Sharing a Neighbor's Well Calls for a Contract

Q: Our neighbors are planning to drill a well and put in an irrigation system. They have asked us whether we would like to install an irrigation system and, if so, to tap into their well and help pay for it. Our neighbors across the street have a similar arrangement. The neighbors with the well on their property pay for the electricity, and any repairs are paid for by the others who use the well. That sounds fine, but what needs to be done to make sure that this agreement and our ability to use the well would continue if our neighbors sell their house? -- Sue B.

DEAR SUE: You should enter into a written agreement, spelling out all terms and conditions, and have that agreement notarized and recorded on the land records in your county. The agreement should also state that unless terminated by both parties, the agreement will apply to "successors and assigns." This document will be recorded against your neighbor's property. Recording puts the world on notice of your agreement. Have your lawyer draft the agreement.

My wife and I are looking to buy our first home. Given this market, what legal and financial advice would you give to a couple of first-time buyers? -- Gary

DEAR GARY: I could write at least two books on this subject. Perhaps the first places you should start your research are with Fannie Mae and Freddie Mac, two Washington area companies that are central to the mortgage industry. They both have excellent Web sites with a lot of consumer information on how to buy a home.

You also should find a good real estate lawyer in the county where you live or want to buy and have him or her walk you through the various steps. Once you find the house that is of interest to you, have your lawyer review (or prepare) the sales contract before you sign it. You should also talk with a couple of mortgage lenders (make sure they are licensed in your state) to determine how large a loan you will be able to get.

Is this a good time to buy? Who knows? Will the market go up or down? Again, who knows? But I have told my clients over the years that you don't buy a house for investment purposes; you buy because you want a solid roof over your head in a neighborhood you like. If the house does increase in value, more power to you.

My wife and I plan to move to Fort Myers, Fla., when I retire at age 62, in two years. On a recent house-hunting trip to that area, we saw lots of homes for sale. We own our home in New York, which we will sell. Given the real estate slump, how should we time the market? -- Paul

DEAR PAUL: For many years, I had a crystal ball on my desk. Now I have two, and I still cannot predict the future.

From what I understand, this is a good time to buy property in Florida. Are you able to afford to buy that new house without selling your current one? Depending on your financial situation, you may be able to obtain a bridge loan on your house to enable you to buy the other one.

However, if you cannot financially carry two houses, you will most likely have to sell your current house first. And you may find that you will get a good deal on the new Florida property but a not-so-good deal on your present home.

If you cannot move to Florida now, you might try to find a buyer who will rent your house back to you. This way, while you will have to pay rent, you will not have to pay principal, interest, taxes and insurance. And the sales proceeds can be used to purchase that Florida property. If you are lucky, you can rent that property out, which would somewhat offset the rent you would pay on your current house.

I am a first-time home buyer. My husband and I have credit ratings above 750. I make about $95,000 a year, and my husband makes about $35,000. He gets paid in cash, and his boss will sign a letter indicating what he makes and submit it to the bank.

We plan on buying a two-family house for $540,000 with a seller's concession of $20,000. The total mortgage would be $560,000 with a 5 percent down payment. I asked my lender whether we can get one mortgage for $532,000. He said that the private mortgage insurance would be high and that it would benefit us if we take out two mortgages to eliminate the PMI. They call this an 80-15 arrangement. The first mortgage would be 80 percent of the purchase price at a fixed rate of 6.375 percent (locked in) and the other 15 percent at 8 percent, except that I cannot lock it in until four days before closing. Why can't I lock in the rate now? Is this a good deal?

He also said that even though we have good credit and make good money, the current rate of 4.75 percent is only for people who have bad credit and are involved with the subprime lenders. Is that true? -- L.M.

DEAR L.M.: I am confused, and I believe you are, too. First, if the purchase price is $540,000 with the seller giving you a credit of $20,000, I seriously doubt that you can get a loan for $560,000.

Next, I do not understand why your lender cannot lock in the second trust, the one for 15 percent of the purchase price. And it also makes no sense to me that a mortgage for people with bad credit would be lower than a loan for people with good credit like you and your husband.

My strong suggestion: Get a second opinion from another mortgage lender. Something does not sound right.

Benny L. Kass is a practicing lawyer in Washington. Questions for this column can be submitted to benny@inman.com.