DEAR BOB: Thank you for your recent article about home appraisals. We had a similar situation. When my wife and I bought our home, we applied for a mortgage at the bank where we’ve done business for many years, and where my company has done business as well. All went well until the bank’s appraiser said our new home was worth about $23,000 less than the price we offered and the seller accepted. Phone calls to the appraiser and the bank loan officer did no good. So we applied for a mortgage with my wife’s credit union (where she has a small account). They sent out their appraiser who confirmed we got a bargain purchase price. Our new mortgage approval, including the appraisal, took only three days for what turned out to be a better mortgage. As a result, I pulled our company multimillion-dollar accounts from that “big bad bank” which lost our business due to a bad appraisal. You are so right that appraisal is an art, not a science. How can two experienced, licensed appraisers be $23,000 apart on their appraisals of an upscale home in a subdivision of similar houses? – Robert T.
DEAR ROBERT: Congratulations for taking your business away from that big bad bank. You did the right thing to first phone the appraiser to see if he made a mistake and then phone your bank loan officer. He should have requested a “review appraisal” to double-check the appraiser’s work.
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When both individuals refused to correct the situation, you acted properly to take your business elsewhere (including your business bank accounts).
Over the years, I’ve received my share of bad appraisals, as you did. Unfortunately, there is little a home buyer can do when the lender hires a bad appraiser and refuses to even have that appraisal reviewed.
But most appraisers are very professional and do a superb job in a very tough and competitive business. Each month I enjoy reading the excellent “Appraisal Today” newsletter published by appraiser Ann O’Rourke (www.appraisaltoday.com). But I find it shocking to learn what she reveals goes on in the appraisal industry, which is far from perfect.
LIVING WITHOUT A WILL IS LIVING DANGEROUSLY
DEAR BOB: My husband I own our home as joint tenants with right of survivorship. We have no written wills. Right now we can’t afford to change anything as we live paycheck to paycheck. Someday, we will probably be able to afford a living trust. We bought our current home brand new about two years ago for cash. But we recently had to take out a $50,000 mortgage. Do you think it is smart to sell our home now and give some money to our six children? We are senior citizens who are worried if we land in a convalescent hospital the state will put a lien on our home – Mary G.
DEAR MARY: You and your husband should each have a written will. Joint tenancy is fine if you die separately. Then the surviving joint tenant receives the house. But suppose you both die at the same time, such as in a car or airplane crash. Then your estates would be subject to probate court costs and delays.
As for selling your home and giving your six children some money now, that is the dumbest idea I have heard in a long time. Where would you move? Your children will thank you and quickly spend the money. That’s foolish.
You say you are both “senior citizens.” I presume that means you are both over 62. Then you are eligible for a tax-free home reverse mortgage, which will pay you money each month or whenever you want it.
Your reverse mortgage can be used to pay off that $50,000 mortgage so you won’t have any more mortgage payments. 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.
HOW TO BUY A HOME WITH AN ASSUMABLE MORTGAGE
DEAR BOB: I read your recent article where you explained how to buy a home with little or no cash by taking over an existing mortgage. How can I find such a home with an assumption mortgage? – Rod W.
DEAR ROD: Millions of existing home mortgages are assumable by home buyers with decent income and credit. Virtually every adjustable rate mortgage is assumable.
Work with a good buyer’s agent, explaining you want to buy a home and take over an existing mortgage.
Most mortgage lenders allow assumptions for minimal assumption fees of one percent or less. To learn more, I recommend Ron LeGrand’s excellent new book “How to be a Quick Turn Real Estate Millionaire,” available in stock or by special order at local bookstores, public libraries, and at www.amazon.com.
HOW TO GET OUT OF A HOME PURCHASE CONTRACT
DEAR BOB: We made an $11,110 down payment on a new house to be built in 12 months in Orlando. But after the recent hurricanes, we are having second thoughts. What will happen if we back out of this contract? Will we lose our down payment? – Olga O.
DEAR OLGA: The purpose of your down payment deposit is to obligate both you and the home builder. If you refuse to complete your purchase, you might lose your deposit and be liable to the builder for any breach of contract damages.
Please read your purchase contract to see what it says if you fail to complete the purchase. A year from now, you might have a completely different attitude.
Or, if you absolutely certain you don’t want to buy that new home, you might want to sell your purchase contract if it is assignable. For full details, please consult a local real estate attorney.
CAN A CONVICTED CRIMINAL OBTAIN A REAL ESTATE LICENSE?
DEAR BOB: As you can see from my return address, I am a “guest” at a prison. I am due to be released in about five months after serving my sentence for forgery at age 19. While in prison, I have educated myself, obtaining my GED. Also, I spend my free time in the prison library reading the newspapers (especially your articles) and anything I can find about real estate and law. When I get out, I have a job waiting with a relative’s printing business. Although I am very grateful, I don’t want to spend the rest of my life as a printer. Is it possible for a convicted criminal to obtain a real estate sales license? – John R.
DEAR JOHN: Your situation reminds me of a college student in my class years ago. He served time for a drug conviction and was out on parole. He wisely took my evening course while working at a boring job he hated. My class was the highlight of his week, he told me.
His question was whether or not he could obtain a realty sales license. I suggested he apply for the license exam, disclose his conviction, and see what happens.
Later, I learned he passed the sales license exam but was called in for a hearing. He showed the examiner his excellent work record, several recommendation letters including mine, so the state gave him a restricted sales license. Last time I heard, he is doing great selling homes.
I recommend you take that printing job and give it 110 percent effort. Also, take all the real estate evening courses you can get at a local community college.
Meanwhile, consider becoming a real estate tycoon investor rather than a salesperson. No license is required to invest in real estate and your potential profits are much greater than commissions for selling property.
ADMINISTRATIVE FEES SPREAD TO TITLE INSURERS
DEAR BOB: The contagion of the so-called “administrative” and “transaction” fees some realty agents charge in addition to their sales commissions has now spread to the title insurance business. As a Realtor, last week I closed a transaction representing sellers of a property. The title insurance company charged $500 for document preparation, additional closing fees of $1,000 (no explanation or breakdown), and signing fees of $200. When I questioned these fees for my clients, I was told “all the title companies are doing it now.” As a long time Realtor, my best advice is “Be aware, ask first, and compare is a good rule for consumers.” Needless to say, I won’t recommend that title insurer again to my clients – Jonathan H.
DEAR JONATHAN: Thank you for sharing that valuable information which I had not previously encountered with title insurers.
I have often criticized realty agents who impose unnecessary administrative fees on their buyers and sellers, on top of their sales commissions. But your letter is my first encounter with title insurers adding extra fees on top of their normal charges.
Title insurers are currently earning huge record profits. There is no valid reason for them to nickel and dime buyers and sellers for extra closing fees.
The new Robert Bruss special report “Robert’s Realty Rules: How to Avoid the 10 Worst Home Buyer Mistakes” 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 PDF download at www.bobbruss.com. Your questions for this column are welcome at either address.
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