By Ilyce Glink and Samuel J. Tamkin
Saturday, April 19, 2008
The housing market has some homeowners up in arms. Sure, if you're trying to sell your house to get out of financial difficulties, or because you have already bought another place and carrying two mortgages is killing you financially, we can understand why you're not happy.
What doesn't make much sense to us are the dozens of readers who say they are ready to hand over their property to the lenders simply because their home doesn't work for them anymore.
Where did these folks get the idea that homes are like disposable consumer goods? When they break, you throw them out? As if, in a matter of minutes, you can get rid of the old and buy something new.
Real estate is what investment advisers call an "illiquid" investment. Historically, it hasn't been easy to sell a house on a whim. It took planning, patience and a lot of ibuprofen to get you through the long months or years (sometimes) without an offer.
But since the early 1990s, homeowners have been able to sell almost on demand, and certainly within a few weeks or months. An entire generation of real estate agents has never known a time like this, when homes just sit. And sit. And sit.
If you cannot sell, the natural inclination is to find another way to get rid of the house. After all, if you hate your car and one dealer doesn't give you a good enough offer, you can try another dealer. Eventually, when 10 dealers tell you your car is worth only $17,000 and not the $20,000 you owe on the loan, you will have to make a decision: Either cough up $3,000 in cash, buy a new car and roll over what's left of your loan into the new larger loan (so you're immediately underwater on your new car), or find a way to keep the car a few more years to pay off more of your loan.
Why aren't more homeowners doing the same thing with their houses? Why complain about how unhappy you are instead of learning to love the house you bought, at least for another few years?
After World War II, builders put up 1,200-square-foot, three-bedroom houses with one bathroom. Soldiers and their wives moved into these suburban residences and raised their families. These houses weren't considered "too small." It's what everyone had.
Today, a 1,200-square-foot condo might contain two bedrooms -- or just one. You might have two bathrooms, or a bath and a half. The typical new house has about 2,400 square feet, central air, an attached two-car garage, several bedrooms and bathrooms, and a built-out attic or basement.
Our friend Fred has been raising his twins in an older 1,200-square-foot house. The house is too small, he says, and they feel on top of one another all the time. They tried to sell, but there wasn't any interest.
So he and his wife have learned to love what they can about the house, including the neighbors, with whom they've grown quite close. The house is affordable. Even if they could sell -- Fred still thinks the market is too soft in their neighborhood -- they probably wouldn't. Their mind-set has changed.
Sometimes our ideas need a little tweaking. As we keep learning, investments like real estate don't always rise in value. It's difficult to find, fix and flip a house and clear $60,000 in a few months, no matter what you see on television infomercials.
If you turn over your property to your lender, it will have a severely negative impact on your credit history and credit score. If you're foreclosed on, it may take years before any lender is willing to grant you a mortgage to buy another property.
So if you can figure out a way to love the house you're in, at least until the time you can sell it or rent it, you'll be a lot happier.
Q My husband and I are German and own a house in Fairfax County. As we will have to go back to Germany for a few years starting this summer, we are planning to rent out our house. We have some questions about the lease. Our house is on a half-acre lot, with a swimming pool, hot tub and septic tank (which will be emptied this summer).
Should we have the landscape and the swimming pool maintained by companies instead of leaving it to the renter? The cost for these services is quite high and, in addition to the local real estate taxes, we may not get it back with the rent we're able to get.
If we decide to leave the maintenance to the renter, what kind of rules would you recommend to put into the contract? Is there a model contract we could use?
We have a lawn mower. Should we leave it here and rent it out with the house or sell it? Should we talk about the septic tank in the lease? Should we leave instructions for how to use a septic tank?
If there is damage caused by the tenants, how should we deal with it?
A close friend of ours is a real estate agent and will take care of the leasing process, as well as the property as our property manager. We know there are property-management companies. How are the costs calculated for such a service?
ALong-distance rentals are often problematic. You're going to be living in Germany, thousands of miles from your home in Virginia. Normally it's not a great idea to keep a long-distance rental for an unlimited time because you're not going to be there to check on it. But it sounds as though you're preparing as well as you can.
First, you need an agreement with your friend, the real estate agent, who will be acting as the property manager. The agreement should detail how much the friend will be paid and what services he or she will provide.
Will she check on the property weekly or monthly? Will she send digital photos or video of the exterior and interior of the property? Will she run ads, find tenants, screen them, and arrange credit and background checks? Will she collect rent checks and deposit them for you?
More important, what happens if your friend is unable to fulfill her end of the bargain? (While you may still be friends, she could get sick, move or leave the business.) Or what if she's taking your money but not doing a good job? What mechanism do you have for firing her and finding another property manager?
Next, you need to work with a real estate lawyer to draw up a lease that addresses your issues, such as landscape care, pool/hot-tub use and insurance, and rules regarding the septic tank. It sounds as if yours is a more expensive home, and off-the-shelf leases may not address the protections you need in case problems arise.
Even the landscape is a big issue. While your grass can grow back, a poorly maintained lawn can cost thousands of dollars to repair. Pools, hot tubs and septic systems are expensive to build, fix and maintain. If you leave maintenance to the tenant and the tenant doesn't do it, you could wind up with a problem that could cost you tens of thousands of dollars. If you have a security deposit with the lease, that security deposit may not cover the damage.
So write up a long list of rules for the pool and septic system. But I would pay to have the septic system checked twice a year (or more often), and have the pool serviced so you don't have a bigger issue with these items down the road. Your property manager can then check in weekly with the pool company to make sure the property is in good hands. The lease could provide that the tenant use companies approved by you to maintain these items and that the tenant provide proof that the work is done on schedule.
I have a commercial property in Georgia. The tenant has not paid rent for 45 days and is giving me all kinds of excuses. He failed to pay taxes for the last year, and I have tried to work with him in paying those taxes in installments. But he has not made a single payment and now has stopped paying rent, as well.
What are my options? Can I change the locks and recover my losses from his belongings? Is it legal to do? Or will it cause additional problems? How can I evict him, and how long is the eviction process? Can I do it myself?
You have a tenant who may be in financial trouble. Your only recourse may be to evict the tenant. In some states, evictions can be rather quick, taking two or three months to complete. In other states, it might be longer. In some states, landlords can do it all and the process isn't too burdensome for a non-lawyer.
However, in many states there are lawyers who work only on evictions. They charge a flat rate, sometimes only a couple of hundred dollars. You may decide to talk to one of these lawyers and let him or her handle the case.
In many states, the self-help remedies you suggest -- such as changing the locks and the like -- are illegal and can result in you becoming liable to the tenant for damages. I wouldn't suggest that you go down that path without knowing your state laws.
Your better bet is to hire a lawyer, evict the tenant as quickly as possible and get another tenant on the property who will honor the terms of the rental agreement. You'll also want to make sure that your real estate property taxes are paid in full so you don't risk losing your property in a tax sale.
Since my father died, my mother takes care of all the bills, including the mortgage, which is in his name. Her name wasn't on the mortgage or deed, but I would like to know what would happen if she died. Would we have any problem taking care of the house because title is still in his name?
I have five siblings. My mother is trying to make us sign papers stating that all six of us would have to come to an agreement regarding the estate.
If your father owned the home in his name alone, at the time of his death the laws in the state in which he lived would provide how title to the house would transfer. If he had a will, the will should have specified who would inherit the house.
If he did not have a will, then the laws of that state will tell you how title will be transferred. Those laws vary. In your case, many states would provide that half of the interest in the house would go to your father's wife at the time of his death. So your mom would have inherited half of the home. Likewise, many states provide that the rest of the interest in the home would go to your father's children. Thus, your mother would end up owning half of the house and your father's children would each own one-twelfth of the house (one-sixth of the half of the home that passed to you and your siblings).
If that's the case, you all will need to come up with some sort of arrangement regarding the disposition of the home and other assets your dad had.
Take a look at the document your mother has presented to you. You and your siblings will have to agree on how to handle the estate. The paperwork she is giving to you may be to your benefit and could ease the estate work necessary once she dies.
On the other hand, the document may say something entirely different from the way it is being presented to you. If you don't understand it, seek the advice of an lawyer.
Assuming that you and your siblings own half the property and you want your mother to be able to continue to live in the property, all of you should sign a document that gives her the right to stay in the house for as long as she wants.
But what happens if she dies or moves into a nursing home? Then you might want to know what to do with the house. The right sort of paperwork might avoid prolonged and agonizing decisions later. If you all agree that it should be sold at some time and you agree which one of you will have the right to decide when and how to sell it, you will have a plan to follow.
A plan, any plan, sometimes is better than no plan. If all of you need to decide, some of you may want to wait to sell, others may never want to sell and still others may want to sell now.
If you have a piece of property listed with a real estate agent and you decide you don't want to sell it before the listing period is up, do you have the right to cancel your listing and take it off the market?
If so, what happens if you sell in a few months to a family member who never saw the property while it was listed? Can the agent come back and demand money or sue you?
The real issue here is what your listing agreement says about your right to withdraw a property from the market.
You might have to review the document with a real estate lawyer to determine whether and under what conditions you have the right to cancel the agreement. If the agent has performed his or her end of the agreement, you generally would not be able to unilaterally terminate the agreement.
Most sellers never take a close look at the listing agreement the agent presents for signature before listing a property. That's unfortunate, because the listing agreement sets up the terms and conditions for the listing, including how much commission the seller will pay; how long the listing will last; whether the seller can take the property off the market; and how much, if anything, the seller will owe the broker if this occurs.
A new term added to some listing agreements over the past few years is how much you will pay for the listing company to process your sale when the contract comes in. These fees can run several hundred dollars on top of the commission.
On some listing agreements, sellers agree to reimburse the agent for any out-of-pocket expenses incurred if the listing is withdrawn. On many listing agreements, sellers agree to pay commission if the property is withdrawn but sold within a specified period of time to someone who saw the property while it was listed.
Other agreements will require a homeowner to pay a commission if the property is sold within a certain period of time after the end of the listing agreement no matter who buys it, unless the property is sold using another real estate company.
In many instances, if you withdraw the listing and someone who didn't see the property while it was listed buys it, the agent would be out of luck and not entitled to any commission. Again, it depends on the terms of the listing agreement.
In general, if the seller cancels the listing to switch the property over to another agent, often there is no other fee or commission owed to the agent who originally listed the property. But this exception is spelled out in the agreement.
You must go back to your listing agreement and figure out what it says.
If it turns out that you may owe a commission to the agent, you and your lawyer should figure out what to do. This may involve a call to the agent or the agent's managing broker.
Given the current state of the real estate market, you might find that your current agent is quite willing to terminate the listing agreement early. Not all real estate agents would agree, but some might want to focus their efforts with motivated and eager sellers and wait until later to work with a seller who might not be as eager.
My husband and I recently built a new home in a planned community. We questioned how the house next to ours would be set before signing a purchase agreement. We received a plot plan with the proposed house outlined on the lot and even signed it.
That lot has recently sold, and now the builder is trying to set the house in a different direction. Had we known that, we would not have purchased this particular lot. We're curious as to how far we can take this.
It's unfortunate that the builder and you have a misunderstanding about what could occur with the lot next door. Did you and the developer sign a document that would require the home to be placed in a certain manner? Was the "plot plan" document you signed merely a document to indicate the location of your lot, or did it provide assurances about the way any future homes would be built on adjoining lots?
Speak to a real estate lawyer who can look over your contract. If a lawyer originally represented you in this transaction, ask him or her to pick up the negotiations.
This might be a case where a simple call from your lawyer to the builder, along with a copy of the signed plot plan, might be enough to jog the builder's memory and encourage him or her to do the right thing.
Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is "100 Questions Every First-Time Home Buyer Should Ask." Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites, http://www.thinkglink.comandhttp://www.expertrealestatetips.net.
© 2008 Ilyce R. Glink and Samuel J. Tamkin
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