DEAR BOB: After purchasing a townhouse condominium, my husband and I soon learned the heat didn’t work. I have had several heating experts confirm the problem. Local heating contractors tell me they are aware of the deficient heat throughout the complex. In addition to the seller failing to disclose this major defect, her real estate agent who sells these units lived in the complex until recently. Replacing the electrical system (gas is not available) won’t be cheap. Estimates are about $30,000. The seller refuses to respond to our letters, and the listing agent refuses to enter into arbitration. Is it worthwhile to recover our costs with a lawsuit against the seller and the realty agent? If we can prove fraud, can we recover punitive damages? –Karen S.
DEAR KAREN: How ironic that your letter about lack of heat arrived in the middle of summer. But you are very wise to take steps to solve the problem now before cold weather arrives.
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Your first step should be to consult a local real estate attorney. This is not a do-it-yourself project, especially since both the seller and the listing agent obviously knew about the significant undisclosed defect.
Normally, the buyer’s biggest obstacle is proving the seller and/or realty agent knew about the undisclosed defect before the sale closed. That should be no problem, especially since the local heating contractors can be called to testify as to their knowledge of the widespread heating problem in the condo complex.
Unless your sales contract provided for arbitration of disputes involving the seller and/or real estate agent, they cannot be forced to arbitrate this dispute. As for recovering punitive damages for fraud, that is usually very difficult.
HOW TO RENOUNCE AN INHERITANCE
DEAR BOB: My sister died and left her house to her daughter, but the daughter doesn’t want the house. A quitclaim deed has been suggested. What exactly is it and how might it benefit my niece rather than letting the mortgage company foreclose? –Joyce H.
DEAR JOYCE: If she wishes, an heir can renounce an inheritance. A quitclaim deed would be applicable if the daughter has already received title to the house, either from the local probate court or other source such as the living-trust trustee. The daughter should consult a local probate attorney so the property won’t be lost by foreclosure for nonpayment.
After the daughter renounces her inheritance of the house, the estate executor or administrator will distribute it to the next heir named in the deceased’s will or living trust. If your sister died intestate without a will or living trust, then the probate court will distribute the house to the next-closest heir.
WHAT IS “NORMAL” DEPOSIT TO BUY A $350,000 CONDOMINIUM?
DEAR BOB: What is the “normal” earnest money deposit that should be offered by a buyer for a $350,000 condominium? Is it a percentage of the sales price or is it based on something else? –Ottilia C.
DEAR OTTILIA: There is no “normal” earnest money or good faith deposit amount for the purchase of a residence. At a minimum, however, it should be 1 percent of the sales price to show your serious buyer intent. That would be $3,500 in your situation.
If you are making a “low ball” purchase offer substantially below the seller’s asking price, then a larger deposit such as $5,000, $10,000 or more can often impress the seller into accepting a low offer. However, your earnest money deposit should not be more than 5 percent of the purchase price.
Of course, never make your deposit check payable directly to the seller. Always make it payable to the firm you want to handle the closing of the sale, such as a title-escrow company or perhaps a real estate attorney.
Pending that closing, after the seller accepts your purchase offer the deposit money should be held by a trustee. But I prefer not to make my deposit checks payable to a real estate agent’s trust account, even though some agents will pressure you do to so because that gives the agent more control over the sale.
WOULD YOU PAY $150 TO GET RID OF PMI?
DEAR BOB: My mortgage company, U.S. Bank Home Mortgage Co., sent me a letter stating I can request to have my PMI (private mortgage insurance) canceled if I meet the conditions they listed. They ask that I send a $150 check for a formal written evaluation of the property to determine that my house has not declined below its original value. Can I shop around to find someone else to do this evaluation perhaps at a lower price? Or would it be wise to go ahead and send the mortgage company $150? –Elizabeth H.
DEAR ELIZABETH: Don’t steal in slow motion. U.S. Bank offered you a bargain-priced appraisal. Grab it. Spending $150 to get rid of your costly PMI premium sounds like a great investment. That’s presuming, of course, your home has not declined in market value.
$67-PER-MONTH MORTGAGE SOUNDS TOO GOOD TO BE TRUE
DEAR BOB: I received an offer from an independent mortgage lender stating I can refinance my mortgage (currently $215,000 at 5.5 percent fixed interest) to a monthly payment of $67 for 10 years. How is that possible? What is the catch and is it necessarily bad, especially since we could use the financial break over the next few years? –Bill P.
DEAR BILL: Please read the fine print in the lender’s offer. If the lender wants you to pay any upfront loan fee, other than perhaps for an appraisal costing around $300, be very cautious. You already have an excellent mortgage.
It sounds like the proposed mortgage has negative amortization. That means the unpaid interest will be added to your principal balance so you will owe more than the original balance borrowed. Ask the lender for full details, including any later increase in monthly payments, the APR (annual percentage rate), and any prepayment penalty.
HOW TO GET RID OF AN OLD MORTGAGE
DEAR BOB: About 20 years ago I purchased some property. The seller provided mortgage financing. I made sporadic payments for a few years, but I have not made any payments for at least 15 years. I was told there is a statute of limitations on collections (foreclosure) for personal financing like this if the lender shows no interest in collecting payments. How can I get his name off my title so I can sell this property? I learned that this person is probably dead. –Frank P.
DEAR FRANK: The exact answer to your question depends on state law where the property is located. You may be able to bring a successful quiet title lawsuit in state court there to quiet title in your name. But you will need to prove diligent efforts to show you tried to locate the individual lender, or you can prove he is dead by providing a certified copy of his death certificate.
Until you can get his name off your title as a lienholder, you can’t sell the property and deliver marketable title to your buyer. For full details, please consult a real estate attorney in the community where the property is located.
THIS MORTGAGE REFINANCE PLAN MAKES NO SENSE
DEAR BOB: We are retirees and are considering refinancing our home mortgage. Our existing mortgage interest rate is 6.75 percent with 5.5 years remaining on the life of the mortgage. The monthly payment now goes mostly toward principal reduction and very little to tax-deductible interest. We want to pay off the existing loan and take out some cash, perhaps to purchase CDs earning around 5 percent interest and to increase our tax deductions. The best rate our lender offers us is 7.8 percent on a 30-year fixed-rate loan. We will shop for a better offer. In your opinion does this make sense? How many times can homeowners refinance their mortgages? –Judith P.
DEAR JUDITH: Your plan makes no sense. The best fixed interest rate loan you can get today is around 6.25 percent. Why would you borrow at 6.25 percent and “invest” at only 5 percent interest, which is taxable income?
The tax-deduction angle also makes no sense. Paying $100 in tax-deductible interest to get, at most, 35 percent in federal income tax dollar savings is also foolish.
If you need cash, I suggest adding a home-equity credit line. It is easy to obtain and doesn’t cost you anything until you actually use the money.
Or, if you are both 62 or older, a senior-citizen reverse mortgage will give you tax-free cash with no repayment required as long as you live in the home. You can either take a lump sum, monthly lifetime income, a credit line, or any combination.
My latest special report, “Everything You Need to Know About Reverse Mortgage Pros and Cons for Senior Citizen Homeowners,” is 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
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