DEAR BOB: We closed the purchase of our home on May 7, 2004. The sellers needed to stay in the house until their new home was finished. They paid us daily rent. The sellers paid their rent and turned the keys over to us on Thursday, July 29. We performed our walk-through inspection with no problems. But when we arrived at the house on Saturday, July 31, we discovered the seller had the electric and gas turned off without notifying us. We phoned the utility company and learned they couldn’t turn on our utilities until a week later. In that time, there were several days of heavy rain that resulted in a flooded basement, which ruined the finished basement due to the inoperable sump pump. I filed a claim with our insurance company. It was denied. Should I sue the seller in Small Claims Court for failing to notify us he was turning off the utilities? – Mike C.
DEAR MIKE: That is a difficult question. I suggest you first get several written estimates of costs to repair the damage. Then you have a dollar amount to discuss with both your insurance company and the seller. Also, then you will have proof of the damage amount so you can decide if it’s worth fighting about.
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Just because your insurance company denied your claim doesn’t mean the insurance adjustor is correct. If the basement water damage had occurred because the power went out in a rainstorm so the sump pump couldn’t operate, that water damage would be covered by your homeowner’s policy unless there is a specific exclusion.
You might emphasize to the insurance company that mold could develop unless repairs are made immediately and that could increase the insurer’s “bad faith” liability exposure for consequential damages. You might want to contact the state insurance commissioner’s office to see if they can help get the money from the insurer.
If you can’t get the insurance company to pay, depending on the amount of your loss, you might want to sue both the insurance company and the seller in local Small Claims Court to let the judge decide if one owes you. I suggest suing them separately rather than jointly. For more details, please consult a local real estate attorney.
HOW TO GET YOUR HOME PURCHASE DEPOSIT REFUNDED
DEAR BOB: I made an offer to buy a house for $205,000 with a $4,000 deposit paid to the real estate company. I asked, “If the home fails inspection, do I get my money back?” The agent assured me I would get my money back. The house was inspected on Sept. 22 and it failed miserably. My agent sent an addendum to the purchase agreement to the seller’s agent stating I wanted to withdraw my offer and sent along a copy of the inspector’s report. The damages are excessive and would be cost-prohibitive to me. The seller’s agent replied $1,500 would fix all. But we disagree. Now I find the other Realtor has to sign a “letter of release,” which she refuses to do. The seller says I will be sued for “specific performance” to force me to buy the house. But now I do not want that house. I talked to an attorney who wants $500 to just read the contract and another $500 if he has to send a letter. How can I get my money refunded? – Jan L.
DEAR JAN: Don’t worry about a specific performance lawsuit to force you to buy. Specific performance is a buyer’s legal remedy, not a seller’s remedy. The reason is monetary damages are usually adequate to satisfy the seller’s damages, if any.
Your most effective remedy in a small $4,000 dispute takes two steps: (1) Send a very polite written demand letter to the parties involved, the real estate agents and the home seller, demanding refund of your $4,000 within 10 days. But don’t threaten or disclose what you will do if you don’t receive the $4,000 within 10 days.
(2) You probably won’t receive the $4,000 refund check. After 10 days, your easiest legal remedy is to file a Small Claims Court lawsuit (presuming your local Small Claims Court allows actions for $4,000) for breach of contract against the seller and the realty agents. For more details, please consult a local real estate attorney.
REVERSE MORTGAGE CAN STOP CURRENT MORTGAGE PAYMENTS
DEAR BOB: I am a widow, 73, who owns my home. It is worth $180,000 to $225,000. My mortgage balance is about $86,000. I work part-time to pay my bills. I would like to make some repairs around my home. My children say I should get a reverse mortgage rather than getting a new interest-only mortgage. But I don’t think a reverse mortgage is wise because my house still has a mortgage. What do you advise? – Louise B.
DEAR LOUISE: You must enjoy making those monthly mortgage payments. I suggest you listen to your smart children and at least investigate a reverse mortgage so you can stop making those expensive mortgage payments.
Please interview representatives of at least three reverse mortgage lenders to compare their terms for FHA, Fannie Mae, and Financial Freedom Plan reverse mortgages.
Only after you have all the facts can you decide if an interest-only mortgage (if you have enough income to qualify) or a reverse mortgage with no monthly payments is best for you. More details are in my special report, “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners,” 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.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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