Condo Responsibilities

Reprinted from The Almanac -May 14, 08

Q: I live in a multi-story condo building and water recently poured into my unit from the unit upstairs.  There is considerable damage, not to mention inconvenience.  Who pays for repairs?

A: The answer depends on where the damage originated.  If the water came from a source inside the upstairs unit, for example, an overflowing bathtub or sink, then the owner is responsible for repairing your unit, and would probably make a homeowners' insurance claim to cover the cost.  If the damage was caused by the owners' negligence, the insurance company may decline to pay in which case the homeowner would be liable for the cost.  Individual condo and townhouse owners should carry sufficient insurance to pay for liabilities not covered by general homeowners insurance.

If the damage was from a burst pipe that was located in the common wall or floor area, then the homeowners association might be responsible for repairs.  The HOA would make a claim using the common insurance policy.

If you live in a condominium or townhouse, you should be sure that the insurance coverage, both individual and group, is adequate for the kinds of damages that may occur.  Living close to your neighbors can bring added risk.

A Buyers Market

Reprinted from The Almanac -April 30, 08

Q: I am planning to sell my house next month and want to know how the market is at the present time.  Who is in control: buyers or sellers?

A: There has been a definite shift away from the sellers' market that prevailed in this area for most of the past few years to being much more of a buyers' market.  There are exceptions to this but generally buyers control the market more than sellers do.  Pricing and presentation are key to selling a property in a reasonable period of time.  There are still multiple offers on some properties but overbids are not too high.  Buyers and sellers are negotiating price and terms much more that they have in the recent past.

Much of this change can be attributed to tight financial markets.  Interest rates have gone down but liquidity problems have kept mortgage loan rates from going down as much as you would expect.  Also, some lenders are spending so much time and effort dealing with bad loans that they keep their interest rates highter to discourage new business.

It is very important that you be sure the buyer for your property has a strong lender behind them.  You don't want to find that at the last minute the lender can't fund the loan.

Home Equity Loans In Jeopardy

Reprinted from The Almanac -April 16, 08

Q: We just got a notice from the lender with whom we have an equity line of credit canceling the loan.  We were planning to use this line of credit to remodel the kitchen and now will have to put our plans on hold.  Should we try to find another lender?

A: Many lenders are canceling home equity loans for several reasons.  Tight credit markets have hurt lenders' access to capital and this has reduced the number of loans of all types being done.  Home equity loans usually carry more risk and lenders are trying to reduce risk as much as possible.  In some areas house prices have declined and homeowners have less equity to tap into than they used to have.  Lenders are canceling equity lines because they are afraid borrowers will withdraw funds that then cannot be secured by the home's value.

You should definitely try other lenders.  Once an appraisal is done you will know what the current market value is and if there is enough equity in the property, some lenders may be willing to extend a line of credit.  If not, you may have to wait to remodel your kitchen until the market improves, unless you have other sources of cash to pay for it.

Down Payment Assistance

Reprinted from The Almanac -April 2, 08

Q: My parents are going to provide the down payment for me to buy a property.  I plan to pay them back a bit each year but if I can't; they will forgive the loan.  Should I list them as co-owners of the property or co-signers on the loan?

A: The lender you choose will give you guidance on this.  If the lender says you qualify for the loan on your own financial strength, your parents will not need to be listed as co-borrowers.  They don't need to be burdened with liability for the loan if you can do it on your own.

Many parents and relatives give their children money for a down payment and most lenders are fine with this.  They may ask you to provide a gift letter from your parents so that it doesn't look like you are borrowing 100% of the money needed.  The lender will probably want to be sure that the money from your parents does not need to be repaid.  If the money is a gift, you don't need to list your parents either as co-owners or as mortgagees.

You should consult your accountant before you decide how best to treat your parent's money.  Their payment may have tax implications to them and to you that you should be aware of.

Restrictive Covenants

Reprinted from The Almanac -March 19, 08

Q: We just bought a house on the Peninsula and were surprised to find that there were recorded covenants on the property restricting ownership only to members of the white or Caucasian race.  Are these covenants common in California?

A: Racial covenants and restrictions were very common in California and have been superseded by federal and state fair housing laws.  It is striking to see them still on the record for homes in this area and a reminder of the discriminatory laws that were in effect here for a very long time.

Current laws forbid discrimination in housing based on race, color, religion, sex, familial status, or handicap.  It is unlawful for lenders to refuse mortgage loans based on these aspects as well.  Brokers and agents must not assist anyone who is violating these laws or advertise in a way that discriminates against anyone included in these groups.

You and the other property owners who are covered by the same recorded covenants can amend them eliminating the racial and other restrictions that no longer apply or that you want to change.  However, the original recordings will always be a part of the history of your property even though they no longer apply.

Underground Wires

Reprinted from The Almanac -March 5, 08

Q: I want to bury the utility wires that run through my property underground and want to know what is involved in this process.  Is it expensive to do this?

A: Under grounding the utility wires on your property is an excellent way to upgrade what can be an unsightly and even hazardous condition.  It is not inexpensive to do, however, and many homeowners are reluctant to make this improvement because of the time and cost involved.

To begin the process call your local utility company or go to their website and find out what the steps are.  You will probably need to submit a drawing prepared by an architect, engineer, or contractor, to both the utility company and your local building department, showing where the lines would be buried.  The utility company and the building department will charge an application fee to review the plan.  The process may take a few months before you get a response.

Once the plan is approved you should arrange for inspections by all necessary jurisdictions after you have finished construction.  If you have to dig up your driveway or engineer a pathway around tree roots, this may add to the expense of the project.  But when it is done, you will no doubt be very glad you did it.

How Important is Pricing?

Reprinted from The Almanac -February 20, 08

Q: We will be putting our house on the market in a month and want to know the best pricing strategy.  What would you advise?

A: The market for good properties in prime locations is strong right now.  There are many buyers looking seriously to buy the right property.  But unlike some of the very robust markets of the past, buyers also are showing some caution.  They are not sure whether there will be a recession in the country that will affect this area and they don't want to pay more for property than it is worth in case there is a downturn.

It is because of this caution that I feel it is more important than ever to price your home close to where you think it will sell.  I would not advise you to price it too low because even with multiple offers, buyers are not willing to pay way above the list price.  Buyers are in a more negative frame of mind because of the media reports of recession and mortgage defaults.  But if they are secure in their jobs and have a long term market view, they are ready to meet your price as long as it is reasonable.

A Break in Interest Rates

Reprinted from The Almanac -February 6, 08

Q: I have a low-rate loan that is going to adjust later this year.  I am pleased to see rates coming down but wonder if I should refinance now or wait a bit to see if rates come down further?

A: It is safe to say that interest rates will not be rising anytime soon, althoughthey may fluctuate as they often do.  You should keep watching interest rates carefully and when you think they are attractive enough and meet your needs, you should go ahead and refinance.  You should also look at what the rate for your current loan would be after it adjusts.  Perhaps it will be low enough that you would do well to keep it and not have to pay title, escrow, and refinance fees.

You should also consider your long term plans.  How many years do you plan to stay in your house?  If you are only going to be there for a short time (two years or less) you could let your rate adjust because it may cost you more to refinance than the adjustment will be.  If you plan to be there a long time you should analyze your financial goals to decide how soon you want to pay off your entire loan.  Once you make this determination, find a mortgage loan program that fits your needs.

Why Basements Are Important

Reprinted from The Almanac -January 23, 08

Q: Do you think it is important to include a basement when building a new home?

A: I think basements can be a very important part of a house, particularly if the lot size is modest.  Building guidelines require that basements have large light wells for light and air as well as ingress and egress if they are to qualify as living space.  But except for these light wells, basements are more or less unseen from the outside and have little impact on your neighbors.  Basements can provide recreational space for play areas, TV watching and home gyms, as well as much needed storage.  This additional space adds real value to the structure.

Some towns try to restrict the size of basements but these proposals are usually met with objections from many in the community who feel restrictions are unnecessary.  As long as the basement is well constructed to ensure that it will stay dry and be structurally sound, there should be no public danger from a building standpoint.  If you are building a new home and can afford to include a basement, you should seriously consider doing so.  

Real Estate in 2008

Reprinted from The Almanac -January 9, 2008

This is the time of year when predictions are made about what is likely to happen in the coming year.  No one really knows for sure what will happen until it does, but trends are often apparent and predictions are thus made with some confidence.  In residential real estate, markets can turn in the opposite direction one weekend, although there are usually signs of what is coming.  For example, the stock market decline in 2000 happened six months before real estate began its descent but agents knew the descent was probable.

The real estate market has seasons and we are about to begin what is typically the most active season of the year: the spring market.  Everyone looks at the first transactions of January for signs of what is ahead and it is still too early to do this.  But based on other input, including activity during the last weeks of 2007, here are some predictions of what is likely going to happen in the first half of 2008.

The Mid-Peninsula area has much going for it: demand for housing remains high; the job market is strong; the foreclosures are a rarity.  We can still be impacted by what is happening elsewhere but chances are good that the market will be stable here for the next several months.  Prices are likely to remain strong but will probably not rise for at least the next quarter.  If you are thinking of selling your property this year, inventory is very low and you should begin your process now.  If you are in the market to buy a home, stay active and be in a position to act quickly if you see the right property.  The signs are there that it will be a good real estate year.  Don't hesitate to be part of it.