Friday, September 29, 2006


If you're a home buyer, you want to pay a fair price for the house. If you're a seller, you want to get the most you can. Both of you rely on an appraiser to get the home's value right.

Appraisals are a key part of just about any residential real-estate deal, but the world of appraisals is not without its scandals. Phony appraisals are often a problem in mortgage-fraud cases, where a group of scammers will pose as legitimate real-estate professionals, hiking up a property's price to turn a quick profit.

There's also the issue of inflated appraisals, where appraisers push up a home's value, often to appease lenders, mortgage brokers and real estate agents. That's a potential problem for buyers who may then end up owning a home worth less than they thought.

On top of those appraisal pitfalls, a slowing housing market makes even the legitimate appraiser's job harder. An easing market "is definitely more challenging for the appraiser," said Alan Hummel, past president of the Appraisal Institute, a membership association which provides education and certification programs.

In part, that's because appraisers compare sales data on neighboring houses to assess a home's worth. "As sales have slowed down, the availability of data is less than what we had before," Hummel said.

"A year ago I may have had 15 sales in one subdivision that I could compare to the property I'm appraising, and it was fairly easy to see where the trend is. This year it may only be three sales in that subdivision. It's more difficult for me to analyze less data," he said.

Another way appraisers measure value is by looking at how much it would cost to build that particular house, subtracting any physical depreciation. For those seeking an appraiser's services in this market, make sure the appraiser understands both the comparable sales approach as well as the cost method, Hummel said.

"As the market slows down, you need to make sure you hire an experienced, educated appraiser that understands this other methodology called the cost approach," Hummel said.

Of course, usually the lender hires the appraiser. But, whether you're a buyer or seller, you can scan the appraisal for these red flags:

Does the stated home value seem reasonable, given what you know about the neighborhood?

"The first red flag is, does this value seem reasonable," said Don Kelly, a spokesman for the Appraisal Institute. "If it seems high, that could be a problem."

Still, keep the local market in mind, Hummel warned. A first-time homeowner, new to the market, is probably not used to seeing a slowing market. "To be told that the property you bought two years ago is now worth something less, obviously they look at the appraiser and say you must be nuts," he said. Don't forget that "real estate is a commodity that...goes through cycles."

When the appraiser cites comparable home sales, is he focusing on nearby houses?

"The homeowner looks and says, 'Wait. These comparable sales are six, eight, 10 miles away," Kelly said. "You want to find out why. There might be a reason but that's a red flag."

Also, Hummel said, make sure the homes used in the comparison are in the same school district. If not, find out why not.

Does the appraisers' description of the house match what you know?

Does the square footage match your estimates? "Is the room count wrong? That's a red flag," Kelly said. The appraisal said "this house has four bedrooms, but it's only got three, or they say it's got three baths and it's only got two."

Will the lender give you a copy of the appraisal?
You're entitled to a copy of the appraisal. If "the lender doesn't want to give you a copy of the appraisal, that would be a red flag," Kelly said.

Is the appraiser licensed and/or certified?

Make sure the appraiser is holding a current license or certification, Kelly said.

What to do now

If you own a home that you think was appraised incorrectly, your next step depends on your situation, Hummel said.

First, "don't make the assumption that the previous appraisal was bad. There may have been changes in the market," he said. "Get a qualified appraiser [to find out] what is today's value."

Then, "if that first appraisal was so far off that it was can complain to the lender, because they got a bad appraiser," he said. You can also complain to the State's appraisal agency, as well as the Better Business Bureau and the Appraisal Institute if the appraiser is a member. And, the FBI investigates mortgage fraud now.

If the appraisal was inflated slightly, and you're planning to stay in the house another, say, five or more years, "maybe the answer is you don't do anything about it," Kelly said, essentially waiting for the home's value to catch up to the appraisal.

Another possible option: Refinance. "Maybe I take my lumps here. Pay some cash, get this thing back on track. Maybe you see that you've got an adjustable-rate mortgage coming due next year. You say, 'Well, we're going to have to do some adjusting here, but maybe I can work with the lender to make up the difference or do a deal on whatever the negotiated package for financing is. Maybe you can keep your payments so you can make them and live this thing out," Kelly said.

-- September 21, 2006

By Andrea Coombes

Monday, September 25, 2006


When it comes to eventually moving into that dream home you've always wanted, keep in mind that many of the choices we make on a house are really driven by lifestyle desires, rather than lifestyle needs.

More bedrooms means more time to clean, more expensive to repaint and carpet/floor in the future. The bigger the house and the larger the lot, the more you're going to pay for it both in time and financial resources. The main three decision factors are larger lot, more space and more stuff. Each of these come with a price tag.

Larger Lot:

Depending on the acreage, this is going to cost the owner in regards to acquisition, monthly payment, and upkeep. First is the acquisition. Larger lot means larger price, thus larger down payment and monthly payment. In metropolitan areas, the closer in to the epicenter of town, the more the extra space is going to cost you. If you decide to get it cheaper by moving out of town, then you'll be paying more for gas and be losing the ever elusive minutes of your life.

A friend of mine is dying for a couple of acres. He's moving into the area from a community where houses with 2 acres are common and they are within minutes of the job centers. No problem. In this market, however, it means possibly driving 30 miles or more for what he's looking for. It also means a longer commute -- upwards to 90 minutes -- in morning and evening rush hour. If that's 30 minutes longer per day than what he does now, that's 2.5 hours per week longer on the road -- folks that's 125 hours per year just on the road to work and back per year -- MORE -- than living closer in. (That's three weeks worth of working hours.)

The larger lot also means more upkeep. If you have teenagers, maybe it's not your problem, you think with a wry grin. Nevertheless, the larger lot that is cleared off and landscaped will take longer to mow, require more gas and possibly even more equipment. In addition, there's the landscaping (mulch, et. al.) that you may not have needed to fret about before.

(In my household, come mulch time, forget bags -- we order it by the truckload now. We didn't even get a larger lot; just decided to "add" a few flower beds -- now each spring costs more for mulch.)

Even in a wooded lot, you'll now have to start watching the trees that border your house. A neighbor told me before he was moving that he was spending about $500 per year taking down trees that were threatening his house. Once he did move, the new owners had a tree fall on their home within a few weeks, causing damage to the roof and patio.

More space:

For most move up buyers, this is the No. 1 reason they are shopping for a home. The 3-bedroom townhouse isn't cutting it for the growing family and it's time for a yard. Let's get the 4th bedroom, or 4th bedroom with a "bonus" room in the basement.

More space creates more expenses for paint, accessories, flooring, etc., every time the room is repainted, remodeled, etc. It's no rocket science calculation to see that the 1,800 square foot home is going to be cheaper to care for than the 2,800 square foot home. Remember, percentage wise, we're talking 55 percent more home – which will interpret into 55 percent more flooring cost, 55 percent more paint, 55 percent more utilities, etc. When purchasing, don't forget to ask the owner for a rundown of monthly or annual expenses for upkeep of the property. (Most likely, it will be an estimate, but a good indicator of your true costs of the property.)

More stuff:

Don't forget that once you get a larger place, it usually is compounded with a decision to replace older furnishings or purchase new furnishings to put into your new areas.'s latest home moving survey revealed that:

  • 57 percent of owners and 37 percent of renters bought furniture within the 12 weeks surrounding their move; owners spent an average of $3,500 and renters spent $1,220.

  • 55 percent of moving homeowners purchase at least one appliance when they move, and 57 percent of homeowners buy furniture.

  • 35 percent of owners and 40 percent of renters bought bedding; of these individuals, 72 percent did so within three after their move. Owners spent an average of $420 and renters $240.

As you're contemplating your next move, be sure to add in to all your calculations the new costs of living in your new castle.

Published: September 22, 2006

By M. Anthony Carr
Realty Times

Friday, September 22, 2006


WASHINGTON (September 18, 2006) –Representatives of the housing and insurance industries, along with members of Congress and key congressional staff, are urging Congress to act quickly to enact comprehensive federal national natural disaster legislation.

The National Association of Realtors® hosted the Federal Natural Disaster Policy Symposium today to help identify appropriate federal policies for dealing with a potential crisis. Attending were 100 people from a wide variety of associations, nongovernmental organizations, congressional offices and federal agencies. NAR has been actively lobbying Congress on the urgent need to protect homeowners and the economy by ensuring the availability and affordability of disaster insurance, especially in disaster-prone areas.

Cynthia Shelton, NAR Commercial and Business Specialties Group liaison and a Realtor® with Northstar Brokerage Services in Orlando, Fla., moderated the meeting. She noted that natural disasters are not only a concern to a few select states. “Natural disasters come in many forms and affect many different areas of the country,” said Shelton. “Beyond hurricanes and floods, earthquakes, tornadoes, wild fires and ice storms can cause significant damage and can result in catastrophic costs.”
“Whatever the event and wherever it may occur, we must prepare now. Absent a comprehensive federal policy to plan for, mitigate the effects of, and recover from natural disasters, the American taxpayer—whether in an affected area or not—will pay the price,” Shelton said.

Keynote speaker Kevin McCarty, Commissioner of the Office of Insurance Regulation for the State of Florida, said, “If I leave you with one message today it is this: Natural catastrophes are a national problem that requires a national solution.” McCarty noted that Hurricane Katrina highlighted many of the pitfalls in today’s insurance structure. “State resources are not sufficient to handle mega-catastrophes; we must engage in planning before a disaster; and we are confronting an economic problem, not an insurance problem,” said McCarty.

McCarty said that when a catastrophe hits it affects far more than insurance companies and the victims of these events. “It places stress on the homebuilders market, the banking market, land development markets, real estate values, community tax bases, unemployment rates, and ultimately affects the economic security of all Americans,” said McCarty.
Other participants at today’s symposium included L. James Valverde, vice president, economic and risk management at the Insurance Information Institute; Chris Wilson, managing partner at First Choice; Mitchell Glassman, from the Federal Deposit Insurance Corp.; Mike Grimm from FEMA; and a host of congressional staff representatives.

Recent research conducted by NAR in Florida concluded that the lack of affordable or available homeowner’s insurance in that state contributed to the slowdown in Florida real estate, impacting the overall economic activity in the region. In earlier congressional testimony, NAR stated that a strong real estate market is a linchpin of a healthy economy, generating jobs, wages, tax revenues and a demand for goods and services. To maintain a strong economic climate, the vitality of residential and commercial real estate must be safeguarded, NAR said. NAR, as America’s leading advocate for homeownership, affordable housing and private property rights, is committed to ensuring a strong and secure housing market.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
Article Offered by the NAR

Wednesday, September 20, 2006


By any measure, things are getting tougher for American homeowners.

Online foreclosure-data service RealtyTrac of Irvine, Calif., said yesterday 115,292 properties nationwide entered some stage of foreclosure last month, a rise of 24% from July and nearly a 53% increase from a year earlier.

Also yesterday, of Boca Raton, Fla., which also tracks foreclosures nationwide, said new residential foreclosures fell by 6.7% in August from July to 26,255 nationwide. The company's figures, however, show that foreclosures are up 7.3% compared to August 2005.

The divergent results can be explained by the way each company counts foreclosed properties. RealtyTrac data includes properties in the early stages of a foreclosure proceeding, even before the bank actually owns those properties. About 60% of these get remedied or the properties are sold before they get to the auction stage, said Rick Sharga, vice president of marketing for RealtyTrac.

A spokesman for said it only reports properties officially foreclosed and in the hands of the banks.

The trend is supported by data collected by the Mortgage Bankers Association, which reports the number of U.S. households late on mortgage payments fell slightly in the second quarter, but that a modest rise in delinquency and foreclosures is expected going forward.

The delinquency rate for residential mortgages was 4.39% in the April-June period, down from 4.41% in the previous three months, the MBA said in a survey that included 42.5 million loans. Home mortgages in foreclosure made up 0.99% of total mortgages at the end of the quarter, up from 0.98% three months earlier.

The MBA expects further cooling in the economy and the housing market, which in turn could lead to "modest increases in delinquency and foreclosure rates in the quarters ahead," said Douglas Duncan, MBA's chief economist and senior vice president of research and business development.

RealtyTrac Chief Executive James J. Saccacio noted that billions of dollars of adjustable-rate mortgages that have benefited from a stable fixed rate of interest over the past two years are due to shift to higher floating rates in coming months.

"With home-price appreciation continuing to decelerate," he said, August's "increase could be the beginning of an upward shift in the foreclosures market." President and CEO Brad Geisen said while the company has continued to see fluctuations in month-to-month data, "as we near the end of the third quarter, most housing and economic indicators point to a sustained period of increased new foreclosure activity across the country." noted that the West was becoming "an emerging foreclosure hot spot," with new foreclosures in Arizona up 155% in August from July. Foreclosures in California were up 32% and New Mexico saw a 10% increase.

-- September 15, 2006

By Danielle Reed
The Wall Street Journal Online

Monday, September 18, 2006


WASHINGTON (September 15, 2006) – As they begin to enter the housing market, many consumers in their 20s are more likely to buy a home at a younger age than their older brothers and sisters as well as their baby boomer parents, and are not necessarily waiting for marriage or even a long-term relationship before becoming homeowners.

“The next generation of homeowners is beginning to exert its influence on the housing market,” said Thomas M. Stevens, National Association of Realtors president from Vienna, Va., and senior vice president of NRT Inc. “Many younger buyers have seen the wealth-building effects of homeownership in their parents and understand the value of housing as a good long-term investment.”

The motivations, interests, and home buying approach of some younger buyers are chronicled in “Tomorrow’s Buyers: Who They Are and What They Want” in the September 2006 issue of REALTOR Magazine. The report integrates NAR research with the experiences and attitudes of real-life buyers who represent different demographic populations, putting a human face on statistical trends.

The percentage of first-time homebuyers under age 25 has been increasing in response to historically low interest rates and continued confidence in the long-term housing market, from 11 percent in 2001 to 14 percent in 2005, according to the 2005 NAR Profile of Home Buyers and Sellers. “Owning a home is no more burdensome than renting, and in the long term, it’s the better investment,” said Kristen Carreira, a 26-year-old homeowner in Pittsburgh.

Carreira is also part of a trend in single female home buyers. While married couples are still the norm, they represent a smaller share of the home buying public than they did just 10 years ago, from 70 percent of home buyers in 1995 to 61 percent today, says NAR. During that same time, the proportion of single women buying homes has increased, from 14 percent in 1995 to 21 percent today.

Younger buyers are also likely to use technology and the Internet in their home buying search. In 2005, according to NAR research, the median age of buyers who used the Internet to search for homes was 11 years younger than those who did not, at 38 and 49, respectively.

“Realtors have adapted to meet the needs of this growing population of young home buyers,” said Stevens. “More than one-third of NAR’s 1.3 million Realtor members have had special training and lots of experience in buyer representation and technology. That expertise is reflected in special designations and certifications, such as the Accredited Buyer Representative (ABR) designation and e-PRO certification. A commitment to understanding the demands of this changing marketplace is just one more way Realtors add value to the real estate transaction.”

The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Article offered by the NAR

Friday, September 15, 2006

Inflation outlook improves

Long-term interest rates are sitting on a six-month low, the 10-year T-note at 4.75 percent and low-fee 30-year mortgages at 6.5 percent. The reasons that these rates are so low are not the widely advertised pre-recession or housing collapse.

The biggest recent help to long rates is the authentic collapse in commodity prices: oil is $62.70 this morning, natural gas $4.85 (10 bucks below last winter), wholesale gasoline $1.53 (which should put retail at $2.20 or less within two months), and gold is in freefall at $573 (down from $730 in May).

Aside from improving the inflation outlook, the big drop in energy costs will relieve household budgets. As is, consumption has not faltered much: August retail sales were forecast to decline and instead rose.

Probably the largest force pushing down on long-term rates is the solution to the Greenspan Conundrum. Federal Reserve Chair Ben Bernanke has been correct: a global savings glut is the only sensible reason for long-term Treasurys to be trading .5 percent below the Fed's cost of money, and with no spread to inflation. Unless we see an actual economic stumble, today's yield curve inversion is as false a recession signal as last winter's.

Housing is slowing, no question, its past stimulus fading to nil, but housing trouble will not exert drag unless waves of foreclosures result in a price spiral. The newest foreclosure and loan-delinquency data do not support the scare headlines, and there is widespread misunderstanding about the process of a housing slowdown.

RealtyTrac, which lately has gotten most of the ink, shouted this week that the number of homes in any stage of foreclosure had jumped 24 percent from July and 53 percent from last year.

Hang on to your door handle., tracking only completed foreclosures, says foreclosures fell 6.7 percent in August, only 7.3 percent higher than last year.

Who is right -- or most descriptive? The Mortgage Bankers Association's study of 42 million loans confirms's picture: current-quarter delinquent payments and foreclosures are unchanged from last spring. To understand why a rapid slowdown is sales is not causing widespread distress, it's necessary to think through the mechanics of a slowing housing market.

At the end of a boom, for-sale signs blooming like dandelions, sellers still assume a continuation of prior appreciation and set their prices well above the last sales. The first wave of "price declines" is a reduction in expectation, not in actual prior-price-paid value, and it often takes a year or more to squash those expectations.

True declines in price follow. It is perfectly normal for those who bought in the last year of a boom, just before the forest of signs, not to be able to sell at the price they paid, markets going negative 5 percent to 10 percent cumulative over the next few years.

No great harm ensues (except to the unluckiest families, and the ones who bought with the smallest down payments) because all of the people who bought before the last-year price pop feel no pain but psychological. If my Miami condo rose 137 percent since 2001 (, is it a disaster to lose 10 percent in 2007, or to take a while to sell in 2008 or 2010? Cumulative appreciation is the reason for the divergence between foreclosures in process and completed ones: if you have a bunch of equity, you can sell or maneuver your way out of foreclosure.

Here in Colorado, our housing boom coincided with the technology boom, '98-'01, and prices have been largely flat since. It took three years of flat prices before our foreclosure problem appeared: as always (except for times of big job losses), it takes a while for flat prices to expose the over-leveraged households.

Even now, the leading cause of our foreclosures is a spurt of idiotic subdivision of land in four counties north and east of Denver. Never underestimate old-fashioned roads to perdition.

--September 15, 2006

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at

By Lou Barnes
Inman News

Wednesday, September 13, 2006


McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.47 percent with an average 0.4 point for the week ending September 7, 2006, up from last week's average of 6.44 percent. Last year at this time, the 30-year FRM averaged 5.71 percent.

The average for the 15-year FRM this week is 6.16 percent with an average 0.4 point, up from last week when it averaged 6.14 percent. A year ago, the 15-year FRM averaged 5.30 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.14 percent this week, with an average 0.5 point, up from last week's rate of 6.11 percent. A year ago, the five-year ARM averaged 5.24 percent.

One-year Treasury-indexed ARMs averaged 5.63 percent this week with an average 0.7 point, up from last week when it averaged 5.59 percent. At this time last year, the one-year ARM averaged 4.45 percent.

"We expect that mortgage rates will continue to fluctuate as new economic data are released, but still remain in the 6.5 percent to 7 percent range for the rest of the year," said Frank Nothaft, Freddie Mac vice president and chief economist. "Slowly rising mortgage rates are offset in part by a slowdown in house price appreciation."

"Consequently, higher rates have resulted in houses sitting on the market for longer periods of time, changing the real estate sector into more of a buyer's market from the seller's market of the last few years. This is a plus, as it allows potential homebuyers more time to look around and decide what they really want and what they can afford."

Published: September 8, 2006

Article offered by Realty Times

Monday, September 11, 2006


Mortgage rates aren't any good if you can't lock them in. No matter what you're being quoted, if the lender or mortgage broker can't lock those things -- beware.

I say this because I lost a deal to a mortgage broker the other day. Hey, can't win 'em all, right? Nope, ya can't. But you certainly have to try. No loan officer gets every deal; it's impossible.

In fact, I dare say I've lost as many or more loans that I've won. It's just sometimes when I get beat, and any loan officer out there can back me up on this one, by someone quoting interest rates that are simply not available it burns me up. It just isn't fair.

I know full well my prospective client will get the shaft later on down the road by this person, but there's little I can do. I'm not talking about an 1/8 or even 1/4 percent difference in rate; I got beat by a full percentage point. On the same exact loan!

That doesn't happen. Can't happen. Lenders can't be that far apart in rates. Yet I lost my client to someone who simply "low balled" and got the deal. What will happen is that the loan officer quoting ultra-low rates is simply hoping that rates go down so he can honor his rate quote or tell my prospect that rates went up after he got the application.

Sour grapes, anyone? Maybe. Okay, yeah, sour grapes.

This prospect was a referral from one of my top Realtors, and I quoted my best stuff. But I got a call a couple of days later telling me that my prospect chose someone else who was quoting much lower rates, thank you very much.

"Did you get a Good Faith Estimate?" I asked.

"Yes, I have it right here," he responded, "I'm afraid I'm going to have to go with this other person."

"Okay, thanks for the opportunity, hope I can help you in the future. Can you lock those rates in today with this mortgage broker?"

"No, he said he couldn't lock me in until he had my application in and I paid my application fee, but I can't pass up this offer," said my potential client.

"Hmmm," I said, "Usually someone can lock you in without an application or especially paying any fees, but I guess this loan officer since he has such low rates might have special requirements." I tried to be as diplomatic as possible and certainly with all due courtesy.

What was I supposed to say was, "Hey, you. You're working with a liar. If he can't guarantee those rates -- they aren't there."

But I didn't.

I lost the deal and resigned to keeping my fingers crossed that I'll get another phone call in a few weeks when he's getting ready to close, wanting to know what my rates are. Maybe. Or maybe not because he'll be too far into the process that he can't change lenders.

If your loan officer can't lock in ultra-low interest rates without such stipulations as "pay me some money then we'll talk," then you'd better watch out.

Okay, I know that there are fees that are sometimes paid to lenders upfront for a long term lock or perhaps a lender takes a commitment fee at the beginning of a construction project, but overall a consumer should be able to get what they're quoted. I also know that some lenders don't lock without an application and that's perfectly understandable to make sure the prospect is serious about the transaction.

But if either paying upfront money or providing a completed loan application while accompanied by rates that are literally out of this world -- just watch out. Get your lock confirmation as soon as you can.

I've got a funny joke I like to tell that illustrates the ol' "bait and switch."

A customer walked into a meat market and said to the butcher, "How much is a pound of hamburger today?"

The butcher replied, "My hamburger is $5.00 a pound."

"$5.00 a pound! Why, the market just across the street sells it for $3.00 a pound!" yelled the customer.

"Then go buy it across the street."

The customer said, "Well, I can't because he's out of hamburger."

"That's nothing" said the butcher, "when I'm out, my hamburger is only $1.00 per pound."

Published: September 8, 2006

By David Reed
Realty Times

Friday, September 08, 2006


Marriage comes with financial benefits -- a fact sometimes best recognized by couples who don't or can't get married.

Marriage allows couples tax-free transfers of property and gifts, as well as some inheritance rights without a will. Same-sex couples who can't officially wed, or heterosexual couples who are unwilling to, need to put extra protections into place when buying or sharing property.

Several states are now offering rights for unmarried couples, while others are taking them away. So local laws need to be carefully considered when choosing a home-ownership structure.

Colorado is one of the latest states to propose that same-sex partners receive the same state rights as married couples -- a vote is scheduled for November -- while in Massachusetts, gay and lesbian couples can marry and are afforded all of the same state rights. California, Vermont, Connecticut, New Jersey, Maine and Hawaii provide all state spousal rights to same-sex couples, such as the right to inherit when a partner dies without a will, according to Human Rights Campaign, a gay rights advocacy group in Washington. On the other hand, Virginia law prohibits same-sex unions and says a "civil union, partnership contract or other arrangement between persons of the same sex" created in other states is void and unenforceable.

What people really need to realize is that "real estate is governed by state law, not federal law," says Brian Chase, an attorney with the western regional office of Lambda Legal, a gay rights advocacy group. "So what's best will vary dramatically based on what state you are in."

But even if you're permitted to form a domestic partnership or other union recognized by your state, remember that many of these laws are new, nor are they recognized by the federal government, which makes joint ownership and financial planning more complicated. That's why it's best to work through these issues with an attorney and a financial professional.

Unmarried couples need to decide how to title their home, or how to structure ownership, because different structures have different consequences.

Many unmarried couples choose the "joint tenants with rights of survivorship" structure, which allows for an automatic and probate-free transfer to a surviving partner. Still, for couples with taxable estates, it can trigger an additional tax bill. Since married couples can transfer assets to each other tax-free, estate taxes aren't owed until the second spouse dies.

But unmarried people risk being taxed on a property twice: A surviving partner may pay estate taxes on the portion of a property he or she already owned since the Internal Revenue Service may consider the first partner to die the sole owner, and the full value of the property would be taxed again upon the second partner's death.

Both partners "need to have records to prove their contribution to the purchase and upkeep of the property, or else the IRS will presume the first person [to die] owned everything," says Rick Kraft, an estate-planning attorney in Boston who focuses on same-sex couples.

Tenancy-in-common -- when coupled with a revocable living trust -- is a more flexible way to title one's home, attorneys say. This structure allows partners to own unequal interests in the property, but there's no automatic transfer after one dies unless it's designated by the living trust.

A properly funded trust, in which assets are titled to the trust, is a hassle-free way to leave property to a partner because you avoid probate. And, if you're afraid a family member will contest a will, a revocable trust can be more difficult to challenge, some lawyers say. The trust also can be structured so that after one partner dies, the survivor can live in the home until he or she dies. The first partner's share can ultimately go to someone else -- perhaps a niece or nephew, Mr. Kraft adds.

Feeling generous? Be careful. If you already own property and want to transfer a portion to a partner, it's considered a gift, explains Kathleen Sherby, a partner with Bryan Cave LLP in St. Louis. And "you'd have to file a gift tax return," she adds. (Gifts worth less than $12,000 can go unreported; anything above that amount will begin to eat into your $1 million lifetime gift-tax exemption.)

Although many view prenuptial agreements as unromantic, similar agreements are critical for unmarried, property-owning couples. The agreements -- often called living-together, property, or domestic-partner agreements -- set out in detail how assets should be divided in the event of a break-up or death. In states with laws posing restrictions on same-sex couples, extra care must be taken; these agreements should be clearly structured as an investment or business arrangement.

You will also need to keep track of how much each party contributes to the mortgage. Since unmarried couples can't file joint federal tax returns, they'll have to divvy up deductions on mortgage interest and property taxes. A partner who pays 60% of the mortgage is entitled to 60% of the deductions, says Debra Neiman, a financial planner in Arlington, Mass., who co-founded PridePlanners, a national association of planners who service the gay, lesbian and nontraditional community. In states that do recognize same-sex unions, such as Massachusetts, you might file a joint return on the state level.

-- September 06, 2006

By Tara Siegel Bernard
From The Wall Street Journal Online

Wednesday, September 06, 2006


You buy the house on Monday, and by Tuesday the upstairs tub starts leaking.

Purchasing a used home is certainly an important part of the American dream. Millions of Americans scrape together their savings in order to come up with a down payment. And when they move in, they don't want the euphoria to end.

For most it doesn't.

But while with homeownership comes the expected mortgage payments, insurance payments, and costs of home maintenance, there are unexpected exceptions.

It's the unexpected that can push home purchasers into financial distress. While most unexpected costs are beyond anyone's control, the subject of this article are those expenses that were truly unanticipated by the purchaser, not by the seller.

For some reason, upstairs bathtubs seem to be a common villain. But plumbing leaks of all types, as well as mold conditions and leaking roofs are certainly high up there. What I'm talking about are problems of which the seller knew of before the closing, but which were hidden from the purchaser. Perhaps negligently concealed, perhaps intentionally concealed.

So what of the leaky bathtub upstairs?

Repairing this will cost thousands of dollars. Sheetrock will have to be torn off, a plumber will have to investigate and identify the source, plumbing will have to be put into place, and then the entire area will have to be restored. The price of repairs will vary on how much you know how to do or how much you'll have to pay a professional. It will also depend on the cost of supplies at that time and how high end you need to go. In some extreme cases, it could cost as much as $5 to $10 thousand dollars.

This is just one example. Obviously, there are no limits to the number of instances in which sellers have failed to disclose hidden problems that become apparent only after the purchase. It might be a leaking roof after the first post closing rain fall, a leaking pipe after the first post closing bath, or the appearance of mold when lights are turned on for the first time in the attic (something a home inspection would surely catch).

In all cases, the question is: What legal rights do these home purchasers have?

Of course, the first place to begin this inquiry is an evaluation of the contract and of local state law concerning issues of misrepresentation. Presumably, the contract provides that the purchaser had a reasonable opportunity to conduct an inspection of the home. And further that the purchaser is accepting the home in as is, where is condition.

As is, where is condition, or similar language, means that the purchaser is taking the property in its existing condition. If there are defects, usually the seller has no liability for them.

Usually, but not always. Where a defect is difficult for the purchaser to find prior to closing, and where the defect was intentionally hidden by the seller, the seller may have legal exposure.

You will need to consult with a local lawyer to determine what your rights might be in a particular case. But often, the litmus test seems to be whether the purchaser could have detected this problem had the purchaser engaged in a reasonable inspection of the home.

If the defect is considered to be "latent," in other words, one that is not reasonably discernible through a proper home inspection, then there is a possibility that the seller will be liable to the purchaser for costs associated with the repair. A local lawyer who understands real estate law in your jurisdiction will help you determine the extent of your rights, if any.

And the law may go beyond that. There may also be a question of whether or not this omission of information was intentional. In other words, did the seller attempt to defraud the purchaser by hiding this defect. In certain jurisdictions, this scenario may make the seller liable for punitive damages and attorneys fees.

Not only are remedies available under traditional state law, but many states have consumer fraud statutes that also apply to these circumstances. They may also provide for punitive damages and for the recovery of attorney's fees.

In conclusion, purchasing a new home is full of excitement and anticipation. Purchasers have to understand that even under the best of circumstances unexpected costs will occur.

However, no purchaser should have to put up with paying for something that was intentionally concealed by a seller. When that happens, and where the costs to the purchaser are substantial, it might be appropriate to seek legal advice from an attorney who understands the law in your particular state regarding these issues.

Published: August 31, 2006

By Stuart Lieberman
Realty Times

Monday, September 04, 2006


Let's be honest with ourselves: Aren't you just a little glad the real-estate boom is over? No more bragging from self-congratulatory owners of property in high-priced areas. No more breathless tales of bidding wars and comparative sales.

Last week's figures for sales of new and existing homes, both showing sharp declines of more than 4%, make it clear that the long-anticipated real-estate downturn has begun. I realize that a significant downturn in any market causes hardship for some. Tales of woe are mounting from the real-estate industry, from home builders and architects, to empty-nesters and retirees hoping to cash out of big homes and move to smaller places.

There is no doubt that the real-estate industry casts a long shadow, which is why some economists and policy makers are fretting about a slumping market's capacity to drag down the whole economy.

But let's look at the bright side, too. The real-estate market during recent years had many unhealthy economic and psychological effects. Soaring prices forced many people, especially young people buying their first homes and starting families, out of many markets. It pushed too many people into dreadful mortgages. It misallocated capital to construction for which there was no fundamental demand.

Market Cooling

Like the tech bubble, the rapid double-digit annual appreciation in real-estate prices couldn't go on forever. It has clearly been cause for pervasive concern at the Federal Reserve, which helped fuel the boom with its superlow short-term rates. Surely Fed Chairman Ben Bernanke and his colleagues are pleased by a cooling of the market. The recent pause or possible end to rate increases seems well-timed to gauge just how cool it's become.

Purging the market of excess speculation will no doubt yield some tales of plunging prices and hardship. But I wouldn't expect an out-and-out collapse, or even anything as severe as the downturn in the early 1990s. As Toll Brothers Chairman Robert Toll said last week, there's no recession, long-term mortgage rates remain low, and there's still demand for housing. This is a pretty healthy environment for housing, even if there are price declines still in store.

What does this turning point mean for investors? It's time to re-think my longstanding aversion to real estate and related investments.

Hard-Hit Stocks

Stocks of home builders like Toll Brothers and Pulte Homes have suffered severe declines; expectations are so low that they seem good values for patient, risk-tolerant investors willing to wait for the market to stabilize. Some mortgage real-estate investment trusts, hard-hit by rising interest rates and fears of an overvalued market, have just begun to tick up. REITs like Annaly Capital Management and Newcastle Investment are both about 20% above their lows for the year. Other REITs, in my view, remain overvalued.

Property itself may also begin to be attractive, either as an investment vehicle or for your own use. In some markets, falling prices for condos compared with rents are beginning to make them attractive to yield-oriented investors. It is a paradox of falling real-estate values that buyers balk at paying far less than they would have in a rising market, simply because they're afraid the value may decline further after they buy. All of a sudden they're market timers, aiming for an elusive bottom.

As usual, and especially for first-time buyers, I don't believe in trying to time the real-estate market. If you like something, it fits your budget, and you plan to be there for an extended period, stop worrying about where prices are headed. Instead, be grateful you weren't buying a year ago.

-- James B. Stewart, a columnist for SmartMoney magazine and, writes weekly about his personal investing strategy. Unlike Dow Jones reporters, he may have positions in the stocks he writes about. For his past columns, see:

-- August 31, 2006

By James B. Stewart
The Wall Street Journal Online

Friday, September 01, 2006


Survey: Consumer confidence rebounds, but still weak in August

Consumers' attitudes about home buying remained low in August, with home-buying plans falling to the lowest level since 1990, according to a consumer confidence report.

Overall consumer confidence remains weak, but the pace of decline slowed significantly in late August from the July level, according to a survey released today. The overall confidence rebound was mainly due to the decline in gas prices since the start of August.

"Despite the remarkable resilience of consumers, the data does not indicate a renewed upsurge in consumer spending but that consumers will remain cautious spenders rather than engage in sharp recessionary cutbacks," according to Richard Curtin, the director of the University of Michigan's Survey of Consumers, which releases the report.

The clear exception involved housing. "Consumers held the least favorable home-buying plans since the low point in the 1990 recession, which indicates continued declines in sales of new and existing homes during the year ahead," Curtin said.

The latest data on consumer confidence is consistent with a growth rate in real consumption expenditures that averages about 2.5 percent over the next four quarters.

The Index of Consumer Sentiment was 82 in the August 2006 survey, down from 84.7 in July, and significantly below the 89.1 recorded in August of 2005. The entire August decline was in expectations for future economic conditions, as the Current Economic Conditions Index rose slightly to 103.8 in August from 103.5 in July. The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, fell to 68 in August from 72.5 in July and 76.9 in August of 2005.

Most of the rebound in late August involved a reduction in expected inflation and a small upward revision in the anticipated pace of economic growth. "Even after the late August changes, consumers still expected an inflation rate of 3.8 percent during the year ahead, and still anticipated the ongoing slowdown in the pace of economic growth would continue," Curtin said.

The primary concerns of consumers about the ongoing slowdown in economic growth were the creation of fewer new jobs and an increasing unemployment rate during the year ahead. Four out of 10 consumers expected the unemployment rate to increase during the next four quarters.

Consumers reported growing weaknesses in their personal financial situation. "The corrosive impact of inflation on their finances is still the top problem cited by consumers," Curtin said. Consumers voiced even greater pessimism about future changes in the financial situation. Just 29 percent of all households thought that their finances would improve during the year ahead in August; the lowest level since the 1990 recession.

"Consumers are much more concerned about the potential for persistently high inflation than about the potential impact of some additional increases in interest rates," according to Curtin.

Although home-buying plans fell to the lowest level since 1990 in August of 2006, most of the decline was recorded by mid 2005, well in advance of the declines in home sales. "The recent declines in home prices as well as mortgage rates have been reported by consumers, but the declines have not been judged sufficient to adopt more favorable home-buying plans," Curtin said.


Friday, September 01, 2006

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