DEAR BENNY: Our neighbor is planning on drilling a well and putting in an irrigation system. They have asked us if we would like to install an irrigation system and if so, would we like to tap into their well and help pay for it. Our neighbors across the street have a similar arrangement. The neighbors that have the well on their property pay for the electricity, and any repairs are paid for by the others that use the well. That sounds fine, but what needs to be done to make sure this agreement and our ability to use the well continues if our neighbor decides to sell their house? –Sue B.
DEAR SUE: You should enter into a written agreement, spelling out all terms and conditions, and have that agreement notarized and recorded on the land records in the county where your neighbor’s house is located. The agreement should also state that unless terminated by both parties, the agreement will apply to “successors and assigns.” This document will be recorded against your neighbor’s property. By recording, this puts the entire world on notice of your agreement. I do, however, recommend that you have your attorney draft the agreement.
DEAR BENNY: The Mrs. and I are looking to purchase our first home. Given this market, what advice both legally and financially would you give to a couple of first-time buyers? –Gary
DEAR GARY: Wow! I could write at least two books on this subject. Perhaps the first place I would start my research is with Fannie Mae and Freddie Mac. Have you ever heard of them? They are financial institutions that do not make loans, but assist consumers and lenders in the home-buying process. They both have excellent websites with a lot of consumer information on how to buy a home.
I would also find a good real estate attorney in the county where you live (or want to buy) and have him or her walk you through the various steps. Once you find the house that is of interest to you, have your attorney review (or prepare) the sales contract before you sign it. You should also talk with a couple of mortgage lenders (make sure they are licensed in your state) to determine approximately how large a loan you will be able to obtain.
Is this a good time to buy? Who knows? Will the market go up or down? Again, who knows? But I have told my clients over the years that you don’t buy a house for investment purposes; you buy because you want a solid roof over your head in a neighborhood you like. If the house does increase in value, more power to you.
And, Gary, I suggest you and your wife continue to read the Mailbag column, as I am sure that I will be answering a lot more questions similar to yours in the coming months.
DEAR BENNY: My wife and I plan to move to Fort Myers, Fla., in two years when I retire at age 62. On a recent house-hunting trip to that area, we saw lots of homes for sale. We own our home in New York, which will be sold. Due to the current real estate slump in value, please give me your advice on how to time the market. –Paul
DEAR PAUL: For many years, I had a crystal ball on my desk. Now, I have two and still cannot predict the future.
From what I understand, this is a good time to buy property in Florida. Are you able to afford to buy that new house without selling your current one? Depending on your financial situation, you may be able to obtain a bridge loan on your house to enable you to buy the other one.
If, on the other hand, you cannot financially carry two houses, then you will most likely have to sell your present house first. And while in some parts of the country it’s a buyer’s market, you may find that you will get a good deal on the new Florida property but a not-so-good deal on your present home.
If you cannot move down to Florida now, you might try to find a buyer who will rent your house back to you. This way, while you will have to pay rent, you will not have to pay PITI (principal, interest, taxes and insurance). And the sales proceeds can be used to purchase that Florida property. If you are lucky, you can rent that property out, which will somewhat offset the rent you have to pay on your present property.
DEAR BENNY: Are there any Internet sites that can give me a north, south, east and west aerial view of a house that I am interested in buying? –Phil
DEAR PHIL: For fear of alienating what I understand are many Web sites that show aerial pictures of real estate, I suggest that you go to your favorite Internet search engine and type in either “property maps” or “aerial maps”; I just did that and found quite a few for me to choose.
DEAR BENNY: I am a first-time home buyer. My husband and I have a credit rating above 750. I make about $95K a year and my husband makes about $35K, except that he gets paid by cash, so his boss will sign a letter indicating what he makes a year and submit it to the bank.
We plan on purchasing a two-family house for $540K with a seller’s concession of $20K. The total mortgage would be $560K with a 5 percent down payment. I asked my lender if we can get one mortgage for $532K. He said that the PMI would be high and that it would benefit us if we take out two separate mortgages in order to eliminate the PMI. They call this an 80-15 arrangement. The first mortgage will be 80 percent at a fixed rate of 6.375 percent (locked in) and the other 15 percent at a rate of 8 percent, except that I cannot lock it in until the last four days of the closing. Why can’t I lock in the rate now; why do I have to wait until the closing? Is this a good deal? It sure doesn’t feel like it is.
He said that if something happens to the lender then we would be covered on 15 percent of the loan because of the PMI. Why not 100 percent covered in one loan? How much of a difference will we be paying a mortgage if we take one mortgage? He also said that even though we have good credit and make good money together that the current rate of 4.75 percent is only for people that had bad credit and are involved with the subprime lenders. Is that true? Please help? I really do appreciate your advice. –L.M.
DEAR L.M.: I am very confused and unfortunately I believe you are also. First, if the purchase price is $540,000 with the seller giving you a credit of $20,000, I seriously doubt that you can get a loan for $560,000.
Second, I do not understand why your lender cannot lock in the second trust (the one for 15 percent of the purchase price.
Third, it makes no sense to me that a subprime mortgage for people with bad credit would be lower than a loan for people with good credit like you and your husband.
My strong suggestion: Get a second opinion from another mortgage lender. Something does not sound right.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. Questions for this column can be submitted to [email protected].