Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, June 18, 2006.
DEAR BOB: Which home mortgage fees are proper for a lender to charge borrowers? I recall you said some fees are unnecessary junk or garbage fees to avoid –Stephen O.
DEAR STEPHEN: Mortgage lenders are constantly working 24 hours a day, seven days a week, to create new names for unnecessary junk or garbage fees to impose on innocent borrowers who have no clue when they are being ripped off. However, there are many honest mortgage lenders who won’t try to impose unexpected last-minute fees.
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I suggest you start shopping among at least a half-dozen mortgage lenders for a so-called “no cost, no fee” home loan. In today’s mortgage market with rising interest rates, I recommend obtaining a fixed-rate mortgage.
However, if you are certain you won’t keep your home more than five years, then an adjustable-rate mortgage (ARM) fixed for five years can save you a few interest dollars. But be certain it does not contain a prepayment penalty or negative amortization (where the interest rate adjusts monthly or semi-annually and unpaid interest is added to your loan balance).
If you are dealing with a direct lender, such as Wells Fargo, Bank of America or Countrywide, the lender’s good faith estimate must reveal all loan charges. But you might be asked to pay legitimate fees to third parties, such as for the appraisal, credit report and lender’s title insurance fee. That’s fine. Those are not junk or garbage fees.
However, if you are dealing with a middleperson, such as a mortgage broker, his or her written good faith estimate might be less reliable. The reason is the broker often says, “I got you the best mortgage, but the lender imposed these unexpected junk fees at the last minute. Take it or leave it.”
Watch out for unnecessary, 100 percent pure lender profit, previously undisclosed junk or garbage fees with creative names such as underwriting fee, document preparation fee, loan review fee, warehousing fee, and loan origination fee.
If the lender asks you to pay a loan fee of 1 percent or 2 percent of the amount borrowed, usually called points, ask how much reduction you will receive in the loan’s interest rate. For each one point loan fee paid, you should receive at least a one-eighth-percent reduction in your loan’s interest rate for the life of the mortgage. Pay a loan fee only if you expect to stay in the house at least 10 years. Otherwise, take the no-cost, no-fee mortgage with all lender charges included in the interest rate.
WHY ALL CONDO OWNERS SOMETIMES GET ASSESSED WITHOUT RECEIVING BENEFITS
DEAR BOB: Our condo homeowner’s association (HOA) got assessed $6,000 each for replacement of roofs, which we have to pay even if we sell the condo and move out. My roof was replaced last year, but they still want me to pay $6,000. What can I do? –Rita S.
DEAR RITA: Your HOA did not get assessed. Instead, the HOA is assessing the individual condo owners $6,000 each to replace the roofs.
That’s the way HOAs work. It’s like a mini-democracy. Even when your individual condo unit won’t directly benefit, you are subject to special assessments approved by the HOA board of directors, which benefit the entire condo complex but not your specific unit.
SHOP AROUND FOR PROBATE FEES
DEAR BOB: My widowed mother recently passed away. The lawyer who prepared her trust wants to charge an outlandish fee just to fill out the death papers for the court for her small estate. Is it possible I could file the papers myself with the court? Where do I obtain them? –Eugene B.
DEAR EUGENE: If your mother left her major assets in a revocable living trust, as I constantly recommend, no probate court proceedings are required.
However, if she left a will with a testamentary or irrevocable trust, then probate court proceedings are usually required. This is definitely not a do-it-yourself project.
Shop around among probate attorneys. Although state law sets the maximum probate attorney fees allowed, based on the gross value of the deceased’s estate, most probate attorneys will “adjust” their fees downward if you ask (unless there are lots of complications or a will contest involving the heirs).
Just because an attorney prepared a will and testamentary or irrevocable trust doesn’t mean you must hire that attorney after the principal trustor dies. Shop around. You will be spending part of your inheritance for probate attorney fees.
DEAR BOB: Several days after we phoned our neighbor to ask him to quiet his barking dog and stop running his tractor and spewing carbon monoxide near my disabled daughter’s room, he built a tall spite fence. I live on a lake and had a nice view from my kitchen window for 28 years. The neighbor has lived next door for 17 years. But the couple next door is now splitting. What chance do I have to either remove part of the fence that blocks my lake view or cut it down by 2 feet? He moved out but still owns the house. The wife seems amenable to being reasonable. What recourse do I have? –Elly W.
DEAR ELLY: Unless your city or county has a view protection ordinance, you have no legal right to a view.
However, if the neighbor’s tall fence is defined by local ordinance as a spite fence (usually 6 feet or taller built without a required building permit), you may have a legal right to have the fence removed. For details, check with a local real estate attorney.
ADDING NEW HUSBAND TO HOME TITLE WON’T SAVE TAX YET
DEAR BOB: In 1988 my husband and I bought a house together. In 1994 we got divorced and I changed the title to my name only. In February 2006 we got back together and remarried in May 2006. I added his name back to the title. If we sell our home within a year and file our income tax returns jointly for 2006, can we claim the $500,000 home sale tax deduction? –Rita R.
DEAR RITA: Not yet. For your “new husband” to qualify for an additional $250,000 principal residence sale tax exemption, Internal Revenue Code 121 says he must occupy the principal residence at least 24 of the 60 months before its sale.
However, he does not have to be on the title if he meets the 24-month principal residence occupancy test and you both file a joint income tax return in the year of principal residence sale. For full details, please consult your tax adviser.
NO WAY TO LEARN WHO IS BUYING THE HOUSE NEXT DOOR
DEAR BOB: I am interested in finding out who is buying the house next door to mine. The sale is currently pending. Is there any way to learn other than asking the buyers or realty agents directly? –Carole B.
DEAR CAROLE: No. Until a home sale closes and the title transfer is recorded, the real estate agents and the other parties handling the transfer cannot legally disclose who is buying the home. That is confidential information.
Nor can they reveal the purchase price without breaching their fiduciary duty to the seller and buyer. The only way to find out the buyer’s name now is to ask the seller. But that individual doesn’t have to disclose the buyer’s name.
CAN HOME BUYER OBTAIN DISCLOSURES FROM PREVIOUS SELLER?
DEAR BOB: I feel the sellers from whom I bought my home did not disclose a material and expensive problem with the house. The neighbors tell me the previous owners tried extensive repairs over the years to remedy the problem, but did not succeed. Is there any way I can learn the disclosures the sellers of my house were given when they purchased? –Diane S.
DEAR DIANE: No. You have no legal right to obtain the written disclosures made to your seller unless that information is public information, such as local building permits, pest control inspection report, etc.
Of course, if there are any warranties, such as a 10-year roof warranty, you are entitled to the balance of that warranty period. For full details, please consult a local real estate attorney.
The new Robert Bruss special report “Probate Property Profit Secrets Revealed” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery 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).