Nolo’s Real Estate Tips for Home Buyers

This is one of those issues you'd think would have been settled by now: Does a condo owner have a right to expect that his or her unit will be free of secondhand smoke from nearby units? And if so, can the owner demand a remedy, perhaps that the condo association pay to seal off their unit (which may be impossible) or that the neighbors simply stop smoking in their home?

Given the wide range of other things that condo associations typically govern, from the size of owners' dogs to the color of their house paint, you might even expect that smoking rules would be written into the typical Covenants, Conditions, and Restrictions (CC&Rs; the government document for homeowner associations).

Apparently not. In fact, as described in the article, "Battle Over Smoking in Condos Catches Fire in Florida," by I.M. Stackel of the Daily Business Review , the issue is just making its way to the forefront of public attention -- mostly via the court system.

Until it's resolved, both condo buyers and sellers need to put it high on their list of issues to address before the sale is finalized. Buyers who want to either avoid neighbors' smoke or have the right to smoke themselves should carefully read the CC&Rs, ask questions of the sellers, and talk to the neighbors' about others' experiences there.

Sellers who know that their unit is subject to the entry of secondhand smoke will want to disclose this to buyers. Yes, it might turn some buyers off, but as we explain in detail in Selling Your House in a Tough Market, that's better than facing a lawsuit later.

Like many homebuyers, we discovered during the course of the inspections that our new home-to-be wasn't entirely perfect -- in fact, it really needed a whole new foundation if we wanted a decent chance of surviving the next earthquake. (Not too surprising for a house that's nearly 100 years old.)

That led us to the same question many others have dealt with: Do the work right away, in the midst of all the craziness of moving, or wait a bit?

Of course, for some people, there's no choice, because their mortgage lender insists that the work be done before funding the loan. But our lender wasn't requiring this. So for us, the pros and cons looked something like this:

ADVANTAGES TO DOING WORK RIGHT AWAY:
1) Our lives were already in chaos, why not add a little more?
2) Once the work was done, we'd be able to settle in, hang paintings, and repaint if we wanted to, without having to undo it all and repaint over new cracks in the walls after the foundation work was done.
3) We could avoid buying earthquake insurance (which many homeowners with solid new foundations forgo)

DISADVANTAGES TO DOING WORK RIGHT AWAY:
1) The weather. It was one of the rainiest winters in my memory, which would have made it nearly impossible to store things outside that would have, but for the foundation work, normally been in the basement.
2) We didn't know anyone who'd need a house-sitter in January -- whereas, by waiting, we could house-sit for friends on summer vacations if the noise and chaos of construction got to be too much.
3) We'd have a chance to regroup, cash-wise. We moved into our new house before selling the old, which was already a financial challenge. We didn't want to be down to our last dollar when the inevitable new costs arose ("Hey, how about we replace your old, cracking floor slab while we're at it?")

So, three against three -- and we decided to wait. Mostly glad we did. We keep looking at the surrounding chaos, with a trench all around the house, deep holes underneath, and dirt piles in our back yard, and saying, "Can you imagine doing this in the rain?"  

But it does sometimes feel like we're moving all over again. And we did end up house-sitting for friends. (Thanks, guys.)

A foundation removal is a big deal -- there was dust pouring through cracks in the house we didn't know existed. It was shooting up behind the mantel! And the downstairs plumbing had to be disconnected for nearly a week.

Does this lead me to any advice for others? Nope, I'm afraid there no universal answer. Wait, there's a better way to put that: There's no wrong answer. Do what feels more comfortable, and expect some chaos either way!

As this recent article in the Washington Post by Michael A. Fletcher describes, a number of unemployed Americans are finding that, even if jobs are available in other cities, they can't sell their homes -- or can't sell them for enough to cover their mortgages -- leaving them, effectively, stuck.

Surprisingly, however, the article doesn't mention the possibility of renting out the space until house values improve. This won't work for everyone, but it can work well for those living in areas where rents have actually risen or held steady since the real estate bust. In many cases, demand has actually been driven up by the numbers of people foreclosed upon or otherwise unable to qualify for a mortgage.

For example, check out this July 27 Bloomberg article by Prashant Ghopal, stating that, "U.S. apartment landlords are seeing a surge in rentals as mounting foreclosures reduce homeownership and an improving job market for young adults encourages them to find their own places to live."

Still, even at a decent rent, the amount might not cover the mortgage and other expenses. You'd need to run some numbers. For help with that, see Nolo's award-winning book, First-Time Landlord: Your Guide to Renting Out a Single-Family Home, and the free article, "What It's Like Being a Landlord."

Sometimes a personal story is the most powerful way to illustrate the importance of certain tidbits of advice.

For example, if you've read any of Nolo's books on homebuying (such as Nolo's Essential Guide to Buying Your First Home), you've heard us say a million times that it's important to read the fine print in the Covenants, Conditions, & Restrictions provided by the homeowners' association (HOA) of your soon-to-be newly purchased condo or townhouse.

But, as a friend of mine buying a condo recently commented to me, "There were 300 pages of documents -- I'm not sure I ever would have read the whole thing!"

Good thing for her, the condo seller (of this existing complex, built in the 1980s) was not only a member of the condo board, but was upfront in making his seller's disclosures. He revealed that, on top of the regular homeowners' dues, there was a probable special assessment coming down the pike -- alarmingly enough, of an uncertain amount in the neighborhood of $10,000 to $20,000 per homeowner.

The problem is that various of the condo owners' roofs have started to leak, and not just because the roofs are old. (They'd already budgeted into the regular homeowners dues for regular roof replacements.) Apparently when the condos were originally built, someone didn't do the roofs correctly, and the flaws are starting to take a toll.

What's a condo buyer to do in this situation? My friend asked for and received a credit of $10,000 to be put into the escrow account at closing, but she's also researching madly, talking to contractors and people within the HOA about the likely costs of replacing over 100 roofs - or maybe just replacing individual roofs as they leak (a choice that the HOA members are still considering).

She may not get the answer before closing time -- but you can bet she'll be an active member of the homeowners' association, and attend all the meetings, to watch how this plays out!

It has happened to some homebuyers; the neighbors turn out to be NOT WHO THEY APPEARED TO BE. Luckily, late-night host David Letterman has supplied this handy list of Top Ten Signs That Your Neighbor is a Russian spy. Yup, if your mail carriers keep mysteriously dying of polonium poisoning, you just might want to investigate further.

On a more serious note, when home shopping, it's worth asking both the home seller and passersby you meet in the neighborhood about your neighbors' personalities and activities before you close the deal. Some states' disclosure forms will ask the seller to provide potentially neighbor-related information, such as local nuisances or legal disputes concerning the property. But others leave it to up the up to the seller's conscience as to whether they fill in the "Other" box.

There's nothing to stop you from knocking on your potential new neighbors' doors, introducing yourself, and taking your own measure of their personalities. In most cases, a Russian accent means you should look forward to some pleasant evenings over borscht, blini, or vodka. But, as Letterman warns, think twice if they hand you a business card where "Russian Spy" is crossed out and "Landscaper" is scribbled in . . .  .

For more information on checking out the neighborhood and the neighbors when choosing a new place to call your own, see Nolo's Essential Guide to Buying Your First Home.

The National Association of Realtors recently reminded its members that each tree a person plants around a home can add an estimated $630 to the home's value. (That's according to a 2002 study by the USDA Forest Service.) And trees can save on energy costs, too. The U.S. Department of Energy says that, due to shading of the home in summer and protecting it from winds and weather in winter, well-planted trees can save homeowners between $100 and $250 a year.

Personally, what I like best about trees is the pleasant view they create out the window, with filtered light and sneak peaks into the lives of birds, squirrels, and occasionally the cats who chase them.

So if you've got the space to plant some trees, here's the best news of all: Buying a tree doesn't have to break the bank. By joining the Arbor Day Foundation, you become eligible to receive ten free trees, specially selected to grow well in your geographic area. 

But before you start planting, a few cautions apply. For starters, it's important to do your research on how fast your chosen tree will grow -- sometimes it's faster than you think -- and what that will mean for both your own property and any neighboring ones. In some common interest developments, for example, the rules forbid you to block another neighbor's view.

Also check on whether the particular species of tree's roots are known for invading, say, concrete plumbing pipes. And you might want to avoid trees with special needs, like the Coast live oak in my back yard, which can't be watered all summer -- meaning nothing else in my yard can be, either.

Tree placement is another important consideration. For example, a tree that loses its leaves  shouldn't be put too close to the house if you don't want to be cleaning out the gutters frequently. And if you plant a tree near your property line, and the trunk grows over the boundary, the law says that your neighbor will then own part of the tree. Even if the trunk doesn't grow this wide, realize that other tree issues -- falling leaves, ownership of overhanging fruit, and dropped limbs -- are a common source of neighbor disputes. To help forestall or deal with these, see the free "Trees and Neighbors FAQ" on Nolo's website, or buy the excellent, plain-English reference, Neighbor Law: Fences, Trees, Boundaries & Noise, by Cora Jordan and Emily Doskow (Nolo).  
 

You've probably got a long list of places to advise of your move to a new home, such as your doctor's office, kids' school, magazine and alumni subscriptions, gym, and more. It's the kind of task that's easy to put off as you unpack.

But here's a good reason to tell your car insurer right away -- if you've moved to a better neighborhood, it may lower your rates! That's right, a zip code considered "safer" can equal lower car insurance premiums. If you've already paid, you'll get a rebate for the remainder of the year. Not that you could use any extra cash right now . . . . 

Anyone who's read any of my books on real estate will know I cast a wary eye on homeowners' warranties -- those service contracts meant to supply repair and replacement of a home's appliances, heating, and other systems when needed.

I've heard too many stories of homeowners who were disappointed when, after paying the standard service fee, they were told that nothing more could be done because the condition arose before the contract period, or they didn't do the required maintenance on whatever the malfunctioning object was, or the problematic portion of the pipe or whatever was excluded from coverage. (Actually, that last bit wasn't a story I heard -- it happened to me, with my dishwasher. Grr.)

Anyway, we can now thank Amanda Gengler, of MONEY magazine, for coming up with yet another reason not to love home warranties: When the warranty company actually agrees to a replacement, they don't need to use the same brand!

Gengler notes, in an article in the June 2010 issue of MONEY called "5 Things You Need to Know About Home Warranties,"  "There's no promise that a GE will not replace your Viking or a black dishwasher won't appear in a kitchen full of white appliances."

Just another reminder that a home warranty is not, repeat not, a form of insurance. You don't get cash, you don't get a choice of repairpeople -- you get services, and often limited ones. 

The annual Bruss awards for excellence in newly published books were recently announced at a conference of the National Association of Real Estate Editors (NAREE) in Austin, Texas. Good news for Nolo: Our book First-Time Landlord: Your Guide to Renting Out a Single Family Home, by Janet Portman, Marcia Stewart, and Michael Molinksi, won silver! For real: Here's the NAREE press release.

Author Janet Portman says of helping to plan and write this book, "We knew there were a lot of people who'd never expected to be landlords -- perhaps who'd moved to a different house, or inherited homes that they couldn't sell in the current market -- and we planned the book to address that need. We're delighted to see the enthusiastic response from both customers and the NAREE awards committee."

And congratulations to the other winners!

If you're among the homeowners worried about continuing to make mortgage payments, you've probably noticed all the media discussion offering up short sales as a way to "save" yourself from the horror and the damage to your credit rating caused by a foreclosure. I've been guilty of talking up the benefits of this option myself.

A quick definition: Short sales are when the seller of a home that has dropped in value to less than what the seller owes on the mortgage finds a buyer willing to pay the current market value of the property, and they get the bank or lender's permission to accept the sale proceeds as a payoff of the mortgage.

But I won't be promoting the short sale option any more, at least not without some major caveats. I recently attended a continuing legal education seminar at which a group of lawyers who spend their every day working with distressed homeowners discussed the "dark side" of short sales. Here, in a plain-English nutshell, is what they described:

1) A short sale is not significantly better for your credit rating than a foreclosure.

2) Even though the lenders express willingness to cancel the lien on the property following the short sale, many have started sneaking difficult-to-understand language into the short sale contract allowing them to come after the home seller for the remainder of what was owed on the loan! (That's despite law in the state of California, at least, that seems not to allow such behavior -- but someone's going to have to sue to make this crystal clear).

3) Although common wisdom says that lenders never try to collect on these deficiencies, the experience of these attorneys is that they ALWAYS try to collect -- if not on their own, then by selling the debt to another entity that will try to collect.

My new caveats? Don't even consider a short sale without getting a look at the written documents from your lender and, even better, having them reviewed by an attorney who can discuss the comparative benefits of your various options.

Want to hear a more detailed explanation, straight from the source? I happened to mention this seminar to C.S. Soong of Against the Grain on KPFA radio, and he interviewed William Purdy, one of the lawyer-presenters. You can hear the interview here.