DEAR BOB: Thank you for your great advice to another reader about eight months ago. You suggested she not pay all cash for her retirement condo and instead obtain a mortgage for 75 or 80 percent of the purchase price. The reason you gave was to avoid tying up a large amount of her retirement cash. As we were about six weeks away from buying a brand-new house in a retirement community, we decided to also follow that advice. Now we are so thankful we did. Although we could have paid all cash, instead we paid a 25 percent down payment and got a 75 percent mortgage at 5.75 percent interest. Shortly after we bought, the homeowner’s association sued the developer over faulty underground utilities, construction defects and other problems. As a result, sales of new homes in the development quickly ground to a halt until the litigation is resolved. We’re so glad we didn’t tie up a big chunk of our nest egg – Mark H.
DEAR MARK: I greatly appreciate your sharing your new-home purchase experience and why it was wise not to pay all cash, although you could afford to do so.
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As in your situation, new houses and new condos often have construction defects that buyers don’t learn about until after purchase. If litigation develops, as it frequently does, mortgage lenders often stop lending in that development until the lawsuit is concluded.
Later, after the problems are resolved in a few years, you might decide to pay off your mortgage to save interest. But if you should decide to sell your house in the meantime, I’m sure your lender will gladly allow a buyer to assume your mortgage, thus allowing a sale for you and easy financing for a buyer. There are also many other reasons it is wise not to pay all-cash for a house or condo, even when you can afford to do so.
WHAT CAN BE DONE ABOUT A RUNAWAY CONDO BOARD?
DEAR BOB: After living in my condo for 19 years, I see many things happening that scare me. We have a “runaway board” that we members can’t seem to control. The big problem is they won’t give us an annual audit of the books, yet they keep raising our assessments. There hasn’t been an audit for seven years. Now the directors are borrowing $300,000 for re-siding of the 257 units. Personally, I don’t think that is enough money to pay for the repairs without a special assessment. Several members have consulted lawyers who say there is nothing they can do. What can be done before our condo association goes bankrupt? – Fran W.
DEAR FRAN: Condominium homeowner’s associations are mini-democracies at their best or worst. When was the last time you attended an association director’s meeting? You and your fellow condo owners should propose a new slate of directors at the next election and actively campaign to get them elected.
In the meantime, any homeowner association member can sue to enforce the CC&Rs (conditions, covenants and restrictions) which govern your condo association. If you and your like-minded condo owners look around, I’m sure you can find an attorney who is experienced in condominium law who will take your case to sue for enforcement of the CC&Rs and obtain an independent audit.
I am shocked there has not been an audit of your association for seven years. Also, unless there is an emergency, a condo board of directors should not be borrowing $300,000 without a vote of the members.
MORTGAGE PAY-OFF FEE WAS A RIP-OFF
DEAR BOB: When we recently paid off our mortgage, the lender charged us a $300 mortgage pay-off fee. The escrow company which handled the transaction said our lender charged us $60 for a pay-off statement which was automatically faxed. Somehow, the lender says, there were five pay-off requests at $60 each. How can this be and what can I do about it? – Walter S.
DEAR WALTER: Mortgage lenders often make mistakes. If you don’t challenge them, your lender will get away with ripping you off. If I were in your situation, I would write or fax a very polite letter to your old lender demanding a refund within 10 business days of the overcharges you think were excessive.
If you don’t receive a check or satisfactory explanation, your next step is to sue the lender in local Small Claims Court and let the judge decide if you were ripped-off.
NO NEED TO TRANSFER MORTGAGE INTO YOUR LIVING TRUST
DEAR BOB: I have tried to get my mortgage lender to transfer my home loan into my living trust. But the lender refuses to do so. I could pay off the mortgage, which is only about one-third of my home’s market value, but I really don’t want to tie up that much cash in my home. What can I do to make my mortgage lender transfer the mortgage into my living trust? – Wesley L.
DEAR WESLEY: There is usually no need get your mortgage lender involved with your living trust or to transfer your mortgage into your living trust.
What you need to transfer is title to your home into your living trust so if you die or become incapacitated then your successor trustee can supervise your property without probate court costs or delays. Please consult the attorney who set up your living trust to see if anything needs to be done with your living trust and your mortgage.
CAN NEIGHBOR STOP TREE TRIMMING BACK TO PROPERTY LINE?
DEAR BOB: A few months ago, you had a bunch of tree questions. But I haven’t seen a tree question like mine. I recently hired a professional tree trimmer to trim my neighbor’s overhanging tree back to the property line, as I understand I am allowed to do. But the neighbor called the police who said I couldn’t trim my neighbor’s tree although it infringes on my property, drops leaves and causes a mess. The tree trimmer, who has been in business more than 20 years, said he never had any trouble before trimming a tree back to the property line. What should I do? – Gertie S.
DEAR GERTIE: The general rule is a property owner is entitled to trim a neighbor’s overhanging tree back to the property line unless doing so will cause damage to the tree. Since you hired an experienced professional tree trimmer, you did everything right.
It’s true that you or your tree trimmer cannot enter the tree owner’s property without permission. That would be trespassing. Perhaps the police officer was mistaken. Please consult a local real estate attorney. A letter from him or her to your neighbor stating the applicable tree law should prevent further trouble when you hire that tree trimmer again to complete the work.
WHY HOME BUYERS SHOULD SET DEADLINE IN THEIR OFFERS
DEAR BOB: How strategic is it for home buyers to set an acceptance deadline in their purchase offers? What is a reasonable time period? Until midnight? 24 hours? 48 hours? – Jennifer Y.
DEAR JENNIFER: Great question. Home buyers should always set a deadline in their purchase offers for acceptance by the seller. In most situations, 24 hours is a reasonable time. Midnight of the day the offer is made is also reasonable. Of course, if the seller is out of town or unavailable for a valid reason, the buyer should consider that when setting the acceptance deadline.
The reason for setting a relatively short deadline for offer acceptance is to prevent “offer shopping.” To illustrate, if your home purchase offer is valid for three days, that gives the seller’s agent time to “shop” your offer among other potential buyers who are interested in buying the same home and who might make a better offer.
Incidentally, if the seller accepts the buyer’s purchase offer after it has expired, that becomes an offer by the seller to sell to the buyer. Then the buyer can accept or reject the seller’s offer to sell. For full details, please consult a local real estate attorney.
IS “AS IS” HOME SELLER LIABLE FOR UNDISCLOSED ROOF LEAK?
DEAR BOB: I recently bought an “as is” house. The seller’s disclosure report revealed several defects of which I was aware. But during the last rain storm, a section of my roof leaked. This roof leak was not disclosed by the seller. Several professional roofers tell me the leak was due to bad attempted repairs to seal the leak. So the seller must have known the roof leaked. The leak damaged the wall, ceiling and floor. Since the leaking roof was not disclosed and the seller must have known about it, are the seller and the real estate agent liable to me for damages? – Dave S.
DEAR DAVE: Your issue is proving the seller and/or the seller’s listing agent knew the roof leak was not repaired before selling the house to you. If the roof didn’t leak during the first rain after you took title, then the seller might not have known the leak wasn’t fully repaired. However, without specific proof, the seller’s realty agent probably has no liability to you.
Your best recourse might be against the seller’s roofer who made the repairs. If it is a reputable roofing company, a call to the roofer will be your best and cheapest recourse.
If you can’t work out a reasonable settlement with the roofer or the seller to pay for the repair of the leak damages, your legal recourse would be to take your dispute to local Small Claims Court. But the burden of proof is on you to prove to the judge why the seller must have known of the leak and failed to disclose it. For more details, please consult a local real estate attorney.
The new Robert Bruss special report, “Living Trust Pros and Cons for Avoiding Probate Costs and Delays for Your Heirs,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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