Real Estate Matters
www.reporterherald.com • Saturday, November 26, 2011 • Reporter-Herald
Seller not responsible for condo repairs ILYCE GLINK TRIBUNE MEDIA SERVICES
Q
uestion: I'm in the process of purchasing a condo, and there's a wooden deck near the porch with drainage under it. The homeowners association says that the wooden deck is the condo owner's responsibility, while the drainage is its responsibility. Therefore, if repairs are needed to the drainage, the deck will have to be removed for access. Do you think I should try to negotiate something with the seller now to pay me for the deck for the deck removal/replacement? If so, what is the foolproof way of including this in an agreement? Answer: Owning a home has its costs, duties and responsibilities. You can't have your seller guarantee that you will never have expenses relating to repairs to your condominium. You need to deal with the facts as they exist now, not with a situation as it may develop in the future. If the deck is in good shape and the drainage is working properly, the seller is not responsible for wear and tear or maintenance issues that may arise in the future. You have to factor the possibility of having these expenses into the cost of owning the condominium for the many years you may live there. If the deck has a problem now or if there is an issue with the drainage, you can address that in the purchase process, by having the seller repair or replace the deck after the association fixes the drainage. If you are in the process of buying the home, and inspection has revealed problems with the deck and drainage, it would be prudent to negotiate a repair of those issues now, before you close on the home. You want to make sure the repairs get done prior to your closing and settlement. If the work can't get done by closing, you have several options to protect yourself. One of those choices is to get a few estimates as to what it will cost to make the repairs and have those funds plus a bit extra held back from the seller at closing to insure that the work gets done and the cost is covered. Those funds should be held by an unbiased third party to make sure they don't get paid to the seller without the work having been completed. Once the work has been completed, the third party holding the repair funds can use those funds to pay for the work and return any remaining funds to the seller. All of this should be documented in the contract. Your real estate attorney can provide some language that will acceptable to the seller.
Mortgage outlook: Best of times, worst of times
Mortgage rates expected to remain low for the foreseeable future ILYCE GLINK AND SAMUEL J. TAMKIN TRIBUNE MEDIA SERVICES
A
ccording to a recent study by business information company Fiserv, the typical mortgage costs 40 percent less than it did in 2006. That just about mirrors the drop in home prices over the same period. But there’s more to this than a drop in home prices. Mortgage interest rates have fallen to the lowest levels in more than 60 years. This week, the average interest rate for a 30-year mortgage was 3.8 percent, down 0.1 percent, according to Zillow. A 15-year loan can be had for about 3.16 percent, which is a new record. And while the 10-year wasn’t quoted, one can only assume you could find it for less than 3 percent, plus an average of about 0.6 percent in closing costs. Five years ago, it would have been difficult even to imagine how you could lock in a mortgage for 10 or 15 years at around 3 percent.
And yet, here we are. “Continued instability in Europe, in addition to the uncertainty caused by the (Congressional) supercommittee’s failure to reach an agreement on a deficit reduction plan, has pushed the average 30-year fixed mortgage rate down this week,” said Erin Lantz, director of Zillow Mortgage Marketplace. “Mortgage rates will continue to stay historically low through Thanksgiving week.” Unfortunately, while many homeowners are still paying around 6 percent interest on their mortgage, apparently they can’t refinance. One reason they can’t is that home prices keep falling, increasing the number of homeowners who are underwater (with home prices worth less than the amount owed on the mortgage). Starting in December, the Obama administration’s revamped Home Affordable Refinance Program (HARP) will go into effect, hopefully allowing underwater homeowners to refinance. Like all of the Making Home Affordable programs, HARP 2.0 is voluntary, meaning lenders will not be required to offer these loans to their borrowers. According to CoreLogic, which provides information and analytics on the housing industry, HARP 2.0 includes some key changes that
should make it more attractive to lenders, including: • The 125 percent loan-tovalue (LTV) ceiling will be removed, so that borrowers with significant levels of negative equity will now potentially be eligible. • Risk-based fees, also known as loan-level pricing adjustments, will be reduced, although the reduction depends on the term of the newly refinanced loan among other factors. • There will be representation and warranty relief for the lenders committing loans to the program (likely excluding fraud and misrepresentation). • The use of reliable alternative valuation models to establish eligibility of the LTV ratio will be allowed. • Existing second liens will be able to be subordinated, which will remove a significant impediment to refinancing under HARP. In addition, the program has been extended through the end of 2013. HARP doesn’t have a great track record up to this point. Fewer than 100,000 underwater borrowers have been
able to refinance their properties. While the Obama administration hopes that more borrowers will be able to take advantage, it’s hard to imagine these numbers will grow substantially. Nevertheless, the need is huge. On Ilyce’s radio show this week, she spoke with a woman who has a 6.5 percent interest rate on her loan. She originally put down 20 percent on the property, but her house is worth only about $110,000 instead of the $175,000 she paid eight years ago. Her 20 percent down payment has evaporated, and she is far underwater. So far, she’s current on the loan, but the future is in doubt — her husband lost his job some time ago, and they are starting to struggle
with their monthly debt obligations because his new job pays so much less. The biggest problem is that their mortgage, a conventional 30-year loan, isn’t owned by Fannie Mae or Freddie Mac. Their loan servicer refuses to tell her who owns the loan, and only confirms that the company is not participating in HARP 2.0. This is another family that might well end up in foreclosure, and not for lack of trying. We keep hearing from the major lenders, and from the Office of the Comptroller of the Currency, that everyone is interested in keeping families in their homes. If that’s true, then the numbers of HARP 2.0 loan refinancings must rise dramatically.
For more information, call Glink’s radio show at 800-972-8255 on Sundays from 9 to 10 a.m., write to Real Estate Matters Syndicate, P.O. Box 366, Glencoe, IL 60022 or visit www.thinkglink.com.
Real Estate Matters
Know the risks of selling a house 'as is' MARCIE GEFFNER BANKRATE.COM
worked fine for them for 45 years, so (they’re thinking), ’Why in the world would I need to put in granite countertops?’” elling a home as is can save reOther sellers are upside-down or pair dollars, but the sales tacunderwater — they owe more on the tic has risks and other consid- mortgage than the home is worth, erations sellers should keep in mind. said Jan Baron, a Realtor at HomeSThe main danger of selling a home mart Real Estate in Temecula, Calif. as is comes from the possibility it These sellers need the lender’s perwill fetch a rock-bottom price. mission to close a short sale, and beSometimes, but not all the time, cause they expect to lose money on it’s more cost-effective to pay for re- the deal, they’re in no mood to pay pairs to merit a higher purchase for repairs. price. Virtually all bank-owned homes Sellers can advertise their home are sold as is, though in those cases, any way they choose, whether that the stipulation is more about remeans as is, willing to make repairs sponsibility than the repairs themor no comment on the subject, said selves. Patti Ketcham, owner of Ketcham “Banks are more worried about Realty Group in Tallahassee, Fla. the liability,” Baron said, “though Some sellers don’t want to make they don’t want to make any repairs repairs because they have lived in they don’t have to. The short sellers the house themselves for a long time are thinking more about that they and don’t see the need for improvedon’t want to pay out of pocket bements, Ketcham said. cause they don’t have the money.” “The house is held together with An as-is sale doesn’t mean buyers won’t try to negotiate repairs beduct tape,” she said, “and it’s
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cause the home’s condition, like the sale price, is subject to bargaining regardless of how the property is advertised. In fact, Ketcham said she advises buyers to make an offer on terms they prefer rather than what the seller wants. Many states require sellers to make disclosures about a home’s condition to prospective buyers, said Joanne Fanizza, a real estate attorney in Farmingdale, N.Y. An as-is sale generally doesn’t erase such obligations as much as sellers might wish it did. Nor does as is mean the buyer will waive a home inspection. Ketcham said sellers can try to head off buyers’ demands by getting an inspection before they put their home on the market and using that to price the property and inform prospective buyers of what will and will not be repaired. “It puts your house in a category way above all the other houses buyers have to look at if you’ve already had the inspection done,” she said.
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The biggest risk of an as-is sale is a lower sale price. For sellers who have no equity, this trade-off is irrelevant. But for those who expect a profit, it should be a real consideration. “As is” carries a stigma, said David Tamny, owner of Professional Property Inspection in Columbus, Ohio, since the term suggests the house is in poor condition. “Most houses that are sold as is are sold as is for a reason,” he said. “Something is wrong with it usually, and the sellers know they can’t deal with it.” The bottom line is that today’s housing markets are competitive, and buyers will choose another home if they’re suspicious of the seller’s motivations, or they believe a home isn’t a good deal based on its location, price and condition. “If you’re selling,” Ketcham said, “your house has to be priced a little better than the other four houses the buyer will look at that same day.”
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