DEAR BENNY: I had an appraisal contingency when I bought my condo, but shortly after closing I started to think my appraisal wasn’t fair at all. I paid $190,000 on Dec 2, 2009. The month after I closed, two one-bedroom units just like mine closed, one at $175,000 and one at $170,000. Then, a few months ago I got my city real estate assessment, which came in at $157,000. Now I know you want your assessment low to save on taxes, but this is a huge difference from the price I paid. Basically, do I have any recourse here? –Stephanie

DEAR STEPHANIE: You also advised me that your original offer to purchase the condo was more than $200,000, but based on the appraisal contingency you were able to buy at the lower price of $190,000.

DEAR BENNY: I had an appraisal contingency when I bought my condo, but shortly after closing I started to think my appraisal wasn’t fair at all. I paid $190,000 on Dec 2, 2009. The month after I closed, two one-bedroom units just like mine closed, one at $175,000 and one at $170,000.

Then, a few months ago I got my city real estate assessment, which came in at $157,000. I know you want your assessment low to save on taxes, but this is a huge difference from the price I paid. Basically, do I have any recourse here? –Stephanie

DEAR STEPHANIE: You also advised me that your original offer to purchase the condo was more than $200,000, but based on the appraisal contingency you were able to buy at the lower price of $190,000.

Appraisals — and even city (or county) assessments — are not science; a man or woman, presumably trained in appraising and assessing property values, makes a value judgment based on comparables in the vicinity of the property you plan to buy.

We don’t know all the facts about the two condos that sold at a lower price. Were they on the same floor as yours? What kind of view did they have? Were the sellers desperate to sell because they were facing foreclosure or needed to move to another city quickly?

There are many factors that go into determining the value of a piece of property; perhaps the most important is what a buyer is willing to pay and what a seller is willing to accept. That’s the real market value.

Furthermore, in recent months the secondary mortgage market that basically controls what mortgage lenders can do — such as Fannie Mae, Freddie Mac and even the Federal Housing Administration — have significantly tightened their loan requirements. Many potential purchasers, especially for condominiums, have been unable to get financing, and this tends to lower property values.

Be happy with the lower city tax assessment. I don’t think you have a case, especially since you already bought your unit.

DEAR BENNY: Early last year, I successfully closed on a new house. A few weeks after the closing, I received an e-mail from the closing attorney asking for my signature on revised closing documents and additional monies for my lender. Upon further inquiry, I was told there was a clerical error with the interest amount due and first payment because of an altered closing date. I remember the closing date being postponed because the seller, a bank, needed more time for repairs, yet I was not informed how this would impact me. Also, when questioning the performance of the seller, I was threatened with legal action.

I feel bamboozled by the seller, my agent and the lawyer. Should I have refused to sign any revised documentation? Wasn’t this miscalculation the responsibility of the lawyer? –T.L.

DEAR T.L.: Regardless of whether the miscalculation was done by the attorney or your lender, if it is a legitimate mistake it is your obligation. I recommend that you carefully review the situation and make a determination as to whether there was, in fact, a mistake.

At settlements (also called "escrow closings"), mistakes are made. People are human. Typical mistakes I have seen include: forgetting to sign all documents; errors in mathematics (although most settlement sheets — called HUD-1s — are prepared by computer); failure to obtain the correct payoff statement on existing loans that are to be released; and a typographical error describing the legal description of the property.

However, a change in interest rate is very rare. If the interest rate on the promissory note that you signed at settlement is the same as that disclosed in the lender’s Good Faith Estimate, then there can be no mistake about that rate.

You indicate that there was an error in the amount of the interest due. Most people do not understand that when they make their monthly mortgage payment, that picks up interest that accrued for the previous month.

Let’s take this example: You settle on June 15. Your first mortgage payment will be due Aug. 1. That payment will cover the interest on the loan that accrued during the month of July. However, since you settled on June 15 — and got the money from the lender on that date — you will owe interest from June 15 through the end of the month. Typically, that amount will be included on your HUD-1 and you will have to pay it at closing.

Here’s a tax tip: That interest may not be included in the annual Form 1098 that lenders are required to send to their borrowers. You don’t want to lose any valuable deductions, so do your calculations to make sure that the interest you paid at settlement will be a valid interest deduction.

DEAR BENNY: I enjoyed the article you recently wrote about being "cash poor" and "house rich." We are currently in that exact position. For the past eight years we have had a mortgage payment that is probably too high relative to our income, but even with the current housing-value downturn we have been able to gain a huge amount of equity.

Unfortunately, even with all our equity, we have not been able to get approval for a debt consolidation loan to combine our current second mortgage and some credit-card debt in an effort to gain some interest-rate savings and work on paying off the credit-card debt.

Even though we could pay off our mortgage in seven-plus years, we are moving forward with a refinance to lower our monthly mortgage payment by hundreds of dollars. We are being offered a 30-year fixed at 5.375 percent, a 20-year at 5.25 percent, and a 15-year at 4.75 percent, with no points or fees.

Do you think that given the current interest rates available, we are being offered good rates? And what term do you think we should go with? –John

DEAR JOHN: Only you and your wife can make that decision; I can make suggestions only. Although rates are very low today, I suspect that by the fall they will start creeping up.

Consumers often do not really understand how interest rates work. Let’s take your example: You want to refinance and get a $400,000 loan. The monthly payment for the 30-year loan will be $2,147; for the 20-year loan, $2,695, and for the 15-year loan, $3,111. This includes only principal and interest and not taxes and insurance.

As you can see, although the 30-year loan is clearly longer, the monthly payment is the lowest.

So how do you decide? Are you planning to sell within the next few years? Are you able to take tax deductions for the mortgage interest you pay?

Although 30 years sounds like a long time, most people do not keep the same house for more than approximately seven years. And if you can make one additional monthly payment a year (usually spread out by adding additional money to your monthly payment), you should be able to reduce the length of the loan by eight years.

I know that I will get e-mails from readers telling me that I am wrong; that it makes sense to have a house free and clear. I don’t disagree; it’s always nice not to have to pay a monthly mortgage. But, if you are — or potentially could be — house-rich and cash-poor, my suggestion is to go with the longer loan. And if you are able to make additional payments, more power to you.

Keep in mind, however, that if you do make those extra payments, you must note them on your check as well as on the monthly statement that accompanies your check.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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