Can You Afford to Buy a House?
Monday, May 24, 2004
Owners Love To Hate Contractors
by Lew Sichelman
Home improvement contractors are blasted every year in annual consumer complaint surveys, ranking at or near the top of the pile in terms of gripes about shoddy workmanship, poor performance and a whole host of other categories.
But a survey released last week by the Opinion Research Corp. says that for the most part, overall satisfaction with workmen employed to remodel kitchens, replace roofs or add a room is largely positive.
Indeed, nearly a quarter of the respondents said the final outcome exceeded their expectations, and close to half said that the job turned out pretty much the way they expected.
Only a small number said the work did not meet expectations or boasted that even as rank amateurs, they could have done better had they done the work themselves. Indeed, 10 percent were relieved they didn't have to do the work, largely because they had neither the time nor the skill to complete the tasks on their own.
In case you are wondering on what planet this survey was taken, the thousand or so respondents were not without their complaints. They had plenty, but chief among them were these recurring themes:
Contractors did not show up when they said they would.
Projects took longer to complete than the owners were told they would.
Owners had to wait an inordinate amount of time for the work to start.
There also was a recurring pet peeve that workers failed to clean up after themselves. Mess and dust were everywhere, people complained, suggesting overwhelmingly that workers should wear gloves, shoe mitts and disposable overalls, and provide their own clean-up products.
Now most contractors use drop clothes, but the folks taking part in this survey said it would be good if workers also provided pre-moistened hand wipes and disposable towels that remove dirt, dust and paint.
Trying to turn a big, burly construction worker into a clean freak may be stretching it a bit. But then again, the survey was done on behalf of Kimberly-Clark's SCOTT Rags in a Box, so that's probably why respondents were even asked if they spend all their time cleaning up after the workers leave for the day. Otherwise, the answers revealed a sort of love-hate relationship between homeowners and the people they hire to repair and renovate their homes. For example, while a third said it didn't bother them to have someone invade their castles for long periods, 17 percent said they felt obliged to stay home to protect their possessions from theft and damage.
Thirteen percent said they felt "creepy" with strangers roaming all over their places, but nine percent said they wished they could just leave for vacation and comeback when the work was done. Six percent said they felt like they were living in the middle of a demolition derby.
Of course, no survey on remodeling would be complete without asking people what type of projects they were tackling and how they found the contractors they eventually hired.
The jobs most likely to be turned over to a professional were additions and renovations, followed by such specialty work as roofing, gutters, electrical work, window replacement, carpeting and flooring. The two projects most likely to be tackled by do-it-yourselfers were painting and wallpapering.
And finally, most people went by word of mouth when they hired a contractor. They relied more on recommendations from friends, neighbors and family members than on flyers, circulars, coupons and ads. And more than half said they checked references "all or most of the time."
Maybe that's why these survey participants seemed to be more satisfied than most.
Published: April 21, 2004
Online Mortgage Shopping "Annoying"
by Broderick Perkins
Online mortgage shopping at major mortgage Web sites comes with delays, misleading claims, pressure tactics and unnecessary risks to your personal financial information.
What's more, it's easier to find lower rates at traditional brick and mortar lenders with local offices.
"Rates, in fact, remain one of the disappointments with online mortgages overall," said Consumer Reports after its testers went shopping for mortgages online.
"If you don't mind sending a lot of personal financial information through cyberspace and fielding phone calls from salespeople, online mortgage shopping can be a good way to get a feel for what's out there," the report found.
"But if you're like us, you probably do mind. What's more, when we checked the Web sites of local banks to find out what they offered, we discovered that it is possible to find rates in your own backyard that are lower than or comparable to those advertised on the major mortgage Web sites," according to "Getting A Line On An Online Loan," a recent Consumer Reports Money Adviser test of six mortgage Web sites.
The April report is in line with other recent studies that reveal big hopes for online mortgage shopping were dashed along with the dot com bust. Mortgage information online has been a boon to consumers, but when it comes to mortgage shopping, the Internet has effectively given consumers little more than a new way to face some of the same old problems.
Here's what Consumer Reports discovered when test shopping three lenders, a broker and two mortgage information Web sites for a zero-point, 15-year fixed-rate refinancing for a $99,000 balance on a single-family house in suburban New York:
Ditech (a lender), a GMAC Mortgage business unit, revealed that sales pitches are just that, pitches. Consumer Reports discovered that Ditech's televised advertising -- a flat closing cost fee of $395 -- was often attached to loans that are more expensive over the life of the loan than those with higher closing costs. Unfortunately, an online applicant won't discover that until he or she has submitted their Social Security number and other financial information in an application. Without that information the online application process refuses to proceed.
E-LOAN (a lender) which promises an "instant decision" took several hours to send the Consumer Reports tester an email promising "you will hear from us shortly," but after 48 hours the tester was still waiting. Consumer Reports otherwise had favorable comments about E-Loan's mortgage calculators and privacy policy.
Quicken Loans (a lender) received favorable Consumer Reports comments for knowledge, courteousness, online tools and an accessible Web site staff, but unfavorable comments for sharing applicants' information with partners. The tester also found that Quicken's quote "wasn't particularly low."
HSH (an information Web site) lists lenders by state and their rates and provides links to lenders' Web site where applicants can further check rates and apply for a loan. The bank Consumer Reports tester found through HSH, a regional lender in New Jersey and New York City, offered the best overall rate found in the magazine's test of online mortgage shopping Web sites. Closing costs, however, were "hefty."
Bankrate (an information Web site) allows applicants to choose loans by city or county instead of by state, but like HSH "Some of the mortgage providers listed on the two Web sites aren't banks but brokers, who could prod you into a higher-priced mortgage to collect a fee from the lender called a yield-spread premium, which translates into a higher interest rate for you," Consumer Reports reported.
LendingTree (a broker) offers an extensive, 79-question application it sends to up to four lenders. Applicants have no way to examine a given lender's privacy policies until after the application is complete and then only if the lender contacts the applicant.
"Sales reps trying to close the deal barraged us with so many phone calls that it felt as if they really were on the doorstep," Consumer Reports wrote.
The magazine said the online mortgage process initially was supposed to be a painless alternative to brick and mortar loan shopping making comparing lenders and loans easy.
"We found that applying for a loan online could sometimes be more annoying than using a bank," Consumer Reports concluded.
Published: April 21, 2004
Six Signs That You're Ready To Buy
by Michele Dawson
Figuring out whether you're ready to buy a house -- whether you're a renter or are aiming to move up or size down -- can be a daunting task. But there are signs that will indicate whether you're ready to take the buying plunge.
If you are thinking about buying, you're not alone.
David Lereah, NAR's chief economist, said the housing market has reached a new plateau. "Over the last few years, it's become apparent that the level of home sales will generally remain at higher levels than what was common in the mid-1990s," he said. "The fundamental change is a growing population with a rising number of households entering the age in which people typically buy their first home. In short, we have the need, desire and ability for people to buy homes."
So are you ready to make the move? You might be if you:
Are familiar with the market. If you've been paying attention to how much houses are listed for in the neighborhoods you're eyeing and have a realistic view of how much a house will cost you, you're in good shape. But if you're dreaming about that big corner house with no clue about it's asking price, you may want to spend some more time becoming familiar with the market and how much houses are going for.
Have the money for a down payment and closing costs. The down payment is a percentage of the value of the property. Freddie Mac says the percentage will be determined by the type of mortgage you select. Down payments usually range from 3 to 20 percent of the property value. Also, you may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20 percent. Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. You can expect to pay between from 2 to 7 percent of the property value. Generally, buyers will receive an estimate of these costs from your lender after you apply for a mortgage.
Know how much you can afford. Freddie Mac says that as a general guide, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. Also, your income, debt and credit history go into determining how much you can borrow. As a general rule, your debt -credit card bills, car loans, housing expenses, alimony and child support -- should not be more than about 30 to 40 percent of your gross income.
Know what additional expenses will come with owning a home. This includes homeowners insurance, utility bills, maintenance costs -- roofing, plumbing, heating and cooling.
Have your credit in good shape and make sure your credit report is accurate. Potential lenders will view your credit history -- how much debt you've accrued, how many accounts you have open, whether your payments are made on time, etc. -- to determine whether they'll give you a loan. You should get a report from each of the three credit reporting companies: Equifax, Experian, and Trans Union.
You haven't made any recent major purchases, particularly a vehicle. If you do, you may have a harder time getting a loan -- or it could potentially lower the amount you'll be approved for.
Once you decide you're ready, you'll need to be prepared to move quickly if you're aiming to buy in a sellers' market.
"Over 40 percent of properly priced homes and condos sell within 30 days, and new listings come on the market daily allowing for good choices for buyers ready to take the plunge," said Realtor Karen Dove, of Pompano Beach, Fla.
Similar conditions exist for buyers in other parts of the country, including some New England areas.
"Properties in the lower price ranges that are priced correctly are selling quickly, as buyers are armed with still low interest rates," report Sara Hancox and Charles Hemmerdinger, real estate professionals in Westport, Conn.
The next steps involve hiring a real estate professional and getting preapproved for a mortgage loan. This way you'll know if you can get approved and how much you can spend on a house. It also puts you in a stronger position when you ultimately make an offer on a house.
Published: May 24, 2004
Monday, May 17, 2004
Ask Realty Times
by Peter G. Miller
Question: I'm a first time home buyer. Earlier this month I locked in a 3/1 adjustable-rate mortgage (ARM) with the mortgage broker. Because of delays (on my part) it is highly possible that the paperwork will not get completed within the 30 day lock. I've tried to educate myself in regard to ARMs vs. fixed-rate mortgages. Sometimes I'm completely comfortable with my decision to go ARM and other times I don't feel as confident. During the lending process, can I change my mind and go with a fixed-rate loan instead of an ARM? What about if the rate lock expires?
Answer: You locked in a particular loan with a given set of rates and terms. A fixed-rate loan, in your case, would be a different mortgage. This is somewhat like going to a car dealer, ordering a red sedan, and then seeking to buy a red coupe before the first car is delivered.
If the lock runs out and the loan cannot be delivered, then you might want to go for a fixed-rate mortgage.
You could cancel the ARM -- federal rules give you three business days to cancel a mortgage -- however, this is an extremely unwise choice because you may further delay closing, you may not qualify for the loan you want or you may face higher rates due to changing market conditions.
A larger issue may be this: Can you close on the home under the terms of the sale agreement? The loan delay may lead to a closing delay -- and that may lead to an assortment of problems and costs. Speak with your broker regarding the sale agreement and the status of your loan application
Can You Still Afford Your Home Purchase Loan?
by David Reed
Rates are a lot higher now aren't they? At least in relative terms. Just a few weeks ago mortgage rates were again near historic lows, with a 30-year mortgage flirting with five percent. Today? Closer to six percent. Still much lower than a few years ago, but higher nonetheless. Should you be worried? Of course not. But if you're pushing debt ratios and haven't locked or closed yet, get your loan officer on the phone.
The mortgage rate environment, over the past three years give or take, has been steady. Up a little, down a little. It's one of the main reasons homeownership rates are so high; along with strong home sales. And that's a good thing as it's brought a lot of people into the market who may have otherwise not been able to buy. As rates stay low affordability climbs. But if rates go back up, lots of people find themselves still in the rental category.
It doesn't take much to move a mortgage payment. For instance, you found a house for $200,000 and put 20 percent down, getting a loan for $160,000. At 5.25 percent, your payment would be about $883. Using escrow accounts for taxes and insurance of around $250 and a gross monthly income of $3,600, your housing ratio approaches 31 percent. Not bad, really. Let's also say you have a car payment of $350 which pushes your total debt ratio to 41, which is a house payment ($1,133) plus a car payment ($350) divided by your gross income ($3,600), which equals .41, or 41 percent.
I know of loan programs that have a maximum debt ratio limit of 41. If rates are at 6.00 percent, that pushes your principal and interest payment up to $959. Using the same example, your ratios now go to 43 percent. Not an alarming number, mind you, but if you were on a special loan program that limited ratios to 41 percent, suddenly you're not qualified anymore. Yeah, I know you've got a preapproval letter in your hand saying that you're okay, but unless you locked in your loan that preapproval letter is no good. You'll need to put down more money or buy your rate down to 5.25 percent. Both choices are not so appealing.
Most loan programs don't care much about a two percent change in debt ratio and really mean very little, especially if you're already locked or you're closing at the end of the month. But if you've been preapproved for a mortgage loan and you haven't secured your rate or your closing isn't taking place for several months, it's time to call your loan officer and find out what rising rates can do to your affordability. If you've been approved by an eyelash, call your lender and make sure you're going to be okay in a higher rate environment and if not see what can be done to lock in a rate that fits your approval.
Published: April 30, 2004
New National Credit Bureau Tracks Rental And Utilities Payments
by Kenneth R. Harney
First-time home buyers -- and the Realtors who work with them -- are getting an important new national credit-building resource: The first credit bureau focused solely on compiling credit histories using data that the three dominant national bureaus don't track -- rent, utilities, insurance and other monthly payments.
The new bureau, dubbed PRBC (PayRent, Build Credit), is headquartered in Annapolis, MD and run by a team of risk assessment professionals headed by CEO Michael Nathans. The bureau expects to compile "alternative" credit files on up to 10 million American tenants within the next 60 months.
PRBC is an effort to help low and moderate income, young, minority and immigrant consumers demonstrate creditworthiness, according to Nathans. All of these groups frequently have trouble qualifying for prime-rate mortgages and other credit because their national files tend to be "thin" -- there's not a lot of payment history data on them. They may have minimal or no relationships with traditional banks. They may not have a credit card or charge accounts that show up in their national credit files maintained by Equifax, Experian or Trans Union.
As a result, their credit scores frequently are lower than they actually deserve. Fair Isaac & Co.'s popular FICO credit scoring software cannot even generate a score if a consumer has minimal information on file with the three big bureaus. Yet on-time rent payments -- especially over an extended period of time -- are highly predictive of future payment behavior on a mortgage, according to Fair Isaac officials. The problem, they say, is that nobody is collecting or maintaining much data about rent payments.
PRBC is designed to fill that gap. It allows consumers to register and report their verified payment histories to landlords and other accounts, either by directly entering them online at the website, or by instructing their banks to report payments made through electronic bill-paying services. PRBC has also contracted with PayPal, an online payment service, to report payments made by consumers who choose to use it.
The new bureau is expected to be particularly useful to realty agents and nonprofit groups who work with minority and immigrant populations to promote homeownership. The Harvard Joint Center for Housing Studies estimates that minority and immigrant purchasers -- who often have nontraditional credit histories -- will be at the cutting edge of new home buying during the balance of this decade. Any resource that helps create proof of creditworthiness for these consumers will open the doors to them for home buying -- at market interest rates rather than subprime.
"Our view is that to be considered part of the financial mainstream, you've got to pay your bills on time," said Nathans. "But if (those payments) are not being tracked" by credit bureaus, they can't help consumers demonstrate that they are good credit risks.
"So we are providing a way to do so," said Nathans.
Though it only took in its first consumer registrants in December, PRBC already has begun signing on large mortgage clients who seek to expand their lending to minority and immigrant groups. CitiMortgage, Inc., one of the country's largest-volume mortgage originators, is a charter subscriber. "Many" other large lenders and banks are negotiating contracts to obtain credit reports -- or to supply payment data -- to PRBC, according to Nathans. Subscribers expect to use PRBC's reports as "supplements" to the reports they get from the big three bureaus.
The new credit service is free to consumers, but lenders will have to pay for reports they order on loan applicants. Consumers will have free access to their private files online 24/7, said Nathans. And no data on a consumer will be released to a lender without explicit permission of the consumer.
Published: January 12, 2004
Credit Counseling 'Crisis' Chiseling Consumers
by Broderick Perkins
Overburdened with indebtedness, consumers who seek help from the new generation of credit counseling agencies are putting their trust in a largely unregulated industry rife with the potential for worsening, not improving, consumers' indebtedness problems.
Too often, under-funded credit counseling agencies offer improper advice, deceptive practices, excessive fees and abuse of their non-profit status, according to "Credit Counseling In Crisis: The Impact on Consumers of Funding Cuts, Higher Fees and Aggressive New Market Entrants," the first ever such study of credit counseling agencies. The report is the work of National Consumer Law Center (NCLC) and the Consumer Federation of America (CFA).
The study also says credit counseling agencies have cut back on a component of credit counseling that saves many home owners from bankruptcy -- education -- and that has led more consumers to drop out of counseling and declare bankruptcy.
A large share of consumers in financial trouble are those who've tapped record growth in home equity over the past decade. Things could get worse if they look to some credit counseling agencies for help.
"Aggressive firms masquerading as 'non-profit organizations' are gouging consumers. Deceptive practices and outright scams are on the rise. More consumers are getting bad advice and access to fewer real counseling options. Meanwhile, most state and federal regulators appear to be asleep at the switch," said Deanne Loonin, staff attorney for the NCLC.
The report says the new generation of credit counseling agencies has gained market share and along with it their share of complaints.
A growing number of concerned consumers are specifically checking up on debt consolidation services. The Better Business Bureau said last year, consumer requests for information about them increased by a whopping 162 percent -- up from 81,138 inquiries in 2001 to 212,875 in 2002. That's a bigger percentage jump than any other industry except insurance, the BBB reported.
The credit counseling report said some 9 million consumers have contact with credit counseling agencies each year and the report found numerous incidents of malpractice.
Deceptive and misleading practices. Some agencies don't make consumers' payments to creditors on time, they deceptively claim that fees are voluntary, and they don't adequately disclose fees.
Excessive costs. An industry that offered free services a decade ago, now often charges fees to set up and maintain Debt Management Programs (DMPs) -- sometimes as much as hundreds of dollars just to open an account.
Non-profit status abuse. So-called "non-profit" credit counseling agencies are increasingly performing like profit-making enterprises, aggressively marketing and selling DMPs and related services, maintaining close ties with for-profit firms, reaping revenues as high as $7.3 million a year and paying their executives salaries as high as $462,350 plus $130,000 in benefits.
Offering only debt consolidation. Traditional credit counseling agencies once offered a range of services -- financial and budget counseling, education and DMPs. Newer agencies more often funnel consumers into DMPs, even when they will not benefit. Debt counseling is fast disappearing.
The report says drastic funding cuts to non-profits from major banks and credit card operators and creditors' increasing unwillingness to reduce interest rates for consumers who enter programs are compounding the problems. Stiffer requirements that could come with a proposed national bankruptcy bill making its way through Congress will make matters worse.
"Credit card companies are leaving debt-choked Americans with few options other than bankruptcy," said Travis B. Plunkett, a legislative director with CFA. "It is hypocritical for the credit card industry to demand that Congress give them relief by enacting the bankruptcy bill, while closing off credit counseling as an effective alternative to bankruptcy for many consumers."
The report says the Internal Revenue Service should aggressively enforce non-profit laws, Congress should tightly regulate credit counseling agencies, trade associations should set strong practice standards and enforce them, creditors should increase financial support to bona fide credit counseling agencies and creditors should reverse the trend of reducing concessions for consumers honestly trying to clean up their credit act.
Consumers should beware and heed the seven "red flags" as reasons to reject an agency and look elsewhere for help.
Avoid debt management (consolidation) plans that cost more than $50 to set up and monthly fees higher than $25.
Beware of claims about "voluntary" fees. If voluntary fees are available don't succumb to pressure to pay more than you can afford.
If the telephone pitchman or woman sounds like he or she is reading from a script and aggressively pushing debt "savings" or the possibility of a future "consolidation" loan, hang up.
Employees paid by commission are more likely focusing on their wallets than yours. Ask how counselors are paid.
Any agency offering a debt management plan in 20 minutes or less hasn't spent enough time scrutinizing your finances. Thirty to 90 minutes is more realistic.
Avoid agencies that offer you only a debt management plan without discussing its appropriateness for your situation.
Don't immediately respond to aggressive television ads, Internet advertising, Spam or telemarketing. Get referrals from trusted friends, family members or others, determine which agencies have been subject to complaints and talk to a number of agencies before making a decision.
Additional guidance is available from the BBB's "Debt Negotiators Not the Same as Credit Counseling Agencies," its "Credit Repair Fraud," the NCLC's "NCLC Guide To Surviving Debt" and Nolo.com's "Debt and Bankruptcy" information area online.
Published: April 25, 2003
When It Comes to Bad Credit, There Are No Overnight Fixes
by Lew Sichelman
"If you can't do the time, don't do the crime."
That bit of wisdom is usually offered to the bad guys on television cop shows. But it also applies to rookie home buyers as well. If you don't want to wait months or even years to get into your first house, then don't just keep your nose clean, keep your credit clean, too.
While bogus credit score improvement offers and credit repair firms would like you to believe that fixing up a history full of late and missed payments is a slam-dunk cinch, they are just that, bogus.
"Truth is, rebuilding a credit rating and improving credit scores requires both time and patience," says Paul Richard, the executive director of the Institute of Consumer Financial Education, a San Diego nonprofit.
The ICFE helps consumers improve spending habits, increase savings accumulation and use credit more wisely, in addition to advocating the do-it-yourself approach to fixing credit file mistakes and increasing credit scores.
More people than ever have accumulated high interest debt, according to recent studies, and some have done significant damage to their creditworthiness and credit scores. Without decent credit, it is difficult, if not impossible, to qualify for financing to buy a house, or even a car.
In an effort to turn things around quickly, unscrupulous firms using questionable advertising are preying on people's false hopes, that, for a fee, they can purchase a good credit rating and an improved score. Don't believe them, says Richard.
"A bad credit rating cannot be quickly fixed and anyone who promises they can, is trying to scam your money," the certified credit counselor says.
Four things primarily adversely affect your credit rating and all-important score:
First and foremost, defaulted debts -- either debts unpaid or sent to a collection agency, including credit cards, auto loans, student loans, mortgages and medical bills.
Second is a history of slow pay.
Third, lenders want to know is if all your indebtedness is on credit cards.
The fourth sign that there is a problem is being maxed out or almost maxed out on the credit lines that are available.
A good way to correct a bad credit rating is to reverse the behavior that caused it and then be patient, Richard advises. By paying all your bills on time and keeping debt levels low, your credit record and score will gradually improve.
"It's unlikely all your debt came about overnight, so do not expect a credit rating or score will be improved overnight," the credit advisor says.
Begin the change by sending in your the monthly payments so that they reach the creditor a few days ahead of the due date. Every late payment, even one that is tardy just a day or two late, could be reported to the credit bureaus and become a part of your credit record.
And of course, while you're working to clean up your record, don't take on any new debt. If you become overextended or put yourself deeper into debt, it will be another strike on the credit report and lower your score.
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While millions of folks have been watching real estate maven Donald Trump search for a new apprentice in this season's hot new reality series, a more realistic search took place in Los Angeles recently when a train conductor, waiter and teacher came together to learn what it would take to change the face on depressed inner-city neighborhoods in Southern California.
The unlikely mix, which also included an attorney and civil engineer, attended the highly regarded University of Southern California's Ross Minority Program in Real Estate. Since the program started in 1993, some 300 students have graduated from the intense two-week program that has helped bring millions of dollars in real estate projects to struggling communities in Southern California.
Many members of the current 26-person class, mostly Hispanics and African Americans, will become apprentices, working with mentors they meet during their weekend classes.
The group was part of the first winter class for the Ross program, which is funded by a $1 million grant from real estate finance expert Stan Ross and his wife Marilyn. Ross, who was vice chairman of Ernst & Young before being named chairman of USC's Lusk Center for Real Estate, has advised the biggest names in the business, including The Donald himself when his real estate empire needed restructuring in the early '90s.
There is no other program like this one in the country, but the Lusk Center hopes to take the concept nationwide to teach business professionals the fundamental skills needed to develop affordable housing, retail, mixed-use, offices, and community facilities in underserved communities.
Published: February 25, 2004
Suits By Credit File "Rescorers" Challenge Dominance Of Three Giant Private Bureaus
by Kenneth R. Harney
Home buyers, Realtors and mortgage brokers all have stakes in two major class action lawsuits challenging the dominance of the American credit system by three giant private corporations. The private companies are Experian Information Solutions, Equifax, Inc., and TransUnion, LLC.
The suits -- one filed in federal district court, the other in California Superior Court -- are significant because they seek to preserve the key roles of local, independent credit agencies in correcting erroneous data in consumers' national credit bureau files. Independent credit agencies developed and market "rapid rescoring" services for credit files -- corrections of consumer credit data in the national files and revised FICO scores within 48 to 72 hours. By contrast, consumers who attempt to get the national bureaus to correct their files often find the process takes weeks or months -- too long for most home purchase opportunities or mortgage applications.
The independent agencies charged the national bureaus with predatory pricing of credit report, and antitrust law violations designed to put them out of business. Experian and Equifax spokesmen declined comment on the suits. TransUnion did not respond to multiple requests for comment.
In the federal suit, filed in US District Court in Santa Ana, Calif., 23 independent credit agencies complained that the national bureaus have sought to "place a stranglehold on the consumer credit reporting market." The national bureaus' monopoly power is most evident in the home mortgage market, according to the suit, because they have complete control over the local credit agencies' ability to offer lender clients the mandatory "triple-merged" credit reports using data from all three bureaus.
The independents must buy credit file data from the national bureaus because there are no alternative sources. But the nationals increasingly are pricing their data in a "predatory" manner, according to the suits, charging the independents more on a wholesale basis for credit reports and FICO scores than the bureaus charge small mortgage bankers and brokers for the identical products on a retail basis. Yet those banks and brokers are the independent agencies' main customer base for mortgage credit reports and "rapid rescoring" services. If the independents are forced out of business, say the plaintiffs, home buyers will lose their most important resource for correcting bad data in the national bureaus' files.
Terry Clemans, executive director of the National Credit Reporting Association (NCRA), the trade group representing independents and itself a plaintiff in one suit, said his members are a "safety net that has been built into the home mortgage system to provide the lender and the homebuyer an independent professional with the ability to quickly verify the accuracy of the (national bureaus') data, to correct errors and fill in missing items, and to assure a complete and accurate credit report."
Without intermediaries totally independent of the three national bureaus, Clemans said, "thousands of mortgage applicants will either be denied loans, charged higher rates than their true credit risk, or greatly delayed" in the home buying process.
How bad is the raw information in the three national bureaus' files? A 2002 study of more than 500,000 randomly-selected credit files by the Consumer Federation of America and NCRA, found that:
78 percent of all files were missing at least one revolving credit account in good standing.
One third omitted a mortgage account that had never been paid late.
Two thirds were missing installment accounts that had never been paid late.
43 percent contained conflicting information on whether a credit account had, or had not, been paid on time.
Credit scores on the same consumer varied significantly from bureau to bureau -- often by enough to push home purchase applicants into higher cost loans than they deserved. The score variations were directly attributable to the conflicting or erroneous raw data in the files.
Overall, concluded the study, one in four consumers -- 22 percent or 40 million Americans -- are "at risk of misclassification into the sub-prime, higher priced lending market" because of bad data and omissions in their credit reports.
Published: May 10, 2004
Tips for Reducing Your Homeowners Insurance Costs
by Michele Dawson
With the cost of insuring homes on the rise in recent years, now is a good time to examine your policy and look for ways to save money.
The price tag of insuring homes across the United States rose 6 percent in 2001; a similar increase is expected this year, according to the Insurance Information Institute, a non-profit organization supported by the property and casualty insurance business.
III attributes the increases to the mounting number of catastrophes, the high cost of home repairs, and the emergence of mold claims.
In addition to major catastrophes like Hurricane Andrew and the Northridge earthquake, hundreds of smaller disasters stemming from tropical storms, tornados, wildfires, hail, ice and snow are driving costs up.
III also points out that the cost of home repairs is rising by more than 7 percent a year - three times faster than the rate of inflation.
And the surfacing of mold claims is also boosting costs. In Texas, the number of mold claims increased by 581 percent between the first quarter of 2000 and the first quarter of 2001. Insurer payouts increased 755 percent.
Some states are being hit particularly hard. In December last year, Allstate asked state approval for a 22.3 percent increase for California policyholders. The decision is pending with the state Department of Insurance. Other insurers are seeking increases from 6.9 to 28 percent in California.
So what can you do to help keep your rates reasonable? The III makes the following suggestions:
Shop for the best deal. Get at least three quotes. See if your state department of insurance has any price comparisons available. But don't just look at prices. Evaluate which companies provide the best customer service and are readily available to answer your questions.
Raise your deductible. The higher your deductible, the less premium you'll have to pay. The III says if you raise a $500 deductible to $1000, you may save as much as 25 percent.
Buy your home and automobile policies from the same insurer. Some companies will reduce your premium up to 15 percent if you have at least two policies from them.
Reduce the odds of being affected by a disaster. Make your home more resistant to disasters - you might be able to save by adding storm shutters and shatter-proof glass or reinforcing your roof. If you live in an older home, you should consider modernizing your heating, plumbing and electrical systems to reduce the risks of water and fire damage.
Understand the costs. The cost to rebuild your home is going to be different than what you paid for it. Don't include the cost of the land in deciding how much coverage to purchase.
Secure your home. Some companies offer a modest discount, usually at least 5 percent, for installing smoke detectors, burglar alarms and dead-bolt locks. Some insurers will also offer a discount if you install a sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. First you'll want to research the costs involved, and whether you'd be saving on your premiums.
Inquire about discounts. Ask your company about all potential discounts. For example, some offer discounts to those 55 and older.
Investigate group coverage. You may be able to get a group coverage plan through your employer or a professional or business group. See if it's a better deal than what you have.
Stay put. Many companies offer discounts for longer-term customers - sometimes up to 10 percent if you've had your policy through the company for more than six years. Be sure to compare prices against other companies once in awhile.
Review your policy and the value of your possessions. If you sold that pair of diamond earrings or other valuable for which you have a floater policy - additional coverage for items not covered by a standard homeowners policy - be sure you're not paying for the extra insurance.
Finally, when you're ready to buy a new home, be sure you factor in the cost of homeowners insurance. The cost of your premium will depend on how much it would cost to rebuild, and whether the house is likely to succumb to a disaster or fire.
Also, flood and earthquake damage are not covered by a standard policy. If you need flood insurance, which costs about $400 per year, you'll want to contact the Federal Emergency Management Agency. Most insurance companies offer a separate earthquake policy.
Published: February 18, 2002
What to Do If You Can't Get Homeowners Insurance
by Michele Dawson
Purchasing and keeping your homeowners insurance policy is increasingly difficult these days. Premium costs are escalating at double-digit rates, many companies' renewal policies are tightening, some companies aren't even selling new policies in some states, and if you live in a wildfire- or hurricane-prone area, or have a history of numerous claims, getting insurance is sometimes a complicated - and expensive -matter.
And that can make the whole home-buying process more difficult, especially if you're buying your first house.
One of the biggest triggers leading to these new restrictions and rate increases is the emergence of mold lawsuits and the direction jury verdicts and judicial interpretations are taking, according to the Insurance Information Institute.
While damage from mold is specifically excluded from the standard homeowners policy, it is covered if it is the result of a covered peril, like a pipe that bursts causing water damage.
But now insurers say that if they are going to be asked, by juries and court rulings, to pay for what isn't covered, that consumers will suffer.
"Potential rate increases needed to cover the cost of mold claims threaten to make home insurance coverage unaffordable for some and unavailable for others. A crisis in the price and availability of homeowners coverage could have far-reaching effects on home sales, and, as a result, the economy as a whole," the III says in a topic paper on the mold issue.
Allstate has sought rate increases averaging almost 20 percent in 23 states. And State Farm, the largest home insurer in the country, has stopped writing new policies in a handful of states, including Texas, California, and Louisiana.
Another factor that may keep you from getting a homeowners insurance policy is a bad or borderline credit history.
Through the years insurers have found a person's credit information to be a highly accurate predictor of risk, according to the Insurance Information Institute, a non-profit organization supported by the property and casualty insurance business.
While insurers look at the same factors as lenders, they weigh each factor differently.
"The biggest difference is that insurance risk scores look for stability, but credit risk scores look for a reliable pattern," Craig Watts, a spokesperson for Fair, Isaac, and Co., whose insurance risk scores are used by about 300 insurers nationwide, told www.insure.com.
If you suspect your credit history is the reason you are denied insurance, get a copy of your credit report and make sure it is accurate. Better yet, review your credit reports before you apply for insurance or a loan.
Or perhaps your home, or one you are thinking about buying, is considered high-risk, meaning it might be prone to hurricanes, windstorms, tornadoes, or hail; is in a high-crime area; or has old plumbing, electrical or heating systems that present a higher chance of property damage.
If two or more insurers won't issue you a homeowners policy, there are options. The III suggests:
That if you are buying a new home to ask your real estate agent, lender, or builder for names of companies that write in the area.
That if you are purchasing an existing house to ask the previous owners who insured the house.
Ask your current insurance agent or company representative for assistance. If the problem does not stem from your home's location, but its condition, find out what you can do to remedy the problems and bring your home up to insurable condition.
Contact the Institute for Business and Home Safety for information on natural hazards, community land use and ways you can protect your property from damage. It can be reached at www.ibhs.org.
Talk to your neighbors. Find out what through which company they are insured. Talk to their agents about specific risks in your neighborhood.
Call your state insurance department. Usually it can provide you with insurers in your area.
You may have to get insured through a state-run risk pool, operated by 29 states and the District of Columbia.
You can buy from an agency company that sells through agents, or a direct writer company, in which agents represent several insurers. The most important thing factors are the company's reputation for service, its financial stability, and the coverage offered.
If you are still unable to get insurance, find out if your state has a plan known as shared market. FAIR Plans (Fair Access to Insurance Requirements) are insurance pools that sell property insurance to those who can't get it in the standard market.
FAIR Plans can cost more and may provide less coverage than a typical policy, but they offer protection that you would not have otherwise. About 12 states have some sort of a homeowners policy, including liability. In California the plan covers brush fires, and in Georgia and New York they provide wind and hail coverage for some coastal communities.
And in seven Atlantic and Gulf states, there is an equivalent program - Beach and Windstorm Plans - that provide coverage against hurricanes and windstorms.
Published: August 12, 2002
Buying? Consider Insurance Implications
by Michele Dawson
With the chaotic spring home-buying season in full gear, would-be buyers are getting pre-approved for mortgages, researching school districts, and looking at houses. But one thing that should be added to the to-do list is considering the insurance implications of buying a specific house.
Home sales so far this year have been strong, and experts expect a robust pace to continue this year.
Existing single-family home sales rose strongly in March to the second-highest level on record, according to the National Association of Realtors.
Existing-home sales increased 5.7 percent to a seasonally adjusted annual rate of 6.48 million units in March from an upwardly revised pace of 6.13 million units in February. March's sales activity was 12.7 percent above the 5.75-million unit level in March 2003; the record is 6.68 million in September 2003.
"Although interest rates are rising modestly, an improving job market is creating a favorable backdrop for home sales, but at a somewhat slower pace in the months ahead," said David Lereah, NAR's chief economist.
When consumers are house hunting, the Insurance Information Institute (III) recommends keeping insurance issues at the forefront of their buying decisions.
"In the frenzied excitement of buying a home, it is important that consumers ask a number of key questions about securing financial protection for their most valuable asset," said Jeanne M. Salvatore, vice president, consumer affairs at the III.
For example, if the house you're eyeing is located in a flood zone, you'll need a separate flood insurance policy, which you'll need to budget a few hundred extra dollars for.
The III says you should also get a copy of the house's claim loss history, which comes in the form of a CLUE report from ChoicePoint or an A-plus report from the Insurance Services Office.
"Getting a copy of a home's loss history provides powerful information to a potential buyer," said Salvatore. "These reports provide information on the number and types of homeowner insurance claims filed by the home's owner going back five years."
If the house had water claims, that would be a red flag -- problems that should be remedied before you buy the house. Conversely, you can also pick up reassurances about the house you're eyeing, Salvatore said. For example, if there was significant wind damage that required roof replacement, you'd be pleased to know you have a new roof.
The III says some of the factors that will influence your insurance include the house location, the type of construction, and its condition. You should also consider:
How old the house is. Older homes tend to have features -- plaster walls, ceiling moldings and wooden floors -- that are more expensive to replace and may ultimately raise the price of your insurance.
Plumbing, heating and electrical. The older the systems, the more likely fire or water damage will occur. If recent upgrades have been made, it will be easier to get insurance.
Quality and closeness of fire department. Your insurance premiums will typically be lower if you live near a fire department with a top rating that staffs firefighters full-time.
Disaster-resistance. If the house is built with products that stand up to disasters -- like hail-resistant roofs and windstorm shutters -- it could cost you less to insure.
Location. You always hear location is key in real estate. It's also important in determining your insurance premium. It could cost you more if you leave near the coast or a river or in a dense, wildfire area. If you live in an earthquake-prone area, it will mean getting a separate policy, as is the case with flooding.
Published: May 10, 2004
Lighthouse Point, Florida Beacon For Home Sales
by Blanche Evans
Like other areas of Florida, Lighthouse Point is in a strong seller's market, say local Realtors.
"Florida real estate is booming! The average single family home is appreciating approximately 18 percent per year," says Realtor Maria Galligan. "Broward County is almost totally built out with almost no more vacant land for builders to develop. The trend is moving east and old homes are being either torn down or majorly renovated. Developers are very active in high-rise condos and townhouses. The feeling is that this trend is going to continue for quite some time and the costs will keep rising. Investors are buying pre-construction and making a tidy profit at time of completion when they re-sell."
"The real estate market in Lighthouse Point and the surrounding area has been "red hot" for the past six months," say Realtors Marilyn Wechsler and Allen Rosenthal. "The result is a decrease in available inventory. Whether you are interested in buying or selling, now may be the best time to call for assistance with your plans. It's anybody's guess how long the cost of borrowing will remain affordable or low."
Suggests Realtor Karen Dove, "The intercostal and Hillsboro Mile and the inlet are to the east, Deerfield Beach and The Cove are to the north, and Pompano Beach and Fort Lauderdale to the south. Wonderful waterways wind through this boating community, many new high-end homes offer easy access to the sea for large deepwater yachts; upscale dry lot homes enjoy the lifestyle and breezes off the ocean.
"Safe and clean, and minutes to all the amenities you could want or need, Lighthouse Point is a most unique upscale community," says Dove. "There's condos sitting on the intercostal and the Hillsboro inlet where the Lighthouse points the to the sea. The nearby communities of Las Olas, Fort Lauderdale, Boca Raton and Delray make for easy access to fine dining, the very best of shopping and the arts. The ease of ocean cruising from this town brings new boaters and residents here in droves.
Dove advises, "For the serious boater, there are a wide choice of priced properties, the land-lubber dry lot homes run considerably less but still afford you this area's lifestyle. Florida draws folks from all over the world, the international mix of the cultures can be found in the diversified dining and architecture found from years past and now reflected in homes and communities being built. There are abundant choices of both new and custom construction in LHPT. Feel free to come, play and live in one of the most desirable areas in South Florida."
Published: May 10, 2004
Electrical Check-Up Can Payoff
by Lew Sichelman
The notion that the house should be inspected by an independent third party is well ingrained in the home buyer psyche. After all, upwards of 90 percent of all buyers hire someone to give the house the once-over. But a separate and far more comprehensive electrical inspection?
Yes, says Electrical Safety Foundation International. Absolutely!
Now that's something you might expect a group funded by electrical manufacturers and distributors to say. But ESFI is a nonprofit dedicated exclusively to promoting electrical safety, and independent testing labs, utilities, safety and consumer groups and trade and labor associations also are members. Moreover, it does not engage in lobbying of any sort.
ESFI's sole purpose is to help reduce property damage, personal injury and death caused by electrical accidents. And it recommends full-blown electrical inspections for any house that:
Is more than 40 years old.
Has had a major renovation or major appliance added and is more than 10 years old.
Is changing hands from one owner to the next.
Most buyers realize the need to hire inspectors to examine the houses they have under contract for structural defects as well as problems with the plumbing, electrical and mechanical systems. And if their clients don't know any better, most agents will recommend an inspection, even if it is only to protect their own butts from liability.
But these are surface inspections. The ESFI wants you to make a comprehensive check to make sure the electrical system is in good working order. This means checking for everything from loose-fitting outlets which can overheat and lead to a fire to circuit breakers and fuse boxes to be certain they are not corroded from water damage.
Why be so careful? Or particular? Safety is the obvious answer. According to the Consumer Products Safety Commission, there are more than 165,000 electrical-related home fires in any given year. And on average, they take 900 lives, injure nearly 7,000 people and cause $1.7 billion in property damage.
But another factor to consider is the insurability of the property you are buying. And without hazard insurance, you can't get financing.
I've never heard of an insurance carrier requiring a buyer to have an electrical inspection. But then, I've never purchase a 40-year-old house either. Or one that has been renovated.
But insurers say that at some point after they've written the original policy, they can -- and often do -- ask for an electrical inspection to ensure the condition of the "risk," or the house, has not changed.
"The big issue today in the tight homeowner and resident property insurance marketplace is the need for property owners to be proactive in the upgrading of their old electrical systems to bring their properties into code compliance," says Chuck Worcester, an independent insurance agent with the Hometown Insurance Agency in Milford, N.H.
"We find time and time again we are unable to place what appears to be a well-maintained home or property in the standard marketplace because of outdated electrical systems in the property," Worcester says. "If consumers want to take advantage of the best price and best choice for their future insurance needs, they need to do their part in minimizing the manageable hazards in their properties."
According to a recent study on behalf of the Independent Insurance Agents & Brokers of America, nearly one in four owners don't practice good electrical hygiene. They never check for frayed or overheated cords, overloaded outlets or circuits, or even for light bulbs that are the wrong wattage.
"While it is encouraging that the majority of homeowners are checking for electrical hazards (at least once a month), it is still extremely troubling that more than 18 million do not realize the importance of electrical safety when it comes to protecting their loves ones and property," says Madelyn Flannagan, the vice president of education and research at the IIABA.
Even if you are concerned about preventative safety, the person from whom you are buying the house may not have been so careful. For example, the IIABA study found that only slightly more than a quarter of all owners change the batteries on their smoke detectors at the recommended frequency, or twice a year. Eight percent never change their smoke alarm batteries, and five percent don't even have a smoke alarm. And in the exuberance of buying that home, or the complexity of the transaction, that little -- but extremely important -- detail can easily be lost.
According to the National Fire Prevention Association, more than half the deaths resulting from fires occur in the five percent of the houses without smoke alarms. And in 25 percent of the reported home fires, NFPA says the alarms failed to operate.
"There is no question that smoke alarms save lives," says Michael Clendenin, executive director of the electrical safety foundation. "However, the alarms won't have a chance to work if they are not properly maintained." But even if you never experience such a tragedy, forking over some extra cash for an electrical inspection could play a key role in your ability to obtain and maintain proper insurance coverage.
"It is critical that homeowners understand that the rates and availability of homeowners insurance are dependent upon homes being well-maintained," says Flannagan of the independent agents group. "Preventative upkeep could make your home a much more acceptable risk to most insurance carriers."
Published: May 12, 2004
HOA Manager Mentoring
by Richard Thompson
A professional homeowner association manager serves in many capacities: rule enforcer, money collector, maintenance supervisor, newsletter editor, social chairman and on and on. One of the most important functions is as mentor to the Board. Mentoring provides an informed and objective perspective that is critical to Board decision making.
Much manager mentoring goes on at Board Meetings since that is where decisions are made. Since Board decisions can have sweeping implications, having a manager's informed input can make all the difference in the outcome. By the same token, the Board needs to seek and hear what the manager has to say. To this end, the manager should jump in where appropriate to assist the Board in coming to reasonable conclusions.
Managers have the benefit of experience and perspective. That experience is grounded in working knowledge of the governing documents, applicable state statutes and good business practices. Both statutes and documents should be kept on hand with important sections highlighted. Good business practices for HOAs include fiduciary duty, clear communications, long-range planning, financial stewardship, avoiding conflict of interest and seeking wise counsel for informed decision. In these areas, the manager's role is key.
Here are some specific areas where the manager should mentor the Board:
Education. Volunteer Boards typically don't devote a lot of time to getting educated. They tend to be issue oriented, seeking answers as needed. But there are fundamentals that every Board needs to understand: How to run a meeting, how to build a budget, how to deal with conflict, how to run a successful renovation project and how to make rules. Understanding the principles behind these issues will streamline business. The manager should educate the Board and promote educational resources when available. It will benefit both the HOA and the manager's ability to get work accomplished. The better the Board understands what the manager does, the less time the Board will spend micromanaging the manager.
Avoiding Legal Quagmires. The manager can be indispensable in steering the Board away from legal traps caused by inequitable rules and inconsistent enforcement, poor collection policies, disability access issues and inadequate maintenance planning. The Board can attract litigation by both being overly aggressive and too passive. The manager knows when that risk is likely.
Informed Decisions. Boards meet infrequently and it's common for directors to show up ill prepared for decision making even when meeting information packets have been provided in advance. Since decisions are called for, directors will make them even when they aren't familiar with the issues. It's important that the manager review the issues and make specific recommendations rather than let the Board meander to some conclusion. While the Board may come to a different conclusion than the manager, the recommendation should be the starting point since the manager has thought long about what would work best. Having a recommendation also reduces the time spent talking about uncomplicated or straight forward issues.
Pointing Out Conflict of Interest. Conflict of interest is not always easy to detect by those guilty of it. In HOAs, it usually starts innocently enough as a way to save the HOA money or time by hiring a director's nephew to mow the lawn, for example, or paying a director to oversee a renovation project. It seems logical at the time but sets up the Board for accusations of self dealing. It's the manager's job to call a spade a spade and point the Board to alternatives.
Defusing Personality Conflicts. Personality clashes are not uncommon on an HOA Board. The manager can see the ones that are interfering with HOA business and discreetly counsel the offenders. In some cases, a director should be encouraged to step down from the Board if continuing conflict compromises the ability to perform the duties.
Keeping the Meetings on Track. Unfocused and lengthy Board meetings are one of the main reasons good volunteers don't serve as directors. The manager can help keep the meeting productive and short by tracking the agenda, pressing for decisions and pointing out when the discussion is off topic. Manager's recommendations are invaluable to reaching decisions and keeping the meeting moving.
Mentoring the Board is a high and worthy calling. A good mentor works from the sidelines coaching the team and doesn't lecture, talk down or be heavy handed. Instead of pushing, the good mentor encourages better performance allowing the Board to take credit for the good results. Success encourages more success. What's good for the HOA Board is good for the manager.
Published: May 12, 2004
Home Inspections In Hot Markets
by Broderick Perkins
Don't let the stiff competition in hot seller's markets this spring persuade you to forego a home inspection on a home you want to buy.
As with any spring crop of seller's markets, this year's comes with perennial "as-is" listings and others that prompt the buyer to make an offer without the contingency of a home inspection.
Don't do it.
"How do you know what the 'as-is' is if you don't have the home inspected?" asked Dane Hahn, broker owner of Exit 11 Real Estate in Stratham NH.
With the buyer tagging along, a licensed and/or trade group-certified home inspector gives a property the once over, inspecting systems, structures and components -- that are visually accessible -- to identify material defects, conditions that may significantly affect the value, desirability, habitability or safety of the home.
A narrative report -- rather than or in addition to a checklist -- describes the inspector's findings and not only points out defects, but gives the potential buyer the opportunity to more intimately know the home, learn how to operate systems and schedule future maintenance. Inspection finds can also become negotiating tools.
"The real reason to get an inspection is that the average citizen is not an expert. From a cosmetic standpoint he or she may be satisfied with the carpet, but what about the wiring? Does the furnace need to be replaced? These are not things the average buyer would have any sense of. The discovery is what you are paying for," said Hahn.
There are also some liability issues.
Wise sellers obtain home inspections to provide evidence about what they know about the condition of their home. Not disclosing known conditions that can affect the value of salability of a home can be grounds for legal action in many states.
"One would hope that credible agents will represent sellers and tell them that it's a good idea for sellers to provide home inspections," said "dirt lawyer" David Hofmann, counsel with Hoge, Fenton, Jones and Appel in San Jose, CA.
"The seller's risk is if the buyer discovers something later, they may say the seller knew or should have known and can go after a suit for seller disclosures," Hofmann added.
Hofmann says that doesn't preclude the buyer from obtaining his or her own general home inspection, as well as additional inspections. Termite and roof inspections are often mandated by law. Inspections by structural engineers to determine a home's seismic and wind storm resistance may also be necessary in areas where those conditions exist.
"I think buyers should get as many inspections as they possibly can. That leads them to being fully aware of conditions. People so concerned about getting a property tend to over look things in their anxiety over getting a home, but then they close and face the reality of complications in the property. An offer to buy 'as-is,' with no inspection, no contingencies and to close as soon as possible is very risky business for agents and buyers," said Hofmann.
Some argue real estate agents who suggest buyers forego home inspections are not living up to their fiduciary responsibilities to best represent the buyer.
"Any Realtor who doesn't recommend the buyer get a home inspection will be taking on liability he or she doesn't want. If you bought a house and, a year after you bought it, find $10,000 worth of repairs, you'd be hearing that echo of the Realtor saying 'If you really want this house you don't want to get an inspector,'" said Hahn.
Perhaps the only time a buyer may forego initiating a home inspection is when he or she accepts the seller's home inspection, but then only within certain guidelines, advises Jerry McCarthy of San Mateo, CA-based Building Systems Inspection and Analysis.
McCarthy, spokesman for the California Real Estate Inspection Association, says buyers can sometimes pay a reduced fee to have the seller's inspector virtually retrace his steps by going over everything in the original report.
"Have a meeting with the inspector and go over the report. Pay a reduced fee, the inspector will give you a report in your name, you have someone you have met. This works very effectively. If it's an older house, tell the seller you want the guy to come back out and go over the report and have a personal tour" with the inspector said McCarthy.
He added, "But there are two schools of thought. Get my own report and pay the full price and I have two reports. That way I have a better shot at feeling I know the home," McCarthy said.
Published: May 12, 2004
Rent Backs Can Benefit Or Bite Seller
by M. Anthony Carr
Various scenarios can force sellers into a rent-back situation. This is when the homeowner sells the property but does not move right away and strikes a rental agreement with the new owner to stay in the property for a designated period of time.
A rent-back can provide several benefits for both the buyer and the seller. There are various reasons for a rent-back which is usually requested by the seller:
Sellers want to finish out the school term for their children before moving out of the house.
A new job may not open in time for the seller to move to a new location until several weeks after the planned closing.
Construction on a new home may not be complete before settlement.
The seller may still need to find their home of choice in a resale property.
For the buyer, a rent-back can have several benefits as well. In general, if a seller is asking for a rent-back, this is a major concession. Fair market rent is not really viable in this scenario. As the new owner, try to get a little more than the going rent for your neighborhood. Short-term rentals are much more expensive than year-long rentals -- your lease should reflect that difference. The seller should expect to pay a couple hundred dollars extra per month for delaying the buyer moving in and for the benefit of avoiding temporary housing elsewhere. With an inflated rental fee, the buyer/new owner could make a pretty good profit for the length of time the seller/now renter is in the property.
Some loan programs will not let the buyer settle without taking possession of the property, so check with your loan officer first before agreeing to this type of arrangement. Since it's a rental agreement, don't forget to cover several issues you would cover in a regular rental: condition, rental amount (possibly per day), deposits, condition of property, etc.
Now this is the time when a rent-back agreement can turn on both the buyer and seller. It can get especially sticky if the sale was in an as-is condition basis -- the question may arise, "As-is when?" When the house was sold or when the old sellers are moving out? Get these ironed out and written in an agreement before moving forward with a post-sale, occupancy, rent-back agreement. There's nothing like damaged property from a "renter" to sour an otherwise pleasant transaction.
Even if you've signed a property disclaimer form (meaning that the seller doesn't give any warranty as to the condition of the property) if the buyer can prove that something in the house was in working order or not damaged when they bought the house, then the old owner may end up paying for repairs out of his or her own back pocket. The buyer should conduct a thorough -- fine-tooth comb -- walk-through with the seller and be particular about any damage you see. Note any spots on the carpet -- lift rugs and furniture, look at how many holes are in the walls from pictures, inspect windows for cracks and breaks, and request a professional cleaning on the way out.
Some buyers don't like the idea of someone living in "their" house after they've just bought it. In other terms, it's the same as if you bought a new car but then the dealer wanted to drive around in it for a couple of months before delivering it to you. Consider if that's the type of arrangement you want before signing the post-sale occupancy agreement.
If there is damage afterward, then the buyer and seller are going to have to work it out. You may want to have an arbitrator predesignated in the rental agreement so that you both already know what to do before this type of situation arises. After all, the original intent is to sell the property and exchange ownership -- not create a rental where common wear and tear are expected.
Published: May 14, 2004
Sunday, May 09, 2004
Top Insurers Pulling The Plug On Homebuyers Using Low-Downpayment "NINA" Mortgages
by Kenneth R. Harney
Two of the country's biggest private mortgage insurers are yanking the plug on a popular way to buy or refinance a home without disclosing virtually anything to the lender -- so-called NINA loans.
NINA is the acronym for No Income No Asset verification mortgages, which allow applicants to provide no proof of income, bank accounts or other financial assets. Lenders do get applicants' Social Security numbers, check their credit files, and obtain an appraisal on the property. But that's pretty much all they see.
Frequently used by high income business owners and other professionals who don't want anyone rooting around in their tax returns or financial records, NINAs have also become a hot product for home buyers with small downpayments and even spotty credit. Rates tend to be high for all that privacy -- often two to three points higher than full-documentation loans of comparable size.
For several years, Mortgage Guaranty Insurance Corp. (MGIC) and United Guaranty Residential Insurance Corp (UGC) have provided mortgage insurance on low-downpayment NINAs, where the applicant's equity stake is below 20 percent. But in a major switch that is likely to shut down part of the no-verification market overnight, both insurers confirmed last week that they are withdrawing from the NINA niche.
The reason: NINAs, which some mortgage and realty brokers have dubbed "liar loans," too often turn out to be just that. The people signing up for them too often cannot really afford the house, and they quickly fall behind on their payments. Delinquencies on NINAs at both companies average five to six times those of full-doc loans of comparable size.
"It may be stating the obvious," said Curt Culver, president and CEO of MGIC, "but you can't document what you don't have, and in many instances (NINAs) are allowing borrowers to do just that. Why wouldn't a borrower choose to fully document their income to assure that they get the lowest rate possible?"
The answer, says Culver, is that they might not qualify for the mortgage -- or the house -- if they really had to come clean and document their assets and earnings.
United Guaranty's Kurt Smith, vice president for risk management, said "we have informed our customers ... that it is our intention to no longer insure (NINAs) in the near future."
A United Guaranty postmortem investigation of delinquent NINAs found that in 90 percent of the cases that went bad, the mortgage or real estate professionals working with the home buyers knew that they couldn't really afford the house. Sometimes they simply were hoping things would work out somehow for the client. In other cases, the entire loan application was fraudulent or based on identity theft.
United Guaranty provided internal case-by-case investigative summaries to Realty Times. In one case, a real estate rehabilitation company colluded with loan brokers to persuade home buyers to purchase renovated properties priced above what they could afford. Mortgage documents indicated that the home buyers made a downpayment that in fact was fictitious.
Liz Urquart, a United Guaranty spokeswoman, said that in many cases home buyers themselves are the victims of high-ratio NINAs. In other cases, loan brokers and realty professionals opted for NINAs as a means to close commissionable transactions that otherwise couldn't be closed.
With the cessation of insurance availability, abusive financing schemes like these should be tougher to pull off, if not impossible.
Published: May 3, 2004
The Best Place To Spend Money Is The Kitchen
by Al Heavens
A sentiment on the wall of a friend's kitchen sums up the importance of this part of the house to the typical consumer:
"No matter where I serve my guests, it seems they like my kitchen best."
Whether you are building or remodeling, it seems there is no better place to spend money than on the kitchen.
Some call it the "Grand Central Station of family life."
The kitchen has come a long way from the days when our grandmothers isolated themselves there for hours preparing meals from scratch, but consumers continue to demand improvement in efficiency and style.
Instead of isolation, cooks want to be placed in the middle of family activities so they can keep tabs on what everyone is doing. Kitchens these days are almost always open to the family room and often have wide views of the outside.
They also are getting larger, because cooking has become a social activity, with more than one preparation area and more than one kitchen.
People who do a lot of entertaining want a kitchen with large open areas that allow guests enough room to mingle.
Kitchens must also have style and architectural interest -- high ceilings and decorative beams and moldings. The ceilings accommodate large, unusual windows and taller, more ornate cabinetry.
If you already live in a house and want a larger kitchen, one option is to turn a living room into a formal dining room and incorporate the space from the old dining room into the kitchen.
To cooking areas that once might not have been much more than a stove and exhaust hood with a microwave above them, today we bring in more detail to enhance the area, making it one of the main focal points of the kitchen. What do kitchens look like today?
Black is back, as are reds, blues and celery greens.
Outdoors materials, including stucco, are being used indoors.
Desks are appearing in kitchens at counter height.
Sinks are getting bigger, deeper and more plentiful. Two separate sinks are replacing the double bowl model.
The sinks are becoming an opportunity for art, a statement of personalization.
Although stainless steel is by far the number-one material used, designers are working with quite a few others. One of the beauties of working with solid-surface materials for a sink -- including stone, which can be finished and sealed so it will not stain -- is that you can fabricate and shape it, creating an interesting drainboard as part of the piece.
Sinks can be art, but they also have a function, and that observation applies to faucets, as well. Several major manufacturers this year have introduced a rubbed bronze look that is almost black but has more depth than wrought iron.
Satin nickel is another popular finish.
Faucets include the pot-filler, which is put in a wall near the stove and allows you to fill large, deep pots without having to lift them. It may or may not be near the sink.
For appliances, stainless steel remains number one.
The professional series and look is particularly important at the high end, and it wants to be mimicked at the lower price points.
People are going for a range and separate wall oven, with the oven at a convenient height.
In refrigeration, the watchword is flexibility, with new models from manufacturers either very small (drawer-size) or very large, with beautiful designs and finishes, and available from several sources instead of just one.
Prices are being brought down from very high-end.
It's not just $4,000-and-up for integrated refrigerators. You can get them for less, because there are a variety of sizes and designs.
Different finishes that will not show fingerprints are being used, such as graphite and meteorite.
Appliances also seem to be about the small details. Storage is being made convenient and flexible, including split drawers on a bottom freezer.
More and more, microwaves are combination appliances that also feature toasters and coffeemakers. Dishwashers have become oversize -- or smaller, depending on your preference.
And let us not forget about speed cooking, which allows you to roast a chicken in 20 minutes and eat steaks that taste as if you made them on an outdoor grill.
Granite is the number-one choice for countertops. Alternatives include metal (if the appliances are not metal) and concrete.
The trend in cabinets is warmer, darker, richer, and oak is coming back.
Published: May 6, 2004
Thursday, April 15, 2004
Expanding Home Ownership Remains A Challenge
by Broderick Perkins
Americans believe home ownership provides the best long-term investment potential, but several obstacles are in the way of expanding that potential to underserved markets.
Fannie Mae's 2003 National Housing Survey released yesterday found that while 84 percent of Americans say a major reason to own a home is as a good long-term investment, only 39 percent said that an IRA or a 401k is a safe investment with a lot of potential.
In other investment categories, only 26 percent said that a savings or money market account was a safe investment with potential; 20 percent said the same about mutual funds and 12 percent pointed to stocks as a safe-long term investment with potential.
Also, 87 percent of those surveyed said their homes increased in value since they first purchased them, and 76 percent reported the increase was more than they expected.
Washington, D.C.-based research firm Penn, Schoen & Berland Associates conducted the housing survey of 715 adults, age 18 years or older, between Dec. 17, 2003 and Jan. 6, 2004.
Unfortunately, the lack of adequate general home buying knowledge, income, credit information and confidence is preventing some Americans from enjoying what could be their most valuable asset.
The survey found:
There's a significant difference between the general public and ethnic minority communities in their levels of accurate information about the home-buying process.
Sixty-five percent of English-language Hispanics, 60 percent of African Americans and only 27 percent of Spanish-language Hispanics know that a mortgage does not require a 30-year commitment, compared to 74 percent of all respondents.
Sixty-four percent of English-language Hispanics, 57 percent of African Americans and only 22 percent of Spanish-language Hispanics know that it's not necessary to have a perfect credit rating to qualify for a mortgage, compared to 73 percent of all respondents.
An affordability gap divides renters, lower-income Americans, and those who tried to buy but did not, from homeowners and the general public.
Thirty-five percent of all renters have tried to become homeowners but failed. Affordability was the most common reason cited.
Many believe their credit histories will make it difficult for them to secure a mortgage.
Credit concerns, after affordability issues, are the second leading reason (39 percent) renters overall offer for having not bought a home. The same is true for 49 percent of English-language Hispanics, 46 percent of Spanish-language Hispanics, and 42 percent of African Americans who cited credit concerns as the primary reason they have not yet bought a home.
Gaps in general home-buying information, affordability and credit information combine to reduce home-buying confidence in some Americans, the study found.
English-language Hispanics (3.8 on a confidence scale of 1 to 5) were nearly as confident as the general public (3.9) that they could complete the different home-buying steps, but African Americans (3.6) and Spanish-language Hispanics (3.4) were less confident.
African Americans were particularly less confident in their ability to complete the home-buying process without experiencing discrimination (3.4 compared to 4.0 for the general public), while Spanish-language Hispanics were least confident about obtaining a mortgage (3.2 compared to 3.9 for the general public) and finding a real estate professional (3.1 compared to 3.5).
Overall, 49 percent of all Americans think it is harder to buy a home than it was in their parents' generation compared to 46 percent who think it is easier. Sixty-two percent of renters, 59 percent of those making under $35,000 a year, and 53 percent of English-language Hispanics believe it is more difficult, but 56 percent of Spanish-language Hispanics believe it is easier.
Fifty percent of African Americans said it is easier today and 46 percent said it is harder.
Published: April 15, 2004
Friday, January 30, 2004
Pressed Board Siding Solutions
by Bill Ball
Dear Bill,
Can a home inspector make an assumption on his report without verifying the facts? My parents are selling their home and the buyers hired a home inspector to inspect the property. They have pressed board siding on their house and the inspector, without even knowing the brand, stated in his report that the manufacturer of the siding on the house was involved in a class action lawsuit.
The manufacturer, it turns out, is "Champion" and after thoroughly researching this, I have found that they are NOT one of the many companies that are involved. It is my speculation that the inspector has assumed that just because there is pressed board siding on the house that there is a lawsuit against the siding manufacturer.
What is your advice on this matter?
Jason
Dear Jason:
Although your home inspector was wrong about the manufacturer's involvement in a class action lawsuit, at least so far, he was right to alert you to this type of siding. Over the past 20 years, pressed board sidings from many manufacturers have a history of failure.
"Pressed Board Siding" is any type of composite material that is not solid wood milled directly from a tree trunk. All of the manufacturers of composite products make claims about durability and life expectancy, which, in most cases, have proven untrue, if not outright fraudulent.
Exotic Material
The protocol for home inspectors is to alert the home buyer to any "exotic" materials they identify in a home. Exotic materials include components like plastic water supply pipes, high-efficiency furnaces, and pressed board siding -- along with a dozen others.
A material identified as "exotic" means that it has not been in use for more than 25 years and the only estimate of its durability are the manufacturer's claims.1
The Problem
Incredible as it sounds, the problem with pressed board siding is almost always moisture penetration of the finished surface of the siding which causes swelling, buckling, [photo] or disintegration [photo] of the siding.
It would seem logical, wouldn't it, that a product intended for exterior siding would be good at repelling water? But pressed board materials are not! Anytime the bottom edge or an end-cut are not sealed with paint or caulking, [photo] the siding soaks up the water from normal weathering and begins to swell, then deteriorate.
If you own a home with composite siding, it is critical that it is painted regularly to seal it, and that all joints or unions are very well caulked. If this maintenance is not completed, it is likely that the siding will have to be replaced in 5-10 years [photo].
1 Source: The Uniform Home Inspector's Code Book™
Published: January 29, 2004
Tips for Remodeling Your Kitchen on a Tight Budget
by Michele Dawson
As you choose new cabinets, pore over your countertop options, and find yourself floored by the number of flooring choices, your kitchen remodeling project is quickly adding up. But there are ways to keep spending to a minimum.
Kitchen remodels are among the most popular - and costly. The average cost of a major remodel pushes $40,000, according to Remodeling magazine's 2001 Cost. Vs. Value Report.
Kitchens are more susceptible to changes in taste than other rooms. Wood was popular, then white was in, and now stainless steel is all the rage. But among real estate agents, the report says, the consensus is that a fully remodeled kitchen is a strong selling point. San Francisco remodeler and real estate broker Neil Gibbs does not hesitate when asked what buyers there desire most: a new, top-of-the-line kitchen.
"Young home buyers with money want professional-quality kitchens, even if they don't use them," Gibbs points out. "It's the driving thing in the market here, by far."
While the report points out that about 80 percent of the cost of a major kitchen remodel will be recouped when it comes time to sell, you still need to pay for the project up front, which means you may find yourself trying to stretch every dollar as you plan for your remodel.
For starters, be sure the contractor you hire is professional. Always get references, and get a detailed contract that spells out every detail and step of the remodeling job.
The National Association of the Remodeling Industry offers some additional tips:
Try to keep windows in place. Moving windows gets expensive.
Think paint. Changing the color of a room is one of the most dramatic - and cost-efficient - ways to change your room's appearance.
Try to stick with your existing appliances. This can save up to $5,000. If you do opt for new appliances, choose ones that are energy-efficient: this will save you money on your utility bills, and will be an asset when it comes time to sell your home.
Keep fixtures, appliances, and utilities in place so you don't have to change plumbing, gas, and electrical outlets.
Go with neutral colors. Your new fixtures, appliances, and laminates will be less expensive if you go with a white or almond sink and a neutral laminate. Plus, they won't come and go as a passing trend.
If possible, use your existing floor. If you need new flooring, vinyl and laminate are less expensive than wood and tile. Choose a color that ties the kitchen to the adjoining rooms.
Carefully study your cabinet options, because this will play a big role in the cost. You can delay some options to help reduce the initial costs. If you do decide to wait, make sure the option you want will be available and can be added after your new cabinets are in place.
Consider refacing existing cabinets. This will save money and you won't need to install a new floor, countertops, and appliances.
Use standard cabinetry instead of custom.
Choose cabinets that are finger-pulled and don't need additional hardware.
Think about laminate countertops. They are less expensive than tile and granite. You can accent it with wood or tile trim.
Choosing less costly products will help bring the total cost down, so compare prices carefully. You'll also need to find out how much labor is involved in some of the features you are seeking, like tile countertops.
The most important thing you can do to extend your budget is to plan ahead. Go through the design process with a fine-tooth comb and select all your new countertops, flooring, appliances, and fixtures. This will help keep you from making impulsive decisions down the road.
Published: September 2, 2002
Dual Dishwashers, More Workspace, Sea Colors Expected To Be Popular In Kitchen In 2004
by Michele Dawson
Kitchen remodeling is expected to continue at a rapid pace in 2004 with such trends as the kitchen serving as a multipurpose room, incorporating dual dishwashers and ovens, and coloring the room in softer sea blue and greens expected to take hold this year.
The National Association of the Remodeling Industry expects general remodeling expenditures in 2004 to increase five percent over last year, from $214 billion to $224 billion, according to NARI spokeswoman Gwen Biasi.
"Interest rates are projected to be stable, which is a good thing for the remodeling industry, since refinancing is often a source of funds for a homeowner's remodeling needs," said Biasi.
In a recent study, Home Depot found that 30 percent of American women between 25 and 54 find their kitchens cramped or out of date. The telephone poll, conducted by Opinion Research Corporation International on behalf of Home Depot, said the thing they'd most like to change is their appliances.
Kate Schwartz, editor of kitchens.com, a consumer website devoted to kitchen design and remodeling, said the boundaries of the kitchen will continue to break down in 2004 with it serving as a multipurpose room for cooking, dining, relaxing, doing homework, and paying bills. All the while, it will open up and flow more into the dining and living areas.
"Having a couch in your kitchen won't seem too strange," she said.
Jason Feldman, director of style, innovation and design for Home Depot, says the growing trend toward versatility in the kitchen is the basis for many kitchen remodeling and renovation projects in homes more than 10 years old.
"Most homes constructed in the past decade have an open, expansive kitchen that is more conducive to the way we live and use the space," said Feldman. "Older homes tend to have smaller kitchens that are closed off to the living spaces. For many people, this type of layout doesn't work."
Cook-friendly features, additional workspace unrelated to meal preparation or dining, and a nearby laundry room top the list of must-have features when designing a new kitchen for both men and women, Home Depot's survey found.
Some 49 percent of the survey takers say double ovens, a gas range and stainless steel appliances are must-have features for their newly designed kitchen.
Also appealing: additional workspace for homework, crafts and projects, and an adjacent laundry room.
Biasi said natural materials for countertops -- granite, quartz, slate -- will continue to grow in popularity. Maple and light finishes will be more prevalent in some parts of the country and cherry will dominate in others.
"A new trend is marrying appliances to cabinetry -- cabinet manufacturers have given the homeowner the option to hide dishwashers, refrigerators and other appliances behind panels that match adjacent cabinet doors," Biasi said. "More and more homeowners are opting for this option in their kitchens, although stainless steel appliances remain strong sellers, as well."
Meanwhile, Schwartz expects to see a lot of the following in 2004:
A rise in zone design with the work triangle becoming less important. In large kitchens, it's not always practical to stick with the work triangle floor plan. Instead, design zones -- areas where the appliances, cabinets, and countertop space service a particular task -- will take over.
The hood as a status symbol. Interest in sleek or custom hoods is still on the rise.
Attention to detail -- backsplashes in interesting tile or mosaics, and lighting.
A shift in color preferences. Blues and greens -- especially hues reminiscent of the sea -- were huge in late 2003 and will continue to be popular in 2004.
More universal design touches incorporated for an all-ages, all-abilities kitchen -- pull-down shelving, custom countertop heights and pull-out pantries.
The introduction of more high-tech appliances. "While I think the purchase of these won't necessarily be a huge craze, manufacturers are certainly introducing bigger and better appliances that cook faster and more specifically," Schwartz said.
Home Depot's Feldman said the cost to remodel a 200 square-foot kitchen with new wood cabinets, solid-surface countertops, energy-saving appliances and ceramic tile flooring purchased there is about $15,000.
And homeowners can expect to recover 75 to 90 percent of the cost of a kitchen remodel when they sell their homes, he said.
Published: January 12, 2004
Federal Class Action Settlement Highlights Alleged "Reverse Discrimination" Against White Home Buyers
by Kenneth R. Harney
As a $1.2 million settlement of a federal class action suit suggests, discrimination in mortgage lending doesn't only hurt minority home buyers.
White borrowers can also be targeted -- and charged higher fees behind their backs.
Flagstar Bank, a large Michigan-based lender that funds home loans nationwide, admitted no wrongdoing as part of its settlement approved by a federal court late in December. But documents filed with the U.S. District Court in Indianapolis included formal, written pricing instructions distributed by Flagstar to its loan officers that required that white borrowers be charged higher maximum fees than non-white, minority borrowers.
The instructions forced loan officers to cap the fees charged to minority applicants at three percent. White borrowers could be charged up to four percent in fees. Loan officers whose average revenue-per-loan from minority applicants exceeded their average revenue-per-loan from white borrowers could be disciplined, put on probation, or fired.
Under the pricing guidelines, loan officers were required to determine each borrower's race from the standard Form 1003 mortgage application sheet. The policy statement defined "non-minority" applicants as "white, not of Hispanic origin."
The settlement, signed by U.S. District Court Magistrate Judge Tim Baker, requires Flagstar to refund overcharges to approximately 1,000 loan applicants negatively affected by the policy -- an estimated $704,000 plus interest. The company also agreed to pay approximately $160,000 in "non-economic damages" and $300,000 in legal fees. The lead plaintiff in the case will receive $10,000.
A Flagstar spokeswoman told Realty Times that the company has a policy of never commenting on litigation. But the lawyer for the plaintiffs, Amy Ficklin DeBrota, said the settlement shows that racial discrimination in home mortgage lending "can take forms that you might not suspect."
In this particular case, according to DeBrota, the differential pricing policy was only discovered and documented when one of Flagstar's loan officers refused to abide by it. The loan office ultimately was fired and turned to DeBrota, an employment law and fair housing expert in Indianapolis, for legal help.
DeBrota said she has never handled a reverse discrimination fair lending case filed by whites before, but believes it could happen elsewhere. Though the company would not confirm or comment on it, DeBrota said the policy on fees was distributed to loan officers after auditors from the federal Office of Thrift Supervision detected a possible pattern of higher fees on minority loans in Flagstar's portfolio records.
To ensure that such a pattern did not occur on new loans, she said, the bank put forth a policy that essentially mandated the reverse: lower average fees for African-American and Hispanic home buyers, and higher average fees for white home buyers.
Either way, though, she said, the policy violated the Fair Housing Act of 1968, which bans any consideration of race, religion, sex, marital status or age in mortgage lending. DeBrota added that although on its face, the Flagstar policy appears to have benefited minority home buyers at the expense of white home buyers, the opposite effect could have occurred as well: Some loan officers, seeking to maximize their own commission revenue, might have sought to fund more white applicants than minorities.
Published: January 5, 2004
Tuesday, January 27, 2004
Tips For Buying Furniture
by Michele Dawson
Once you buy a house, chances are you'll soon be buying new furniture. With all the expenses attached to homeownership, coupled with the one-time expenses that come in the first year decorating and furnishing the house, it's important to carefully plan your furniture purchases.
"In the first twelve months after purchasing a newly built home, owners spend an average of $8,900 to furnish, decorate and improve their homes -- more than twice the $4,000 spent by non-movers," the National Association of Homebuilderssays in its report, "Housing: The Key to Economic Recovery."
The report says about 77 percent of it goes toward furnishings and changes to the property. The rest is spent on appliances.
Those who buy existing homes spend $3,766 more than non-moving homeowners in the year after they buy a home. The Eastern Massachusetts, Maine and Vermont branch of the Better Business Bureau (BBB) says it's important to plan and research so you get the most for your money -- and maximum enjoyment from your furniture.
The group offers these tips:
Figure out what you need. Decide exactly what you will need and how long you will need it. That should also play a role in how much you plan on spending. For example, if you're buying a baby crib that will only be used for a few years, you may want to budget less than a table or piece that you will have for many years.
Know how it will be used. If you have small children, then you'll want to choose furniture and fabrics that can stand up to your kids' wear and tear. On the other hand, if you don't have kids or the kids are out of the house, you may prefer pieces more suitable for entertaining or that won't get everyday use.
Determine your space constraints. Draw up a floor plan of the room you will be furnishing and sketch in different furniture arrangements to see how you can best make use of the space.
Set a budget. Before you shop, determine how much you will spend -- and stick to it.
The American Furniture Manufacturers Association suggests you skim through home and decorating magazines for ideas on how to furnish your house. Specifically, you should identify your personal style, whether it's casual, contemporary, country, traditional, or eclectic. Think about your preferences -- which colors, textures and patterns you like.
The AFMA also says you should prioritize your purchases, determining which items you want or need most.
To assist you in the selection process, many furniture stores offer interior design consultation, room planning guides and product brochures. In the end, trust your own judgment and buy what you like.
The BBB recommends shopping around for quality, price, credit terms and service. Extra delivery charges or higher credit charges could mean what initially appeared to be a good buy isn't so good. And when you're shopping, be sure to check out the labels.
Federal Trade Commission guidelines require manufacturers to say whether materials like vinyl or synthetics are used to give the appearance of another material, like marble. If a label mentions only one wood, all surfaces must be wood. If there are veneers, the label has to say so.
Once you eye furniture you consider purchasing, find out the precise terms and conditions of warranties, as well as the store's return policy. And if you're buying on credit, be sure you know the full terms and know how much interest you'll be paying.
Published: January 26, 2004
Friday, January 23, 2004
Renters: Make Sure Your Carpet's Clean!
by Kate Kemp
After the Christmas dinner party and the New Years Eve bash, your carpet probably won't look too pretty. You might find a blop of cranberry sauce squished into the middle of the living room floor, or maybe a cakey, yellow goop hardened near the coffee table. Spray and scrub as you may, you just can't seem to get them out. "No problem," you think "My lease is nearly up. I just won't mess with it." That's a great solution... but only if you don't want to see any of your security deposit back.
Maybe part of that deposit will simply pay for professional cleaners to come in and get your carpets back in good condition... but what if your landlord decides to go ahead and replace the entire carpet? Goodbye security deposit. If you don't hold up your end of the lease (keeping the apartment in good, clean condition) your landlord has every right to use your security deposit to repair and replace things damaged beyond the average "wear and tear" - including your nasty carpet.
Although cleaning your carpets before you move out will probably help you get your security deposit back, it doesn't come for free. If you're tight on cash, here are some frugal carpet cleaning ideas:
You can rub any type of foaming shaving cream in to the spots or high traffic areas and then rinse with warm, wet towels. Be careful not to over wet the carpet or this could cause mildew.
Rug/carpet cleaner recipe: 2 cup cornmeal + 1 cup borax, Sprinkle, leave for 1 hour, than vacuum.
Rug/carpet stain remover recipe: club soda
If you have a little cash, go to a janitorial supply company and purchase their cleaners in bulk. This way, you'll only be paying for the cleaner, not the advertising, and the solution won't be diluted.
If you think household cleaners aren't going to do the trick, you should see about renting a professional cleaner. A rental is usually somewhere around $20.00 (plus shampoos and cleaners), and most grocery stores and rental centers rent out high quality steam cleaners.
Some people find the best option is to simply purchase a carpet cleaner. These range anywhere from $80 to $400, and you can take this with you to your next home. For consumer opinions on the best value for a carpet cleaner, visit The Dollar Stretcher Website.
There are two types of carpet cleaning machines: wet and dry.
WET
How it works: The wet cleaners work by injecting a solution into the carpet, and then sucking the solution (along with the dirt) into the machine.
Disadvantages: If the carpets are overwet, this can damage the carpet backing and underlayment and can cause shrinkage, discoloration, and odor.
DRY
How it works: Dry cleaning machines work when you sprinkle a chemical powder over the carpet and then vacuum it up.
Disadvantages: Although they usually work better than home steamers, dry machines and chemicals are more expensive than steamers and wet extraction solutions.
So keep in mind that if you're living in an apartment, and you don't get the stains out before your lease is up, your landlord could see this as grounds to replace the carpeting. While future tenants would probably enjoy new carpeting, you would probably enjoy getting your security deposit back even more. If you follow these tips to keep your carpet looking clean, you'll save yourself from losing any money in the long run.
Published: November 9, 2000
Fair Housing Important Part Of Rental Process
by M. Anthony Carr
So you got the foreclosure at a good price, fixed it up under budget and on time, and now you just need to get a good renter to start raking in the cash. Before you start eliminating applicants from your pool of tenants, make sure you are eliminating for all the right -- and legal -- reasons.
Federal fair housing laws prohibit you from discriminating against potential renters in seven categories:
*Race
*Color
*National origin
*Religion
*Sex
*Familial status
*Handicap
Keep in mind that this information is in regard to the Federal laws. Your local and state laws may include other fair housing requirements, such as sexual orientation, age, matriculation, political affiliation, appearance, source of income and others. Research your local fair housing laws before accepting your first application.
The Fair Housing Act covers most housing, according to the U.S. Department of Housing and Urban Development. In some circumstances, various type of properties are exempt from the Act, including: owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members.
Outside of these special circumstances, you cannot do the following based on the above mentioned protected classes:
*Refuse to rent or sell housing
*Refuse to negotiate for housing
*Make housing unavailable
*Deny a dwelling
*Set different terms, conditions or privileges for sale or rental of a dwelling
*Provide different housing services or facilities
*Falsely deny that housing is available for inspection, sale, or rental
*For profit, persuade owners to sell or rent (blockbusting) or
*Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.
The Fair Housing Act was written to protect people in the enjoyment of their housing as well, thus it's also illegal for anyone to:
*Threaten, coerce, intimidate or interfere with anyone exercising a fair housing right or assisting others who exercise that right. This means a person cannot harass a neighbor because of his or her color or familial status or the other protected classes.
*Advertise or make any statement that indicates a limitation or preference based on these classes. For instance, advertising your property as "great for single adults," may violate the Fair Housing Act.
If you violate the Fair Housing Act, you could find yourself up against some very stiff consequences, including payment of fines, retribution payments to the claimant and even the attorney expenses. The Fair Housing Act also allows fair housing groups who sue on behalf of victims to sue for legal expenses. So if you discriminate, you're not just threatening a law suit from the victim, but the government and nonprofits as well.
The bottom line is treat everyone the same. Don't hold rules up for one group to follow and bend them for another. As you qualify potential tenants, RentGrow.com, a background checking organization that processes rental applications, suggests basing your decision on the following criteria:
*Check the credit history. Obviously.
*Consider the extent of credit established (it's not good enough to just have credit).
*Income. Is there any and how deep in debt is the applicant?
*Length of housing history. Is it stable, long-term, did they pay rent ON-TIME?
*Verify rental experience. The screener should call past rentals. Is the rent current? Were they asked to leave? Would the applicant be welcome back?
*Length of employment history. Have they demonstrated a stable work habit? Will they continue their employment so rent can be paid.
*Employment verifications. The property manager wants to know if the salary statements, including length on the job, in the position, etc., is accurate.
*Criminal record search. Need I say more?
*Eviction records search. This checks for judgments filed at the courthouse and any evictions from the past.
*Co-applicant status. Not only do you want to feel comfortable with the roomie, but can this person help or hurt the primary applicant in qualifying for renting that next penthouse condo?
As you can see, none of these questions were based on the seven fair housing classes. Following these processes can save you a lot of trouble and give you a worry-free investment experience.
Published: January 23, 2004
