Seeing Red - HouseMaster Highlights Red Flags for Home Buyers during National Home Inspection Month

RISMEDIA, March 30, 2009-HouseMaster, a North American inspection franchisor, reminds buyers and sellers that a professional home inspection is critical when buying or selling a home. As April marks National Home Inspection Month and the start of the peak home buying season, HouseMaster is providing consumers with a simple list of “red flags” to watch out for during the home buying process. Each of these red flags could be a sign of significant issues and defects and each should be thoroughly evaluated by a professional home inspector before potential buyers make an offer on the home.

These are the red flags that home buyers should look out for:

Numerous extension cords: This could be a sign of an outdated electrical system. Today’s electrical needs have grown significantly and as a result the home could require an entire electrical upgrade to meet these new demands. A professional home inspector will be able to assess whether a new panel and wiring is needed or additional receptacles will need to be installed.

Low water pressure or gurgling: If you turn on the faucet and the pressure is low, it could be evidence of a problem with older galvanized piping or inadequate piping. A professional home inspector will indicate the type of piping and estimated age and determine whether or not an entire new plumbing system is required. In many instances, sections of piping can be replaced on an as needed basis to correct the problem.

Horizontal foundation cracking: Vertical cracks are, for the most part, within normal settlement tolerances. Horizontal cracks are not. A horizontal crack generally results from hydrostatic pressure against the home’s foundation. Correction will often involve excavation, drainage provisions as well as repairs to the wall itself. If horizontal cracking is evident, several structural engineers should be consulted to ascertain the extent of movement as well as corrective measures. Opinions do vary and with a structural element issue, it is best to get several opinions.

Musty smell in basement: Storage in the basement that is raised off the floor (such as books and boxes), stains, or efflorescence on walls are conditions that can indicate water in the basement. A professional home inspector can assess potential causes. Simply improving the property grading or draining downspouts further away from the foundation could be a solution.

Wall or ceiling stains: Any stain should be further evaluated to determine the cause and extent of any possible hidden damage. A professional home inspector will look for causes of the stain as well as test the stain using a moisture meter to determine whether or not the stain is active.

Vacancy: Often a home that is in foreclosure is vacant which increases the potential for the home to deteriorate due to lack of maintenance, and ventilation. Mold and other moisture problems are very common in vacant foreclosed homes as are plumbing problems due to drying gaskets and valves or freezing pipes.

When purchasing a home, a buyer should never forego a professional home inspection. The tips above are provided as guidelines so that potential buyers can effectively and efficiently narrow down their options. Once a choice has been made, a professional home inspection by a qualified inspector will provide the potential buyer with an education on the home enabling them to make an educated real estate decision.

For more information, visit www.housemaster.com.

Tips for Tenants - Know Your Rights

RISMEDIA, March 28, 2009-As the state of the economy and tighter lending rules make it hard for many prospective homebuyers to get into a home these days, renting has become an affordable option to many of these individuals. If you are in the market to rent a home instead of buying it, here are 10 things you should do to protect yourself and make sure the communication between you and your landlord is clear:

1. Bring your paperwork. The best way to win over a prospective landlord is to be prepared. Bringing the following information when you meet prospective landlords will give you a competitive edge over other applicants: a completed rental application; written references from landlords, employers, friends and colleagues; and a current copy of your credit report.

2. Review the lease. Carefully review all of the conditions of the tenancy before you sign on the dotted line. Your lease or rental agreement may contain a provision that you find unacceptable - for example, restrictions on guests, pets, design alterations, or running a home business.

3. Get everything in writing. To avoid disputes or misunderstandings with your landlord, get everything in writing. Keep copies of any correspondence and follow up an oral agreement with a letter, setting out your understandings. For example, if you ask your landlord to make repairs, put your request in writing and keep a copy for yourself. If the landlord agrees orally, send a letter confirming this.

4. Protect your privacy rights. Next to disputes over rent or security deposits, one of the most common and emotion-filled misunderstandings arises over the tension between a landlord’s right to enter a rental unit and a tenant’s right to be left alone. If you understand your privacy rights (for example, the amount of notice your landlord must provide before entering), it will be easier to protect them.

5. Demand repairs. Know your rights to live in a habitable rental unit - and don’t give them up. The vast majority of landlords are required to offer their tenants livable premises, including adequate weatherproofing; heat, water, and electricity; and clean, sanitary, and structurally safe premises. If your rental unit is not kept in good repair, you have a number of options, ranging from withholding a portion of the rent, to paying for repairs and deducting the cost from your rent, to calling the building inspector (who may order the landlord to make repairs), to moving out without liability for your future rent.

6. Talk to your landlord. Keep communication open with your landlord. If there’s a problem - for example, if the landlord is slow to make repairs - talk it over to see if the issue can be resolved short of a nasty legal battle.

7. Purchase renters’ insurance. Your landlord’s insurance policy will not cover your losses due to theft or damage. Renters’ insurance also covers you if you’re sued by someone who claims to have been injured in your rental due to your carelessness. Renters’ insurance typically costs $350 a year for a $50,000 policy that covers loss due to theft or damage caused by other people or natural disasters; if you don’t need that much coverage, there are cheaper policies.

8. Protect your security deposit. To protect yourself and avoid any misunderstandings, make sure your lease or rental agreement is clear on the use and refund of security deposits, including allowable deductions. When you move in, do a walk-through with the landlord to record existing damage to the premises on a move-in statement or checklist.

9. Protect your safety. Learn whether your building and neighborhood are safe, and what you can expect your landlord to do about it if they aren’t. Get copies of any state or local laws that require safety devices such as deadbolts and window locks, check out the property’s vulnerability to intrusion by a criminal, and learn whether criminal incidents have already occurred on the property or nearby. If a crime is highly likely, your landlord may be obligated to take some steps to protect you.

10. Deal with an eviction properly. Know when to fight an eviction notice - and when to move. If you feel the landlord is clearly in the wrong (for example, you haven’t received proper notice, the premises are uninhabitable), you may want to fight the eviction. But unless you have the law and provable facts on your side, fighting an eviction notice can be short-sighted. If you lose an eviction lawsuit, you may end up hundreds (even thousands) of dollars in debt, which will damage your credit rating and your ability to easily rent from future landlords.

Six Questions to Ask When Considering a Reverse Mortgage

RISMEDIA, March 27, 2009

Reverse mortgages have become an increasingly important financial tool for people 62 and older who want to remain in their home and fund their retirement. And, with 78 million Baby Boomers approaching retirement, interest is expected to grow. Despite this, many Americans are still unclear about how reverse mortgages work and when they may be appropriate.

“A reverse mortgage is a loan secured by the value of a house, where no repayment of the loan is required until the borrowers permanently vacate the home,” explained Peter Bell, president of the non-profit National Reverse Mortgage Lenders Association. ” Historically, reverse mortgages have been of particular interest to those with limited sources of liquid income, these days, there are many new retirees considering a reverse mortgage as an option after looking at all the other assets they’ve accumulated. This tool can help a person avoid taking Social Security too early or defer taxable withdrawals from IRA or 401(k) balances.”

“Reverse mortgages enable many Americans to ‘age in place’ comfortably in retirement,” said Donna DeMaio, president of MetLife Bank. “For many people, reverse mortgages are a good way to continue to stay where they are, remain independent, and live a more fulfilling life. Modern retirement income planning is about making the most of what you have, and reverse mortgages can be an important part of that plan.”

There are several advantages to securing a reverse mortgage. Borrowers can continue to live in the home as long as they want, and the amount owed to the bank by the borrowers when the property is sold will not exceed the lesser of the mortgage or its sale value. Interest and charges, including origination and closing costs, accumulate until that time, with no periodic payment required. As with traditional mortgages, the bank does not own the client’s home: borrowers retain ownership, and are responsible for paying property taxes and homeowner’s insurance, as well as property repairs.

So, when does a reverse mortgage make sense? Consider the following questions:

1. Do you qualify? Are you and any co-owner of the home at least 62 years old? Do you own your home and live in it as your primary residence? These qualifications need to be met before a reverse mortgage can be considered.

2. Do you have equity built up in your home? For individuals and families who have diligently paid down mortgages for years, and have worked hard to maintain and improve their property, a reverse mortgage is a way to realize a portion of that financial value.

3. Are you satisfied with your current level of retirement income? Many individuals in retirement or approaching retirement are finding that traditional retirement tools, including IRAs, pensions, and 401(k)s, do not provide enough income to comfortably fund current or anticipated living and healthcare expenses. A reverse mortgage can provide greater peace of mind and improve one’s quality of life. Taking reverse mortgage proceeds in regular monthly payments (the “tenure” option) that last as long as one lives in the property is a way to boost cash flow each month, and usually will produce a lower loan balance than a lump sum distribution when the time comes to pay off the loan.

4. Do you want to retire your existing mortgage? Many retirees are still paying a conventional mortgage, and as a result, have less disposable income than they would like to have at the end of the month. Depending upon the amount, a reverse mortgage can pay off an existing mortgage, freeing up money for other things. To gain a better understanding of where you stand, the AARP has a free reverse mortgage calculator that’s available at www.rmaarp.com.

5. Is a reverse mortgage a better option than a home equity loan? For many retirees, the income and credit requirements on a home equity loan may prove an obstacle to accessing that particular financial tool. A reverse mortgage doesn’t have these requirements.

6. Do you intend to pass your home on to your children or other loved ones? With a reverse mortgage loan, the outstanding balance needs to be repaid when the title changes hands. If one’s heirs wish to keep the home, they may be able to refinance the loan at that time, but it may be necessary to sell the property to repay the loan. Take the time to openly discuss this question with loved ones as an important first step when considering a reverse mortgage. Many families find that their children would prefer to see their parents experience a more comfortable retirement, rather than making the priority obtaining the family home, ‘free and clear.’

Appraiser Checklist

By Barbara Ballinger | April 2009

Help clients understand what to expect during the appraisal process by sharing information on how appraisers reach their property value estimates.

Here are some of the factors that appraisers Joni L. Herndon of Real Property Analysts/Gulf Coast in Tampa, Fla., and John A. Hillas of Hulbert & Associates Inc. in Modesto, Calif., say they consider when determining value.


Incentives and concessions. Most of today’s buyers expect to pay the lowest possible price and still get some extras. Sellers and home builders are offering money toward closing costs, remodeling and decorating, upgrades, and association dues. The price set initially may not be the final price once concessions are factored out. Appraisers care about that final number.


Closing date. Forget what comparable neighborhood houses sold for a few months back. Appraisers want prices from the most recently closed transactions. “If a sale was more than 45 days ago, even 35, the price may be irrelevant,” Hillas says.


Condition and curb appeal. Appraisers typically find several properties with similar interior and exterior features to determine value. When markets are healthy, blemishes matter less, but when markets soften, problems—a dated kitchen or barren lawn—can reduce prices and deter buyers. “The difference in value is not just the repair costs but the time and hassle to make them. It’s better for sellers to do work in advance,” Hillas says.


Foreclosures. Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market, says Herndon. “But when several neighborhood homes are abandoned, it’s hard not to caution sellers that this is a troubling trend and may affect home values,” she says.


Changing demographics. If a house is in an up-and-coming area, the value can be expected to rise. A location that’s perceived as safe also may help attract the increasing number of single female buyers.


Economic clouds. If there’s an oversupply of comparable homes for sale, or if the local job market is suffering, buyers may be hesitant to invest. Hillas advises setting prices aggressively from the get-go.


Chemistry. It’s hard to account for those times when buyers fall in love with a house, despite a high price, poor condition, or tough economy. “Emotional attachment is a factor that can’t be predicted,” says Herndon. Hillas agrees, “It’s what makes it harder to appraise homes versus commercial buildings, where buyers care more about the bottom line.”

Light at the End of the Tunnel? U.S. Home Prices Rise for First time in 12 Months

RISMEDIA, March 25, 2009-U.S. home prices rose for the first time in 12 months, showing an increase of 1.7% on a seasonally-adjusted basis from December to January, according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index. December’s previously reported 0.1% increase was revised to a 0.2% decline, and for the 12 months ending in January, U.S. prices fell 6.3%, and the U.S. index is 9.6% below its April 2007 peak.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.

For the nine Census Divisions, seasonally-adjusted monthly price changes from December to January ranged from -0.9% in the Pacific Division to +3.9% in the East North Central Division.

Month-to-month changes in the geographic mix of sales activity explain most of the unexpected rise in prices in January. The January home sales reflected in the FHFA data disproportionately occurred in areas with the strongest markets.

While it is difficult to perfectly control for changing geographic mix in estimating house price indexes, the data suggest that if one were to remove those effects, the change in home prices in January, while still positive, would have been far less dramatic.

It also should be noted that sales volumes, in absolute terms, were relatively low in the month. Accordingly, the estimation imprecision associated with the January estimate is relatively large and subsequent revisions to the monthly figure could be significant.

Do You Understand Your Credit Report?

RISMEDIA, March 21, 2009-Over 70% of consumers identify errors on their credit report. Twenty-five percent of those are serious enough to deny consumers and business owners access to credit, preferred interest rates or even a job. With over 54 billion credit updates occurring each year, it’s very likely you-or your clients-may have errors that are negatively impacting the ability to get credit and/or causing you to pay unnecessary interest expenses.

Identifying a credit report error is only the first step. Most consumers don’t know they have an error on their report because they rarely, if ever, review it until they need to get a loan. By the time this occurs, a consumer typically has less than 45 days before they need their loan funded, and their ability to get a single, valid error corrected within this timeframe is marginal at best.

The need to proactively understand, evaluate and optimize your credit profile has never been greater. So what should a consumer do? Become educated and informed about how credit works. Your clients should continually review and evaluate their credit profile. When a questionable activity is identified, he/she should make sure they understand it and correct any valid errors. In most cases, consumers begin by filing a dispute with the applicable credit agency who is reporting the information.

How Will Foreclosure Effect Credit Scores?

The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.

FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the last two years, says Todd J. Zywicki, a professor of law at George Mason University.

''It just seems obvious that a foreclosure in 2008 or 2009 doesn't have as much information value as a foreclosure five years ago,'' he says. ''To the extent that foreclosure doesn't predict future behavior as much as it did in the past, you'd expect that the FICO algorithm would change to adjust for that.''

One of the country’s largest credit unions Golden 1 has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.

BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ''How to Lend to the Newly Credit Impaired.”

Source: The New York Times, Ron Lieber (03/14/2009)