Summary: A newly-built home is surrounded by a fence that is against the building code. The new owners wonder what recourse they have against the builder.
Q: We bought a newly-built house from a builder and paid him extra to grade the back yard to make it flat and construct large retaining walls around the yard to keep it in shape.
We also paid him a substantial amount of money to fence in the whole back yard to keep our young kids away from the drop along the yard and keep them safe. If we could not have fenced in the yard or made it flat, we would not have purchased the home.
We just closed on the home and the city has told us that the fence is too high and violates the law and we have to either tear down the fence or move it several feet from the property line. If we move the fence, our expensive back yard will be substantially reduced in size. Can we sue the builder? What should we do?
New Fence Violates Building Code
REM #LAW591
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A newly-built home is surrounded by a fence that is against the building code. The new owners wonder what recourse they have against the builder.
Q: We bought a newly-built house from a builder and paid him extra to grade the back yard to make it flat and construct large retaining walls around the yard to keep it in shape.
We also paid him a substantial amount of money to fence in the whole back yard to keep our young kids away from the drop along the yard and keep them safe. If we could not have fenced in the yard or made it flat, we would not have purchased the home.
We just closed on the home and the city has told us that the fence is too high and violates the law and we have to either tear down the fence or move it several feet from the property line. If we move the fence, our expensive back yard will be substantially reduced in size. Can we sue the builder? What should we do?
(article continues below useful links)
A: Unfortunately now that you have moved into the home you are in a difficult situation.
Obviously, you can sue the builder. But you may have a couple of other options. One might be to seek a variation from the zoning board of the city in which you live. This variation, if granted, would permit you to keep the fence in place. If the variation was denied you wouldn’t have lost anything and would where you are today.
Another option would be to force the builder to place mature evergreen bushes around the yard along with a smaller fence to keep your children safe.
Clearly, this is your builder’s mistake and he should have to pay for it. It was up to your builder to know the building codes and if the fence could not be placed on the property, he should have told you so before you closed on the property.
Before you call the builder, talk to a real estate attorney who has had plenty of experience in construction litigation.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Fence_Violates_Code.htm
Friday, August 24, 2007
Warranty Expires on New Home With Problems
Summary: An owner of a new home is experiencing many problems. The builder made a list of his concerns, but now the one year warranty has expired. Ilyce and Sam discuss home warranties and home inspections.
Q: I bought my house from a builder I'd never heard of. He dealt with an agent who said she'd also be my agent. I was a little wary of doing this, especially since I had never heard of the builder.
A few weeks after I bought the home, I noticed lots of problems. I started calling the agent, who had told me that whenever I needed to contact the builder to do so through her.
The two of them came over one day to see what the problems were. He said he could fix everything. The agent listed all of these items, and we each kept a copy of it.
The next week, the builder came back and made some minor repairs but not all of them. Weeks went by, and I didn't hear anything from either one of them. I started contacting the agent again, but neither of them would contact me back until I started sending them registered letters to them.
I gave the builder a deadline but the only response I got was a registered letter detailing the work he'd done. By this time, the one-year warranty that he'd purchased expired.
The agent and the seller are dodging me. I know now that the two of them were stringing me along so that I would trust them enough not to delve into filing a claim to make him either do the repairs or to pay to have them fixed until the twelve months was up.
While I'm ashamed of myself for being so gullible and trusting and not doing a more-thorough job of researching the builder and the agent and, subsequently, of figuring out the warranty, I don't feel that I should have to pay for these repairs. What should I do?
A. Unfortunately you should have paid more attention to your instincts and should not have purchased from this builder.
Now you know better. You should have fully researched the builder, asked for references, seen his other work, talked to other buyers of this seller’s properties to see if they were satisfied after closing, hired a home inspector to review the construction of the home during the building process and sought out independent advice from either an attorney or a buyer’s agent to help you through the buying process.
Now you need to review the sales contract and home warranty to determine what you can do to get the seller to make repairs.
Many, but not all, contracts provide that the seller and buyer of a home will do a closing inspection of the home to determine what items still need to be corrected by the seller. If you contract has this language and your meeting with the builder created what is generally called a “punch list” of items, the seller has a contractual obligation to fix the items listed on the punch list.
On the other hand, many of the warranties builders provide have so many loopholes that the warranty is essentially worthless. And if the builder is unwilling to abide by the terms of the warranty, you, as a buyer, may be out of luck. If he decides not to fix your house, the builder could simply go bankrupt or go out of business and you’d have no recourse.
While you indicated that the warranty expired, some warranties require only that you give notice of the defects to the seller prior to the expiration date of the warranty. The list you made that the seller signed may be sufficient notice to keep you within the warranty period for those items. In some cases, the warranty period expires unless you sue the builder within the warranty period.
You should also obtain estimates from other contractors to fix those items that the builder failed to fix. Once you know what it will cost you to fix the defects you can decide what makes more sense: suing the builder or fixing your house and moving on with your life.
If you decide to pursue the builder, you should first talk to an attorney that has experience in construction litigation to determine how much it will cost you to sue the seller, and to go over the fine print on your warranty.
Finally, you may want to talk to the building department in the town in which you are located and see if the building inspector is willing to talk about the problems you’re having with the builder.
While I don’t advocate that you badmouth the builder, you can objectively express the issues involved and hope that the building department will have second thoughts about letting the builder build in your community in the future.
But tread carefully. Honest differences of opinion can exist between a buyer and a builder as to the quality of construction and what constitutes a defect in construction. If you are unreasonable in your demands, and make outrageous claims that are without merit, the builder could sue you.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Home_Warranty.htm
Q: I bought my house from a builder I'd never heard of. He dealt with an agent who said she'd also be my agent. I was a little wary of doing this, especially since I had never heard of the builder.
A few weeks after I bought the home, I noticed lots of problems. I started calling the agent, who had told me that whenever I needed to contact the builder to do so through her.
The two of them came over one day to see what the problems were. He said he could fix everything. The agent listed all of these items, and we each kept a copy of it.
The next week, the builder came back and made some minor repairs but not all of them. Weeks went by, and I didn't hear anything from either one of them. I started contacting the agent again, but neither of them would contact me back until I started sending them registered letters to them.
I gave the builder a deadline but the only response I got was a registered letter detailing the work he'd done. By this time, the one-year warranty that he'd purchased expired.
The agent and the seller are dodging me. I know now that the two of them were stringing me along so that I would trust them enough not to delve into filing a claim to make him either do the repairs or to pay to have them fixed until the twelve months was up.
While I'm ashamed of myself for being so gullible and trusting and not doing a more-thorough job of researching the builder and the agent and, subsequently, of figuring out the warranty, I don't feel that I should have to pay for these repairs. What should I do?
A. Unfortunately you should have paid more attention to your instincts and should not have purchased from this builder.
Now you know better. You should have fully researched the builder, asked for references, seen his other work, talked to other buyers of this seller’s properties to see if they were satisfied after closing, hired a home inspector to review the construction of the home during the building process and sought out independent advice from either an attorney or a buyer’s agent to help you through the buying process.
Now you need to review the sales contract and home warranty to determine what you can do to get the seller to make repairs.
Many, but not all, contracts provide that the seller and buyer of a home will do a closing inspection of the home to determine what items still need to be corrected by the seller. If you contract has this language and your meeting with the builder created what is generally called a “punch list” of items, the seller has a contractual obligation to fix the items listed on the punch list.
On the other hand, many of the warranties builders provide have so many loopholes that the warranty is essentially worthless. And if the builder is unwilling to abide by the terms of the warranty, you, as a buyer, may be out of luck. If he decides not to fix your house, the builder could simply go bankrupt or go out of business and you’d have no recourse.
While you indicated that the warranty expired, some warranties require only that you give notice of the defects to the seller prior to the expiration date of the warranty. The list you made that the seller signed may be sufficient notice to keep you within the warranty period for those items. In some cases, the warranty period expires unless you sue the builder within the warranty period.
You should also obtain estimates from other contractors to fix those items that the builder failed to fix. Once you know what it will cost you to fix the defects you can decide what makes more sense: suing the builder or fixing your house and moving on with your life.
If you decide to pursue the builder, you should first talk to an attorney that has experience in construction litigation to determine how much it will cost you to sue the seller, and to go over the fine print on your warranty.
Finally, you may want to talk to the building department in the town in which you are located and see if the building inspector is willing to talk about the problems you’re having with the builder.
While I don’t advocate that you badmouth the builder, you can objectively express the issues involved and hope that the building department will have second thoughts about letting the builder build in your community in the future.
But tread carefully. Honest differences of opinion can exist between a buyer and a builder as to the quality of construction and what constitutes a defect in construction. If you are unreasonable in your demands, and make outrageous claims that are without merit, the builder could sue you.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Home_Warranty.htm
Late Mortgage Commitment Leads to Cancelled Deal
Summary: If a buyer is late with a mortgage commitment can the deal fall through? Ilyce and Sam go through the various scenarios that can cause a cancelled contract.
Q: Can a buyer cancel the contract without any penalties if the mortgage commitment was delivered after the date set forth in the contract? The mortgage commitment was late because the sellers’ agent was slow to set up the appointment for the appraiser to see the property.
A: In general, many contracts, but not all, provide a certain amount of time for a buyer to obtain a commitment for financing for the purchase of a home.
If the buyer is unable to obtain the commitment within that time period, the buyer must notify the seller in writing by the date set forth in the contract. If a buyer fails to notify the seller within that time, the buyer waives his right to terminate the contract. And if the buyer then fails to close on the property, the buyer risks losing the money he has put down as down payment for the home – or even more, depending on the seller’s damages.
If the sellers’ real estate agent intentionally failed to allow an appraiser into the home, you, as the buyer, may have the right to sue the sellers’ agent, or even the seller, for bad faith in abiding by the terms of the contract. However, if the sales agent failed to get the appraiser in on time and it was due to tardiness by the appraiser or scheduling problems, you should have requested an extension of the financing contingency.
If you obtained the financing commitment after the date set forth in the contract for the financing contingency and now want to terminate the contract because the commitment did not arrive in time, you probably will not be able to do that.
If you now have your financing commitment you will probably have to close. If the lender turned you down for financing, you should talk to a real estate attorney to determine whether the actions of the seller caused you harm.
This will probably center on why the appraisal was held up. If the seller’s broker did not act maliciously and did not try to interfere with your ability to obtain financing, you may be the one on the hook for the sellers’ damages.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Mortgage_Commitment.htm
Q: Can a buyer cancel the contract without any penalties if the mortgage commitment was delivered after the date set forth in the contract? The mortgage commitment was late because the sellers’ agent was slow to set up the appointment for the appraiser to see the property.
A: In general, many contracts, but not all, provide a certain amount of time for a buyer to obtain a commitment for financing for the purchase of a home.
If the buyer is unable to obtain the commitment within that time period, the buyer must notify the seller in writing by the date set forth in the contract. If a buyer fails to notify the seller within that time, the buyer waives his right to terminate the contract. And if the buyer then fails to close on the property, the buyer risks losing the money he has put down as down payment for the home – or even more, depending on the seller’s damages.
If the sellers’ real estate agent intentionally failed to allow an appraiser into the home, you, as the buyer, may have the right to sue the sellers’ agent, or even the seller, for bad faith in abiding by the terms of the contract. However, if the sales agent failed to get the appraiser in on time and it was due to tardiness by the appraiser or scheduling problems, you should have requested an extension of the financing contingency.
If you obtained the financing commitment after the date set forth in the contract for the financing contingency and now want to terminate the contract because the commitment did not arrive in time, you probably will not be able to do that.
If you now have your financing commitment you will probably have to close. If the lender turned you down for financing, you should talk to a real estate attorney to determine whether the actions of the seller caused you harm.
This will probably center on why the appraisal was held up. If the seller’s broker did not act maliciously and did not try to interfere with your ability to obtain financing, you may be the one on the hook for the sellers’ damages.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Mortgage_Commitment.htm
New Driveway May Be On Neighbor's Lot
Summary: After building a new home, an owner discovers the driveway may be on the neighbor's lot. Ilyce and Sam discuss surveys, easements and builders contract.
Q: We purchased a vacant lot and signed an agreement to have a home built on it. We moved into the home and later when the vacant lot next to ours sold, the neighbor’s surveyors found that part of our driveway, several sprinkler heads and a palm tree were on the neighboring lot.
I contacted our builder and received a message back stating that the builder had inspected our property and found the sprinklers and palm tree were on the wrong property and would be moved, but the driveway was fine.
My builder’s landscapers came and moved the palm tree and the sprinkler heads. But a couple of days ago I received a phone call from the owner of the adjacent property telling me that his sale fell through because of my driveway being on his property. He claims that he could have made a large profit on the land.
I think the builder is ignoring my requests to have the driveway moved because it’s expensive and time-consuming, but I’m afraid my neighbor could sue me. How long do you think I should have to wait until I take action against the builder?
A: The first thing you need to do is determine how far your driveway extends into your neighbor’s property. When you constructed your home, you should have, and the local building department probably required or should have required, a current survey of the property.
That survey should have marked the corners of your lot. Generally, surveyors place wooden stakes on the corner of a property with a small colored flag. If your lot was surveyed and its corners staked, you should have been able to determine where your property line was and should have built within your property line.
You should also double check to make sure that the information you were given by your neighbor’s surveyor was accurate.
If your neighbor’s information is accurate and if the driveway encroaches into the neighbor’s property by a couple of feet or less, you can discuss with your neighbor having an easement over his land to allow your continued use of the driveway over his property. The neighbor may want to be paid a small fee for this right and you and he can negotiate the fee.
A real estate attorney can assist you in drafting the easement and having it recorded against your neighbor’s property.
However, if the driveway extends far into the neighbor’s property and he is unwilling to let you keep it there, you will have to place it all on your property at your expense.
If you know that the cost of fixing this mistake will be yours, you will have to determine who caused the mistake. Was it your original surveyor that improperly surveyed your property? Was it the driveway subcontractor that improperly placed the driveway on your neighbor’s property? Or was it your builder’s responsibility to insure the accuracy of the placement of the improvements?
You may need to review your contract with your builder to determine who was responsible for the proper location of the improvements on your property. Some construction contracts specifically place the burden of obtaining a survey for the property on the homeowner. If you decided not to get a survey you would have to bear the cost of moving the driveway.
You indicated in your letter that the builder decided to move the landscaping onto your property. He may have done it to create good will even if he doesn’t believe he caused the mistake. On the other hand, the builder may have fixed that problem knowing he was responsible for the mistake, and hoping the easy landscaping fix would be good enough.
If the builder is responsible or if you can’t determine the responsibility, you should consult with a litigation attorney that has had experience in construction related issues about your situation.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Driveway_Easement.htm
Q: We purchased a vacant lot and signed an agreement to have a home built on it. We moved into the home and later when the vacant lot next to ours sold, the neighbor’s surveyors found that part of our driveway, several sprinkler heads and a palm tree were on the neighboring lot.
I contacted our builder and received a message back stating that the builder had inspected our property and found the sprinklers and palm tree were on the wrong property and would be moved, but the driveway was fine.
My builder’s landscapers came and moved the palm tree and the sprinkler heads. But a couple of days ago I received a phone call from the owner of the adjacent property telling me that his sale fell through because of my driveway being on his property. He claims that he could have made a large profit on the land.
I think the builder is ignoring my requests to have the driveway moved because it’s expensive and time-consuming, but I’m afraid my neighbor could sue me. How long do you think I should have to wait until I take action against the builder?
A: The first thing you need to do is determine how far your driveway extends into your neighbor’s property. When you constructed your home, you should have, and the local building department probably required or should have required, a current survey of the property.
That survey should have marked the corners of your lot. Generally, surveyors place wooden stakes on the corner of a property with a small colored flag. If your lot was surveyed and its corners staked, you should have been able to determine where your property line was and should have built within your property line.
You should also double check to make sure that the information you were given by your neighbor’s surveyor was accurate.
If your neighbor’s information is accurate and if the driveway encroaches into the neighbor’s property by a couple of feet or less, you can discuss with your neighbor having an easement over his land to allow your continued use of the driveway over his property. The neighbor may want to be paid a small fee for this right and you and he can negotiate the fee.
A real estate attorney can assist you in drafting the easement and having it recorded against your neighbor’s property.
However, if the driveway extends far into the neighbor’s property and he is unwilling to let you keep it there, you will have to place it all on your property at your expense.
If you know that the cost of fixing this mistake will be yours, you will have to determine who caused the mistake. Was it your original surveyor that improperly surveyed your property? Was it the driveway subcontractor that improperly placed the driveway on your neighbor’s property? Or was it your builder’s responsibility to insure the accuracy of the placement of the improvements?
You may need to review your contract with your builder to determine who was responsible for the proper location of the improvements on your property. Some construction contracts specifically place the burden of obtaining a survey for the property on the homeowner. If you decided not to get a survey you would have to bear the cost of moving the driveway.
You indicated in your letter that the builder decided to move the landscaping onto your property. He may have done it to create good will even if he doesn’t believe he caused the mistake. On the other hand, the builder may have fixed that problem knowing he was responsible for the mistake, and hoping the easy landscaping fix would be good enough.
If the builder is responsible or if you can’t determine the responsibility, you should consult with a litigation attorney that has had experience in construction related issues about your situation.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Driveway_Easement.htm
Seller Must Have Title Insurance
Summary: A seller wonders if they still need title insurance to sell their home if the house is paid for. Sam and Ilyce explain the basics of title insurance and tell the owner why they must buy it.
Q: A real estate agent recently prepared for us an assessment of the local market and told us what price he thought we’d get for our home.
In this assessment, he also listed the expenses we could expect to pay during the sale. One expense was for title insurance. He said we "couldn't avoid" buying title insurance.
Why should I purchase this insurance when my house is paid for?
Seller Must Have Title Insurance
REM #LAW589
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A seller wonders if they still need title insurance to sell their home if the house is paid for. Sam and Ilyce explain the basics of title insurance and tell the owner why they must buy it.
Q: A real estate agent recently prepared for us an assessment of the local market and told us what price he thought we’d get for our home.
In this assessment, he also listed the expenses we could expect to pay during the sale. One expense was for title insurance. He said we "couldn't avoid" buying title insurance.
Why should I purchase this insurance when my house is paid for?
(article continues below useful links)
A: Unfortunately, your agent is probably right. In many places, a home seller has the burden of proving that he or she has good title to the home. The common way to prove you have good title is to buy title insurance.
Title insurance companies provide the service of searching the public records and furnishing a report called a title insurance commitment. The commitment outlines who owns the property and what, if anything, affects the title to the property. Some of the items that may appear on a title commitment are mortgages, other liens, recorded easements, homeowner association declarations and restrictions.
The cost of title insurance varies greatly from state to state. Depending on whether the state regulates title insurance, the cost is higher or lower. For example, title insurance on a $100,000 home in Illinois would run about $600. In Texas, a similar policy would cost $1,171.
The big mistake is for you to think of title insurance as a real insurance policy. Instead, think about it as a cost of selling your home. Because what you’re really doing when you buy that policy is proving to the buyer that you have the right to sell it.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Must_Have_Title_Insurance.htm
Q: A real estate agent recently prepared for us an assessment of the local market and told us what price he thought we’d get for our home.
In this assessment, he also listed the expenses we could expect to pay during the sale. One expense was for title insurance. He said we "couldn't avoid" buying title insurance.
Why should I purchase this insurance when my house is paid for?
Seller Must Have Title Insurance
REM #LAW589
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A seller wonders if they still need title insurance to sell their home if the house is paid for. Sam and Ilyce explain the basics of title insurance and tell the owner why they must buy it.
Q: A real estate agent recently prepared for us an assessment of the local market and told us what price he thought we’d get for our home.
In this assessment, he also listed the expenses we could expect to pay during the sale. One expense was for title insurance. He said we "couldn't avoid" buying title insurance.
Why should I purchase this insurance when my house is paid for?
(article continues below useful links)
A: Unfortunately, your agent is probably right. In many places, a home seller has the burden of proving that he or she has good title to the home. The common way to prove you have good title is to buy title insurance.
Title insurance companies provide the service of searching the public records and furnishing a report called a title insurance commitment. The commitment outlines who owns the property and what, if anything, affects the title to the property. Some of the items that may appear on a title commitment are mortgages, other liens, recorded easements, homeowner association declarations and restrictions.
The cost of title insurance varies greatly from state to state. Depending on whether the state regulates title insurance, the cost is higher or lower. For example, title insurance on a $100,000 home in Illinois would run about $600. In Texas, a similar policy would cost $1,171.
The big mistake is for you to think of title insurance as a real insurance policy. Instead, think about it as a cost of selling your home. Because what you’re really doing when you buy that policy is proving to the buyer that you have the right to sell it.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Must_Have_Title_Insurance.htm
New Furnace Too Small
Summary: Owners believe a new construction home has a furnace that is too small. Ilyce and Sam encourage the owner to talk with a heating expert before going after the builder with construction litigation.
Q: I just bought a new construction house and the furnace is too small. Can we make the builder replace it with the proper one? We have only lived here for six months.
A: How do you know that the furnace is too small? Is your house cold? Are there parts of your home that simply won't warm up?
You should have your furnace checked out by a licensed heating contractor who can assess how big the furnace is relative to the size of your property and whether it is adequate to heat the home.
If the furnace is the right size, the heating contractor may need to balance the system. Sometimes heating systems require seasonal changes that can send more hot air to certain parts of the home during the winter and send cold air to other areas in the summer. The problem could be something as simple as your vents in some rooms may be partially or completely closed, or installed incorrectly.
If the furnace is the right size, but one room is cold, you might simply need a space heater or perhaps additional insulation to keep the area at the right temperature.
If the furnace is too small for the home, and the builder should have installed a larger size, you should consult with an attorney who specializes in construction litigation. The attorney can advise you whether you should sue the builder or pursue him in small claims court.
A final thought: Did you have your new home professionally inspected before you closed? A good home inspector should have caught the problem of a too-small furnace before you actually put your money down on the table, and you would have had a lot more leverage to force the builder to replace the inadequately sized furnace unit.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Small_Furnace.htm
Q: I just bought a new construction house and the furnace is too small. Can we make the builder replace it with the proper one? We have only lived here for six months.
A: How do you know that the furnace is too small? Is your house cold? Are there parts of your home that simply won't warm up?
You should have your furnace checked out by a licensed heating contractor who can assess how big the furnace is relative to the size of your property and whether it is adequate to heat the home.
If the furnace is the right size, the heating contractor may need to balance the system. Sometimes heating systems require seasonal changes that can send more hot air to certain parts of the home during the winter and send cold air to other areas in the summer. The problem could be something as simple as your vents in some rooms may be partially or completely closed, or installed incorrectly.
If the furnace is the right size, but one room is cold, you might simply need a space heater or perhaps additional insulation to keep the area at the right temperature.
If the furnace is too small for the home, and the builder should have installed a larger size, you should consult with an attorney who specializes in construction litigation. The attorney can advise you whether you should sue the builder or pursue him in small claims court.
A final thought: Did you have your new home professionally inspected before you closed? A good home inspector should have caught the problem of a too-small furnace before you actually put your money down on the table, and you would have had a lot more leverage to force the builder to replace the inadequately sized furnace unit.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Small_Furnace.htm
Buyer Discovers Back Taxes Owed
Summary: A buyer discovers the sellers owe three years of back taxes. Ilyce and Sam suggest the buyer makes sure his contract for purchase of the land specifies that all taxes are to be paid in full and that he will receive a credit at closing for any taxes for the current year that have not been billed but are for the period of time that the seller owned the property.
Q: I made an offer on some vacant land and the sellers accepted. I just found out that the sellers owe back taxes on the land for the last three years. How can I get them to pay the taxes before I actually sign the closing documents? Am I going to be responsible for the back taxes if they don't pay them?
A. If the back taxes are not paid before, or at, the closing, you will be responsible for them.
Make sure your contract for purchase of the land specifies that all taxes are to be paid in full and that you will receive a credit at closing for any taxes for the current year that have not been billed but are for the period of time that the seller owned the property.
If the sellers are not willing to pay the taxes before, make sure you do not close until the closing company (either the title company or escrow company) cuts a check for the taxes out of the closing proceeds.
Your attorney should help you structure the contract so that you are protected. Please consult with him or her for more information.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Back_Taxes.htm
Q: I made an offer on some vacant land and the sellers accepted. I just found out that the sellers owe back taxes on the land for the last three years. How can I get them to pay the taxes before I actually sign the closing documents? Am I going to be responsible for the back taxes if they don't pay them?
A. If the back taxes are not paid before, or at, the closing, you will be responsible for them.
Make sure your contract for purchase of the land specifies that all taxes are to be paid in full and that you will receive a credit at closing for any taxes for the current year that have not been billed but are for the period of time that the seller owned the property.
If the sellers are not willing to pay the taxes before, make sure you do not close until the closing company (either the title company or escrow company) cuts a check for the taxes out of the closing proceeds.
Your attorney should help you structure the contract so that you are protected. Please consult with him or her for more information.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Back_Taxes.htm
New Home Has Water Damage
Summary: After repeated fixes, a homeowner still has water problems in his basement. Sam talks about the builder's responsibilities and the various construction litigation options.
Q: We purchased a new home in 1997. After moving in we noticed water leaking into basement. After numerous complaints to the builder, he finally agreed to saw cut the floor and clean out weep holes. But that didn’t fix the problem.
Next, the builder then decided to dig up around the foundation and backfill with stone. Also, he painted inside the walls with a waterproofing paint. While, this appeared to work at first, I have noticed black mold growing in some areas around where he supposedly fixed the problem.
Since the builder didn’t resolve the problem, can he be forced to repair and resolve this issue?
A: The answer to your questions depend on the state in which you live.
In some states, you may have a right to pursue an action against the builder, in others, the time in which you could have brought your case against the builder might have expired.
Recent court cases in some states would preclude your ability to sue the builder. If, for example, the builder gave you a one-year warranty on the home and you did not sue the builder during that one year period, you would then lose your ability to later sue the builder.
In other states, the fact that the builder tried repeatedly to fix the problem might be sufficient for a court to find the builder to be liable, even today, for the problems arising from your home.
You should talk to an attorney that specializes in construction litigation and has sued builders for these types of issues to understand your legal options.
Finally, you need to make sure that your mold problem is caused by the recurring water problem issue that was claimed to be fixed by your builder. It is possible that the water problem occurring in your home is being caused by a new problem.
Investigate the cause of your mold first, then determine what can be done to fix it. Only then will you know whether the construction of the home was faulty or if the problem is new.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Builder_Fixes_Water.htm
Q: We purchased a new home in 1997. After moving in we noticed water leaking into basement. After numerous complaints to the builder, he finally agreed to saw cut the floor and clean out weep holes. But that didn’t fix the problem.
Next, the builder then decided to dig up around the foundation and backfill with stone. Also, he painted inside the walls with a waterproofing paint. While, this appeared to work at first, I have noticed black mold growing in some areas around where he supposedly fixed the problem.
Since the builder didn’t resolve the problem, can he be forced to repair and resolve this issue?
A: The answer to your questions depend on the state in which you live.
In some states, you may have a right to pursue an action against the builder, in others, the time in which you could have brought your case against the builder might have expired.
Recent court cases in some states would preclude your ability to sue the builder. If, for example, the builder gave you a one-year warranty on the home and you did not sue the builder during that one year period, you would then lose your ability to later sue the builder.
In other states, the fact that the builder tried repeatedly to fix the problem might be sufficient for a court to find the builder to be liable, even today, for the problems arising from your home.
You should talk to an attorney that specializes in construction litigation and has sued builders for these types of issues to understand your legal options.
Finally, you need to make sure that your mold problem is caused by the recurring water problem issue that was claimed to be fixed by your builder. It is possible that the water problem occurring in your home is being caused by a new problem.
Investigate the cause of your mold first, then determine what can be done to fix it. Only then will you know whether the construction of the home was faulty or if the problem is new.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Builder_Fixes_Water.htm
Hail Damages House After Home Inspection
Summary: After a buyer has the home inspection hail damages the home to the tune of $12,000. Months after closing they are trying to get the seller to file an insurance claim. Sam and Ilyce discuss seller disclosure laws.
Q: We recently purchased a home that has severe hail damage although we were unaware of it at the time of the closing. We had the home inspection prior to the closing and everything was fine. Four days after the inspection, a hail storm hit Columbus, Ohio, and at the end of that month we closed on the house.
Shortly after we moved in, signs started appearing on people's lawns for roof and siding repairs due to hail damage. We decided to have a hail inspection and were shocked to learn that our house had over $12,000 dollars in hail damage. We cannot submit a claim to our insurance company because we did not own the house when the storm hit. We contacted the previous owners and asked them to submit a claim. We even offered to pay the deductible, but they refused saying they did not want their insurance rates to go up.
Is there anything we can do? We paid for a house in a certain condition and it did not come in that condition. Are the previous owners responsible or are we? Could the previous owners insurance rates go up or could they be dropped from their insurance company?
A: Your situation is quite unique. In various parts of the Midwest last year, large storms caused severe hail damage to many communities. Most buyers knew that these storms had hit and proceeded to purchase homes only after doing the final inspection of the home.
Did you know that the storm had hit? If you did know of the storm, did you take care to inspect the home for the damage before closing?
The reason your situation is quite unique is that a hail storm causing damage to a roof is not as evident as a fire in the home or a tornado destroying the home. In many states, it is still buyer beware when it comes to buying the home and if the seller did not lie or hide damage to the home, the seller may be off the hook for damage caused to the home.
As for the hail inspection, you should contact at least two other companies to determine if your roof has hail damage. You should make sure that you do in fact have this damage and someone is not trying to take advantage of your situation.
If there is damage, review the contract for the purchase and sale of your home. The contract may provide for certain representations and warranties regarding the condition of the home. If these representations or warranties were breached, you may have the right to pursue an action against the seller.
Moreover, some states have passed seller disclosure laws. While these disclosure laws require the seller to tell you of thing that they know are wrong with the house, many do not require the seller to give you additional disclosures to you after the initial delivery of the disclosure. However, if the state you live in has a seller disclosure law that requires the seller to disclose to you this type of damage, and the seller failed to tell you, you may be able to sue the seller for the damage.
While the seller may not want to make a claim with his insurance company, if you have a right under the contract or a seller disclosure law to sue the seller for the damage, the seller might be inclined to make the claim with his insurance company and resolve your claim. You may not want to sue the seller, but you may have to sue him to get him to pay and force him to file his own claim with his insurance company.
Keep in mind that in some states violations of seller disclosure laws permit a court to grant the winning party attorneys fees in connection with the case.
For further information on your unique situation, please consult with a real estate attorney or an attorney that specializes in real estate litigation.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Hail_Damage.htm
Q: We recently purchased a home that has severe hail damage although we were unaware of it at the time of the closing. We had the home inspection prior to the closing and everything was fine. Four days after the inspection, a hail storm hit Columbus, Ohio, and at the end of that month we closed on the house.
Shortly after we moved in, signs started appearing on people's lawns for roof and siding repairs due to hail damage. We decided to have a hail inspection and were shocked to learn that our house had over $12,000 dollars in hail damage. We cannot submit a claim to our insurance company because we did not own the house when the storm hit. We contacted the previous owners and asked them to submit a claim. We even offered to pay the deductible, but they refused saying they did not want their insurance rates to go up.
Is there anything we can do? We paid for a house in a certain condition and it did not come in that condition. Are the previous owners responsible or are we? Could the previous owners insurance rates go up or could they be dropped from their insurance company?
A: Your situation is quite unique. In various parts of the Midwest last year, large storms caused severe hail damage to many communities. Most buyers knew that these storms had hit and proceeded to purchase homes only after doing the final inspection of the home.
Did you know that the storm had hit? If you did know of the storm, did you take care to inspect the home for the damage before closing?
The reason your situation is quite unique is that a hail storm causing damage to a roof is not as evident as a fire in the home or a tornado destroying the home. In many states, it is still buyer beware when it comes to buying the home and if the seller did not lie or hide damage to the home, the seller may be off the hook for damage caused to the home.
As for the hail inspection, you should contact at least two other companies to determine if your roof has hail damage. You should make sure that you do in fact have this damage and someone is not trying to take advantage of your situation.
If there is damage, review the contract for the purchase and sale of your home. The contract may provide for certain representations and warranties regarding the condition of the home. If these representations or warranties were breached, you may have the right to pursue an action against the seller.
Moreover, some states have passed seller disclosure laws. While these disclosure laws require the seller to tell you of thing that they know are wrong with the house, many do not require the seller to give you additional disclosures to you after the initial delivery of the disclosure. However, if the state you live in has a seller disclosure law that requires the seller to disclose to you this type of damage, and the seller failed to tell you, you may be able to sue the seller for the damage.
While the seller may not want to make a claim with his insurance company, if you have a right under the contract or a seller disclosure law to sue the seller for the damage, the seller might be inclined to make the claim with his insurance company and resolve your claim. You may not want to sue the seller, but you may have to sue him to get him to pay and force him to file his own claim with his insurance company.
Keep in mind that in some states violations of seller disclosure laws permit a court to grant the winning party attorneys fees in connection with the case.
For further information on your unique situation, please consult with a real estate attorney or an attorney that specializes in real estate litigation.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com
http://www.lawproblems.com/Hail_Damage.htm
Sensible Home Buying in Central Texas
The great quality of life in Central Texas is attracting an ever-increasing number of new residents, resulting in a boom in home building. This growing market is attracting new builders as well, so competition for customers is fierce. That means 1996 should be a banner year for you to get what you want in a new home.
But before you buy, the City of Austin's Green Builder wants you to consider how to get the best possible home for your money--one that's better for your f amily, your community and your planet.
Everyone wants a home that's comfortable, healthy and safe, and that's easy to maintain, as well as one with low monthly bills. Many of the best ways to achieve these benefits will not increase the purchase price of a home (or they pay back quickly), but they do require the home buyer to know what to look for and demand.
Buy a home that's energy-efficient. Making a house payment is tough enough without having to pay a sky-high electric and gas bill every month. One of the most important things that makes a home energy-efficient, without increasing initial cost, is having the right design for the lot orientation. The design should take advantage of the sun's path, prevailing breezes and tree shading to provide warmth in winter, avoid overheating in summer and enable good cross-ventilation.
Some examples of other features that will reduce energy use in your new home are: continuous ridge and soffit vents combined with a radiant barrier to cool down the attic; well-installed insulation; high-efficiency heating, cooling and water-heating equipment combined with a properly designed, air-tight duct system; a good lighting design and efficient light fixtures appropriate for their purpose; and light colored finishes inside and outside the home.
Buy a home that is water-efficient. By national standards, new plumbing fixtures are very water-conserving. However, about half of summer water use goes to lawn and garden care, so it's important to pick the best shrubs and turf for conditions on your lot. St. Augustine grass is fine in the shade, for example, but it requires way too much water to stay alive in sunny areas to be practical in Central Texas. Buffalograss or common Bermuda is a far better choice in high sun areas.
Buy a home made of durable, low-maintenance materials. Having to replace rotten siding or do frequent repainting, for example, can add a lot to the cost of owning a home. Local brick and stone are always a good low-maintenance exterior. But for a more modest budget or a different look, consider fiber-cement siding. It won't deteriorate even if you never paint it. Inside, a good example of a durable, low-maintenance feature is a tile floor. It will usually add to the cost of a house, and may never have to be replaced.
Buy a home that's made of healthier materials. Be aware of the chemicals in common building materials, especially in interior finishes. Products such as carpet, paint, glue and cabinet materials emit fumes for many months, even years, after installation. They affect the quality of the air in your home, sometimes causing stuffy noses and headaches. Major manufacturers of building products are rapidly changing the formulations of their materials to address these problems, but it's often up to the consumer to demand the healthier choice. If your builder is unfamiliar with these aspects of building, call the Green Builder Program staff for help.
Buy a home in the right location. Location, location, location! This is a major factor in determining which house you buy, but be sure to consider location in a realistic way. You may get a great deal on a house far from an urban center, but are you going to spend a fortune on gas and car maintenance getting to work, shopping, schools and entertainment? Selecting a home convenient to amenities and to your workplace will save time as well as money and cut down on air pollution from auto exhaust.
Make sure your home choice contributes to the quality of life in Central Texas. We have a legacy of protecting our natural environment...which is just good business, since that's one of our biggest drawing cards for new companies considering relocation. Ask your builder to help preserve this legacy.
If you have questions about building or buying an energy-efficient and environmentally-sound home in Austin, call or email the City of Austin Sustainable Sources has a list of builders, architects, designers and suppliers who are members of the Green Builder Program.
You can also find more information including the Sustainable Building Sourcebook compiled by the City of Austin's Green Builder Program at the Sustainable Sources website.
http://www.greenbuilder.com/general/articles/greenhome.html
But before you buy, the City of Austin's Green Builder wants you to consider how to get the best possible home for your money--one that's better for your f amily, your community and your planet.
Everyone wants a home that's comfortable, healthy and safe, and that's easy to maintain, as well as one with low monthly bills. Many of the best ways to achieve these benefits will not increase the purchase price of a home (or they pay back quickly), but they do require the home buyer to know what to look for and demand.
Buy a home that's energy-efficient. Making a house payment is tough enough without having to pay a sky-high electric and gas bill every month. One of the most important things that makes a home energy-efficient, without increasing initial cost, is having the right design for the lot orientation. The design should take advantage of the sun's path, prevailing breezes and tree shading to provide warmth in winter, avoid overheating in summer and enable good cross-ventilation.
Some examples of other features that will reduce energy use in your new home are: continuous ridge and soffit vents combined with a radiant barrier to cool down the attic; well-installed insulation; high-efficiency heating, cooling and water-heating equipment combined with a properly designed, air-tight duct system; a good lighting design and efficient light fixtures appropriate for their purpose; and light colored finishes inside and outside the home.
Buy a home that is water-efficient. By national standards, new plumbing fixtures are very water-conserving. However, about half of summer water use goes to lawn and garden care, so it's important to pick the best shrubs and turf for conditions on your lot. St. Augustine grass is fine in the shade, for example, but it requires way too much water to stay alive in sunny areas to be practical in Central Texas. Buffalograss or common Bermuda is a far better choice in high sun areas.
Buy a home made of durable, low-maintenance materials. Having to replace rotten siding or do frequent repainting, for example, can add a lot to the cost of owning a home. Local brick and stone are always a good low-maintenance exterior. But for a more modest budget or a different look, consider fiber-cement siding. It won't deteriorate even if you never paint it. Inside, a good example of a durable, low-maintenance feature is a tile floor. It will usually add to the cost of a house, and may never have to be replaced.
Buy a home that's made of healthier materials. Be aware of the chemicals in common building materials, especially in interior finishes. Products such as carpet, paint, glue and cabinet materials emit fumes for many months, even years, after installation. They affect the quality of the air in your home, sometimes causing stuffy noses and headaches. Major manufacturers of building products are rapidly changing the formulations of their materials to address these problems, but it's often up to the consumer to demand the healthier choice. If your builder is unfamiliar with these aspects of building, call the Green Builder Program staff for help.
Buy a home in the right location. Location, location, location! This is a major factor in determining which house you buy, but be sure to consider location in a realistic way. You may get a great deal on a house far from an urban center, but are you going to spend a fortune on gas and car maintenance getting to work, shopping, schools and entertainment? Selecting a home convenient to amenities and to your workplace will save time as well as money and cut down on air pollution from auto exhaust.
Make sure your home choice contributes to the quality of life in Central Texas. We have a legacy of protecting our natural environment...which is just good business, since that's one of our biggest drawing cards for new companies considering relocation. Ask your builder to help preserve this legacy.
If you have questions about building or buying an energy-efficient and environmentally-sound home in Austin, call or email the City of Austin Sustainable Sources has a list of builders, architects, designers and suppliers who are members of the Green Builder Program.
You can also find more information including the Sustainable Building Sourcebook compiled by the City of Austin's Green Builder Program at the Sustainable Sources website.
http://www.greenbuilder.com/general/articles/greenhome.html
Buying a Home During the Storm
Lately, it seems as though every few days brings another mortgage-related market blowup. The latest one -- as I write this, anyway -- concerns Countrywide Financial (NYSE: CFC), whose shares were down hard Thursday morning on news that the company drew down its entire credit line -- and after a Merrill Lynch analyst's report suggested that the company could be headed for bankruptcy.
Countrywide's troubles are the latest in a string of crises for mortgage lenders, and for institutions such as Bear Stearns (NYSE: BSC) and Goldman Sachs (NYSE: GS) that have taken huge losses after buying the lenders' mortgage-backed securities. The problem is fairly straightforward. Many lenders have built their business models on making loans, packaging those loans and turning them into securities, selling those securities to institutional investors like hedge funds and mutual funds, taking the money from the sales and making new loans, and repeating the process.
Now, after stagnating housing prices have led to increased rates of mortgage defaults (especially, but not entirely, among subprime loans) and huge losses for investors, the market for those securities has dried up. This situation has forced lenders to scramble for liquidity -- money to continue operating -- and that scramble has led to some well-publicized bankruptcies.
So what does this all mean for those of us who are looking to buy a house in the near future?
I'm glad you asked.
If you're looking to buy
Let's make something clear up front: Many lenders are definitely still lending. Mortgages are still widely available. Houses are still being bought and sold. If you have decent credit and proof of a steady income, aren't asking for anything wildly beyond your means, and have a 5% down payment saved up, you'll probably be fine.
I say "probably" not because you'll have trouble getting a loan, but because those bankruptcies have left a few buyers in the lurch. In some cases, people who thought they had an approved loan suddenly found out a few days -- or hours -- before their closing that they wouldn't be getting the loan after all. For loans through lenders such as Accredited Home Lenders (Nasdaq: LEND) and Impac Mortgage (NYSE: IMH), which have been feeling the squeeze in the subprime crisis, it's always possible that by the time you close, something will have happened to jeopardize your loan.
But if this happens to you, don't panic: Generally, you'll be able to work with your loan officer to get the loan transferred to another institution, with only a small delay and a bit of added hassle.
When things aren't that simple
If you don't have great credit, proof of a steady income, or a down payment, things get a little more complicated. Generally speaking, standards are tightening all across the board, especially for loans that fall outside the great-credit-30-year-fixed-conforming envelope, and the days where you could get a mortgage with little more than a phone call are gone.
While you can still get a no-down-payment loan, expect to be asked to show hard proof of employment income and of substantial savings or other liquid assets, as well as a strong credit history. Freelancers (like yours truly) and others who don't have W-2s to show will have a tougher time, as will people with a few dings on their credit report.
Credit matters
And, of course, if your credit is checkered -- if your FICO score is below 620 or so -- your options have become much more limited for the moment. But you do still have options. There are still subprime mortgages available, but not as many, and rates have jumped somewhat.
Essentially, what's going on is that the mortgage industry -- along with Wall Street -- is rethinking the appropriate pricing for taking on the risk of a borrower with a less-than-prime credit history. While it's a safe bet that the industry will come to a new consensus before too long, and the range of products offered to subprime borrowers will expand, lenders are being very conservative right now, for obvious reasons.
The best advice I can give in the current mortgage market is pretty simple: Whether you're seeking a basic conforming 30-year fixed mortgage, a subprime loan, or a non-standard loan like a "jumbo" mortgage or a no-down-payment arrangement, research your options carefully and talk to lenders before you go house-shopping. There are still lots of mortgages available, but the ground is constantly shifting, and it's best to have your expectations firmly grounded before you go and search out the home of your dreams.
For more on how to get the best loan you can -- regardless of your financial circumstances -- take a look at our Home Center.
Fool contributor John Rosevear does not own any of the stocks mentioned above. The Motley Fool has a disclosure policy.
http://www.fool.com/personal-finance/home/2007/08/16/buying-a-home-during-the-storm.aspx
Countrywide's troubles are the latest in a string of crises for mortgage lenders, and for institutions such as Bear Stearns (NYSE: BSC) and Goldman Sachs (NYSE: GS) that have taken huge losses after buying the lenders' mortgage-backed securities. The problem is fairly straightforward. Many lenders have built their business models on making loans, packaging those loans and turning them into securities, selling those securities to institutional investors like hedge funds and mutual funds, taking the money from the sales and making new loans, and repeating the process.
Now, after stagnating housing prices have led to increased rates of mortgage defaults (especially, but not entirely, among subprime loans) and huge losses for investors, the market for those securities has dried up. This situation has forced lenders to scramble for liquidity -- money to continue operating -- and that scramble has led to some well-publicized bankruptcies.
So what does this all mean for those of us who are looking to buy a house in the near future?
I'm glad you asked.
If you're looking to buy
Let's make something clear up front: Many lenders are definitely still lending. Mortgages are still widely available. Houses are still being bought and sold. If you have decent credit and proof of a steady income, aren't asking for anything wildly beyond your means, and have a 5% down payment saved up, you'll probably be fine.
I say "probably" not because you'll have trouble getting a loan, but because those bankruptcies have left a few buyers in the lurch. In some cases, people who thought they had an approved loan suddenly found out a few days -- or hours -- before their closing that they wouldn't be getting the loan after all. For loans through lenders such as Accredited Home Lenders (Nasdaq: LEND) and Impac Mortgage (NYSE: IMH), which have been feeling the squeeze in the subprime crisis, it's always possible that by the time you close, something will have happened to jeopardize your loan.
But if this happens to you, don't panic: Generally, you'll be able to work with your loan officer to get the loan transferred to another institution, with only a small delay and a bit of added hassle.
When things aren't that simple
If you don't have great credit, proof of a steady income, or a down payment, things get a little more complicated. Generally speaking, standards are tightening all across the board, especially for loans that fall outside the great-credit-30-year-fixed-conforming envelope, and the days where you could get a mortgage with little more than a phone call are gone.
While you can still get a no-down-payment loan, expect to be asked to show hard proof of employment income and of substantial savings or other liquid assets, as well as a strong credit history. Freelancers (like yours truly) and others who don't have W-2s to show will have a tougher time, as will people with a few dings on their credit report.
Credit matters
And, of course, if your credit is checkered -- if your FICO score is below 620 or so -- your options have become much more limited for the moment. But you do still have options. There are still subprime mortgages available, but not as many, and rates have jumped somewhat.
Essentially, what's going on is that the mortgage industry -- along with Wall Street -- is rethinking the appropriate pricing for taking on the risk of a borrower with a less-than-prime credit history. While it's a safe bet that the industry will come to a new consensus before too long, and the range of products offered to subprime borrowers will expand, lenders are being very conservative right now, for obvious reasons.
The best advice I can give in the current mortgage market is pretty simple: Whether you're seeking a basic conforming 30-year fixed mortgage, a subprime loan, or a non-standard loan like a "jumbo" mortgage or a no-down-payment arrangement, research your options carefully and talk to lenders before you go house-shopping. There are still lots of mortgages available, but the ground is constantly shifting, and it's best to have your expectations firmly grounded before you go and search out the home of your dreams.
For more on how to get the best loan you can -- regardless of your financial circumstances -- take a look at our Home Center.
Fool contributor John Rosevear does not own any of the stocks mentioned above. The Motley Fool has a disclosure policy.
http://www.fool.com/personal-finance/home/2007/08/16/buying-a-home-during-the-storm.aspx
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