listed for in the same neighborhood. The agent should also have information to back up why some homes are listed for more than others and be able to represent you when you are ready to make an offer for a home. The agent should know about the school district, shopping, commuting and recreational options. He or she should basically be a wealth of information, and be able to point out the flaws as well as the outstanding features of the community. The real estate agent you hire should be able to really listen to your wants, needs, dreams and desires, and ask questions that help you delve beneath the surface to figure out what's really driving those wants and needs. Real estate agents sometimes say that "buyers are liars," because buyers tend to change their mind about what they really want to buy during the home-buying process. But if an agent is able to draw out the buyer ahead of time, and help him or her focus on the important issues of the purchase, it will save everyone a lot of time. It's also important to hire an agent who is willing to tell you what you may not want to hear -- but should. If you're a buyer who is unrealistic about a local neighborhood, you'll want an agent to tell you that what you want to buy can't be found for the price and is unworkable in the current marketplace. No one wants to have their dreams dashed, but you'll come to see that your real estate agent is doing you a favor by not allowing you to run away from reality. A great real estate agent comes laden with resources, similar to a hotel concierge. (Some real estate companies talk about the "concierge" services they provide.) The agent you hire should be able to provide you with a handful of great home inspectors, mortgage lenders and real estate attorneys for you to interview. (Be wary of the agent who steers you to one specific inspector, mortgage lender or real estate attorney. What you want is a choice of great partners.) If you need help locating service people, a handyman, or even a new pediatrician, a great real estate agent should have those names and numbers at his or her fingertips. Being a walking neighborhood directory for many longtime top agents is part of the service they provide. A great real estate agent stays in touch. Top real estate agents use technology to help them communicate frequently with their buyers. E-mail, BlackBerrys, iPhones, cell phones, electronic newsletters, Web sites, digital photography and video help agents share properties that they've previewed, provide feedback, and keep buyers updated on the progress that is being made. Finally, when you hire an agent, it's like a short-term marriage. When the transaction is completed, when you've bought your new home, the intense relationship you've created comes to an end. With a great real estate agent, you'll find you don't want your time together to end. While these are just some of the qualities you should look for in determining whether the agent is a good match for you, you still need to make sure to get referrals and recommendations for the agent from other buyers he or she has represented recently. What happens next? Dinner -- ostensibly to discuss past and future deals, but really to move your relationship into the long-term-friendship stage. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink

Caretaker's a lifesaver: How do I sell her my house? Avoid IRS trouble with reasonable financing rate Ilyce Glink Inman News Q: I inherited a home from a family member, and there is no mortgage. The house is in California, and I am in Georgia. The caretaker who was instrumental in taking care of my elderly aunt prior to her death wants the house but would not qualify for the mortgage based on her income/assets. I will be happy to hold the mortgage to make this house a viable option for her; she was a "godsend" during my aunt's illness. I think you mentioned a company on your radio show or in one of your columns that can help with the transaction itself. Document preparation is my primary concern, although I could probably get a good real estate attorney to help me with that. I do not need a middleman to handle the payments, as I have a number of rental properties. I want to ensure I am completely informed of all issues surrounding this transaction. A: You're trying to reward someone who helped you out in a time of need, and that's a good thing. What you need to focus on is whether you should sell the home to this person or rent it to her. If you rent the home to the caretaker, you might give her time to get her finances in order until she has enough assets and/or income to qualify to purchase the home from you. You and the caretaker can decide on the rent you would be paid and the responsibilities each of you would have for the maintenance and care of the home. If you simply want to sell the home to the caretaker, the two of you could agree on a price for the home, the amount that you would finance for the purchase and the interest that you would earn on the loan amount. If the interest is well below the market interest rates for the loan, you could run afoul of Internal Revenue Service issues, and some of the terms of the loan could be considered a gift to the caretaker. In terms of financing the home, you would have two options in most places. One option would be to sell the home outright to the caretaker and take back a mortgage or deed of trust on the amount she would owe you from the sale of the home. The second option would be to sell her the home on an installment basis or contract for deed. In this arrangement, you would remain the legal owner of the home and your caretaker would pay you over time for the title to the home. When the caretaker satisfies the terms of the contract, title to the home would be transferred to her. Because there is no mortgage on the property, and you don't have to worry about covering expenses above and beyond real estate taxes, insurance and simple maintenance, the finances of the property should be relatively easy for you. Depending on the circumstances and what your intentions are for the home and your late aunt's caretaker, the two of you will have to agree on a price for the home and monthly mortgage/home payments or monthly rental payments she can afford. Thereafter, she can send monthly payments to you. But you should draw up a proper lease or sales document that conforms to California laws. My suggestion would be to go to the California Department of Real Estate to see if they have the form you need, or you should hire a real estate attorney in California to draw up the sales documentation along with the mortgage documents. Q: I wish to refinance my rental property (a townhouse). I have been advised that doing a cash-out refinance isn't possible in today's climate, but if I want to take cash out of the transaction, I have to refinance using an equity loan. I asked if federal or state law required me to refinance this way, but I've received no definitive explanation. Can I refinance to take money using an equity loan? A: The current credit markets have made it difficult to finance rental property -- even if you have a large amount of equity in the deal. Doing a cash-out refinance may also be very difficult at the moment because investors have been burned and aren't looking to buy these sorts of loans. You probably fall into a classification of commercial and investment loans that are currently hurting more than other loans. Your property is classified as residential, but its use to you is as an investment property. In some markets the residential market is doing quite badly, and residential lenders are looking closely at each deal and making it harder to apply for residential loans. You don't qualify for a residential loan, and commercial lenders are limiting their investments in residential properties. Small investors like you are finding it hard to obtain financing for these types of deals. In a sense, what you are hearing is that you should be happy to have the financing you currently have and that new lenders are not looking to give you more money. They're willing to extend additional credit to you as an equity loan on terms that are probably less favorable than your current first mortgage loan. In any event, I don't know of a conventional lender that would allow you to borrow more than 70 percent or 75 percent of the equity in the property at the moment. So if you're looking to cash out 90 percent of the equity, the numbers might not work out. Where might you go to get money? If you're a real estate investor with multiple properties, you might have better luck with a bank that might be willing to look at your portfolio of properties and refinance all of them. You might want to try some local savings and loans or community banks and see if they have any interest in lending you money. Some local banks are becoming more active in the real estate market as larger banks pull back. But that bank must be willing to give you the loan and will probably have to keep the loan on its books. It won't be able to sell the loan on the secondary market as your townhome is rented and does not qualify as an owner-occupied residence or even as a second home. As the real estate market improves, it may be easier to refinance your property. To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink

Common disputes between home buyers, sellers When it comes to defects and deposits, know how to communicate Dian Hymer Inman News One of the best ways to avoid getting into an ugly dispute involving a home purchase or sale is to be proactive. In order to do this, you need to be aware of the sorts of issues that can lead to disputes. By knowing what could possibly go wrong, you can prepare yourself to recognize a potential problem if it arises. A common complaint that can end in a dispute is that the agent didn't act in the best interests of the party being represented; that is, the buyer or seller. Real estate agents who represent buyers or sellers in a transaction owe their client a fiduciary duty to put their client's interests above others in the transaction. Buyers and sellers might be entitled to take legal action against agents who breached their fiduciary duty. But, why put yourself in a situation where you need to engage in a legal battle if you don't have to? Before you select an agent to represent you, make a careful search to find an agent who understands what it means to owe a fiduciary duty to you. You are looking for real estate agents who value the quality of service they provide. Select professionals to represent you who will put your interests first. Personal acquaintances are often good sources of real estate agent recommendations. Some of the most serious disputes arise over material facts that should have been disclosed to the buyers, but weren't. A material fact is something that might affect a buyer's decision to buy or the price a buyer would pay. Disclosure laws vary from one state to another. But, generally, sellers are required to disclosure material facts when they sell. HOUSE HUNTING TIPS: Sellers should take their disclosure requirements seriously. They not only protect the buyer, but they protect the seller from being sued after closing over something that should have been disclosed upfront. Consult with your real estate agent or real estate attorney if you have any questions about what you do and do not need to disclose. Real estate agents are also required to disclose material facts about a property to buyers. Sometimes sellers don't want to disclose facts about their home that they think might deter the sale. However, if you, or your agent, conceal a known material fact, a costly dispute could arise. Disputes can arise over a failure of expectations. Clear and complete communication can usually keep these sorts of problems from arising. For example, let's say you are the buyer and you plan to move into the home you're buying the day the transaction closes. The seller is moving out the day before closing and is planning to leave the house broom swept and free of debris. If you are expecting carpets to be cleaned, floors polished and windows washed, you could be sorely disappointed. To avoid a problem like this, ask your agent to find out if the seller is planning to have the house professionally cleaned before you move in. If not, and if this is not something required of the seller in your purchase agreement, make arrangements to have cleaners come in the morning of closing so that you aren't disappointed, and so that your move is not delayed. Disputes over who is entitled to the deposit if a deal doesn't go through are all too common. The answer to these questions usually involves a legal opinion. So, before making a claim, get legal advice from a knowledgeable real estate attorney. THE CLOSING: Even though you're upset that the buyer is backing out, you may not be entitled to keep the buyer's deposit, depending on the terms of the purchase agreement. Dian Hymer is a nationally syndicated real estate columnist and author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Dian Hymer

Three ways to reduce capital gains tax IRS gives sellers a break when enduring 'unforeseen circumstances' Benny Kass Inman News DEAR BENNY: I was told by a prominent accountant that there is a loophole in the law that states that you can be exempt from paying capital gains (if you are in a home less than the two-year period) if there are "unforeseen circumstances" involved. Are you aware of this? Can you doublecheck to make sure? This accountant is well trusted by a lot of businesspeople! At the time I was going through an "unforeseen" divorce. --Patricia DEAR PATRICIA: In general, in order to take advantage of the up-to-$500,000 exclusion of gain ($250,000 if you file a separate tax return), you have to own and live in the house for two out of the five years before it is sold. However, the law does allow a partial exclusion under certain circumstances. There are three "safe harbors" (meaning that if you meet these tests the IRS will not challenge you): (1) change in employment; (2) health; and (3) unforeseen circumstances. In this third category, if you could not have anticipated an event before you purchased your house, you may also be able to claim a partial exclusion. While this is fact-specific -- and in many cases you will have to get a special ruling from the IRS -- there also are some safe harbors that the IRS will recognize. These include: an involuntary conversion of your house; natural or manmade disasters resulting in a casualty to your home; divorce or legal separation; and multiple births resulting from the same pregnancy. It would appear that you may qualify based on your divorce. The exclusion is equal to the number of days of use times the quotient of $500,000 divided by 730 days. Note that 730 days is two full years. If you are single -- or do not file a joint tax return -- change the $500,000 to $250,000. Your accountant knows what he is talking about so you should ask him to do the calculations. However, I do not think he said that you can escape all capital gains tax. DEAR BENNY: What happens to any additional money in a foreclosure action if the highest bidder pays more for the house than the amount that the bank is owed? Is the money given to the person who was foreclosed upon, or does it go to the county or state? --Monique DEAR MONIQUE: It is a rare case that there is any money left over after a foreclosure sale. The lender, their attorneys and the auctioneer (including advertising costs) will get paid out of the price that the property is sold at the sale. The professionals who buy at foreclosure sales will generally want a good deal and will not bid much higher than the initial bid price set by the lender. And in many cases, there is no buyer, and the lender ends up owning the property. However, if there is a surplus, the money goes back to the person whose home has been foreclosed upon. DEAR BENNY: The neighborhood that I live in is going downhill, with a couple of empty houses on my street that look like they may be foreclosures or REOs, and there are also several others for sale. And to make it worse I will have negative equity in my property and probably need to do a short sale. I have both a first and second mortgage (HELOC), but from two different mortgage companies. What steps do I need to take to find a Realtor that handles this, and will having a second mortgage be a problem in respect to the short sale? --Pam DEAR PAM: The first thing I would do is talk with your lenders. Because there are so many foreclosures taking place all over this country, many lenders would prefer to work with you to possibly reduce your mortgage interest rate rather than have another house in foreclosure. Additionally, there are many government and private programs available (or soon to be available) to assist people in financial difficulty. But a short sale will be difficult unless you can reach an amicable arrangement with the holder of the second trust. DEAR BENNY: Do you know of any books or brochures that help explain the responsibilities of a condominium developer/owner? We live in an unfinished condo development in St. Louis. There are construction and maintenance issues that the current residents believe are the responsibility of the owner/developer, not the condo association. The items/issues are not covered in the bylaws. --Natalie DEAR NATALIE: There is an organization in Virginia known as the Community Associations Institute. You can find them on the Web at caionline.org. This group has a number of valuable resources that may be helpful to you, including books and publications on a number of community association subjects as well as suggested names of attorneys who may be of assistance in helping you learn your rights. DEAR BENNY: I recently purchased a home and directly next to it is a piece of railroad property that separates it and two other properties. All properties have access to the streets. The railroad took the land by eminent domain many years ago, and the prior owners are now long gone. When I contacted the railroad about purchasing the land they said because they took it they cannot sell it but would be willing to abandon it for a small fee. If I pay this fee how do I get title to this land? It does appear that they took a portion of the lot I already purchased and they said so to me. How do I keep someone else from getting it once abandoned? Also, the portion they took (of my lot) was already being used as a driveway by my lot for at least the last 30 years that I know of, and the other lots appear to also have been abandoned years ago. --Robert DEAR ROBERT: This is a complicated legal issue and you should retain an attorney versed in real estate to assist you. I do not know why they can't just sell you the land, and you should ask them for an explanation. If the property has been abandoned, you may have the right to file a lawsuit claiming adverse possession. This means that you (or your predecessor) have, for the period of years authorized by your state statute, openly, notoriously and hostilely used the property. As I stated, these are technical legal issues, which must be reviewed by your attorney. If, in fact, the railroad company is willing to state in writing that they have abandoned the property, you may also be able to file what is known as a "quiet title" action, asking a judge to review the facts and determine who owns the property. DEAR BENNY: I have just found out that my neighbor's septic tank leach line and leach pit is on my property. I was going to buy the property when it was recently up for sale, but I was not given the chance. I did file a lawsuit against the seller. The contract purchaser has not yet taken title to the property. Do I have a legal claim against not just the seller but the buyer if he does indeed go to closing and take possession of the property? I am hoping that after the buyer learns that there is a lawsuit on the property, he will back off and not buy it. What happens in a case like this? --Leo DEAR LEO: You have filed a lawsuit that should put the title (escrow) company on notice. You or your attorney should contact both the title company as well as the buyer and advise them of the lawsuit. There is a concept in law called "lis pendens," meaning that litigation is pending. Ask your attorney if he is able to file this lis pendens document in your case and have it recorded among the land records on your neighbor's property. Clearly, the title (escrow) company will see that there is a pending lawsuit when it searches the title for the buyer. The buyer would be foolish to buy the property until your lawsuit is resolved. I would also try to reach an amicable arrangement with the buyer. After all, if he does buy the property, he will be your next-door neighbor. DEAR BENNY: How can I get a title company to release funds being held in an escrow account for a unreleased deed of trust for a loan 20 years ago from a bank that no longer exists? --C.R. DEAR C.R.: State law differs on how old a deed of trust (mortgage) has to be before it will no longer have any force and effect. Are you sure that the title company still holds the funds in escrow and is still in existence? If you are sure that the money is still there, you can file a suit for quiet title, asking the judge to cancel the note and deed of trust and order the release of the escrowed funds. However, the judge will carefully review the facts to make a decision as to who is the rightful owner of these escrowed funds. Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Benny L. Kass

Credit pinch forces buyers to save Borrowers must get back to basics in building equity Jack Guttentag Inman News Over the last 18 months, the mortgage market has changed more rapidly than in any comparable period since the Great Depression of the 1930s. From the standpoint of borrowers, two changes are of paramount importance. The first is an increase in day-to-day price volatility, which I wrote about a few weeks ago. The second is a tightening of underwriting requirements, with higher down-payment requirements the centerpiece. That is the subject of this article. Underwriting requirements are the rules lenders impose to assure that loans will be paid off, and the down payment has always been the most important of them. The down payment is the difference between the lower of the sale price or property value, and the amount of the mortgage loan secured by the property. If you purchase a house for $200,000 that is appraised for $200,000 or more, and you take a mortgage of $160,000, your down payment is $40,000, or 20 percent of value. A 20 percent down payment can also be described as a borrower having equity in the property of 20 percent. In the future, equity in the property is measured by the difference between the current value of the property and the current loan balance, both of which are likely to differ from their values at the time of purchase. One reason the down payment is so important is that it is the single most important factor affecting loss to the lender. The down payment is a buffer against lender loss in the event of a foreclosure. For example, if foreclosure costs are 20 percent of value and property value does not change, a 20 percent down payment fully protects a foreclosing lender against loss, but a 10 percent down payment provides only partial protection. Perhaps even more important, borrowers who get into payment difficulties but have equity in their properties usually will sell to avoid foreclosure. By selling, they realize the equity themselves whereas if they allow the property to go to foreclosure the equity will be partially or wholly depleted by foreclosure costs. Their selling avoids the foreclosure. There is still another reason why lenders attach so much importance to the down payment. Borrowers who have been able to save the funds for a down payment are less likely to get into payment troubles later on. Saving for a down payment requires budgetary discipline; repaying a mortgage also requires budgetary discipline, and the one carries over to the other. Of course, this assumes that the down payment is saved, not borrowed. Underwriters look for evidence that the funds committed to down payment are the borrower's own. When a house is purchased, the owner's equity is the down payment, but as time passes the equity is affected by two other things. One is any change in the loan balance. If the mortgage is "fully amortizing," the mortgage payment includes a principal component, which reduces the loan balance. If the required payment is interest-only and the borrower does not add anything to the payment, the loan balance will not change. And if it is a negative-amortization loan, the balance will increase rather than decrease, and homeowner equity will decline. In the first few years of a mortgage's life, however, changes in homeowner equity resulting from changes in the loan balance are usually quite small. Homeowner equity is also affected by changes in house prices, which can be sizeable. During 2000-2006, house prices in some metropolitan areas rose by more than 20 percent a year. A home buyer who puts nothing down after a year of 20 percent appreciation has as much equity in his property as a buyer who put 20 percent down in a stable market. It is hardly surprising that house-price inflation during the go-go period resulted in a drastic weakening of underwriting requirements in general and down-payment requirements in particular. Zero-down loans became increasingly common during this period. When the market turned and home prices began to decline in late-2006-2007, down-payment requirements had to be drastically revamped. Just as rising prices generate homeowner equity, falling prices destroy it. There are no zero-down loans anymore except VA loans for veterans. FHA loans remain available at 3 percent down for smaller loan amounts, but conventional loans now generally require 10 percent down, and in some areas it is higher. On top of this, lenders now want most borrowers to have good credit scores and to fully document their incomes. It easily could be worse, and without the federal agencies (FHA, Fannie Mae and Freddie Mac) it surely would be. Nobody is forecasting a quick end of house-price declines, so down payments of 3-10 percent don't look like a lot of protection against future losses. Any loan today that is untouched by one of the federal agencies will have a required down payment larger than 10 percent. Down-payment requirements have a critical impact on the capacity of consumers to afford a house. If buying one is in your plans but you have never been able to save, it is time you learned how. The secret is to give saving high priority in your budget. Decide beforehand what part of your income you can afford to save, and create a special account for that purpose. Then immediately after you are paid, write a check for deposit in that account. If you view saving as a residual -- what remains of your income unspent at the end of the month -- you are giving saving the lowest possible priority, which is a virtual guarantee of failure. The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Jack Guttentag

Don't let home inspector out of your sight 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. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Inman News

Urban planning's future: people, not cars 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. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Arrol Gellner

Can condo board restrict rentals? 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. *** What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story. Copyright 2008 Ilyce R. Glink and Samuel J. Tamkin