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Monday, December 24, 2007
Goodbye shingles, hello stucco
Q: We have cedar shingles on our home and love them. We had a difficult time finding someone to restore them until I mentioned it to a retired contractor. He had leftover oil preservative, which his son-in-law used to paint the shingles for $800. Now it's time to do it again.
However, our daughter and son-in-law are buying our home, and their friends said the ugliest thing about this house is the wood shingles. They think they will take the shingles down and put up stucco. Is that possible?
A: Beauty is in the eye of the beholder, and these friends seem to want to indulge their sense of beauty at significant expense to your daughter and son-in-law.
Replacing cedar shingles with stucco is certainly possible, but be prepared to part with a large chunk of change for the gargantuan job it will be to make the switch. We're always amused to see "friends" try to spend someone else's money. Although we're sure the intentions are good, the money sunk into stuccoing the house could be better used in other places.
You got the deal of the century with your $800 shingle treatment. Expect to pay more to do it again -- but replacing the shingles with stucco is exponentially more expensive.
The extra cost is in the increased number of steps and expert labor required in the stucco process versus the relatively few steps and less skilled labor required to treat the shingles.
Assuming the shingles are in good shape, the job is pretty simple. Clean the shingles with a pressure washer to remove any dirt and debris. Let them dry. Then spray or brush on another coat of preservative. That's it.
On the other hand, replacing the shingles with stucco is a multistep process requiring skilled labor.
Removing the shingles isn't rocket science, but once the shingles are off, the rest of the job should be left to the pros.
Each shingle must be pried off with a bar -- a flat shovel works well. Once off, the split shingles should be dispatched to the landfill. When all of the shingles are gone, the many thousands of nails and any building paper that remains stuck on the wood sheathing must be removed.
Start wrapping the entire house in 15-pound building felt. Make sure to overlap the courses so that any water that penetrates the stucco will be wicked away from the sheathing. Next, apply the lath. Stucco lath is steel mesh that is nailed to the sides of the house, over the building felt. If the lath looks like chicken wire, special nails equipped with a cardboard spacer are used to hold the lath away from the wall.
A perforated metal strip known as a weep screed is attached at the bottom of the wall. The weep screed performs two functions: It acts as a base for the wet stucco, and when the stucco is dry, allows any moisture to drain away from the wall.
Once the lath is on, it's time for the first coat of stucco, known as the scratch coat. Stucco consists of sand, lime, Portland cement and water mixed either by hand or in a mixer to the consistency of thick mud. A job this size requires a mixer.
The scratch coat is applied by trowel, which forces the wet stucco into the lath, forming "keys." The scratch coat should be approximately 3/8 inch thick. Once the scratch coat sets up, it's important to spray the surface intermittently with water so the surface doesn't dry too quickly. Slowing the curing process makes for a stronger job that is resistant to cracks.
Let the scratch coat cure for a day or two and repeat the process by applying a second coat of stucco, known as the brown coat. The brown coat should also be about 3/8 inch thick. The brown coat provides a flat uniform layer to apply the finish coat.
Allow the brown coat to cure for a couple of days, again spritzing it regularly, and then apply the finish coat. Color can be added to the finish coat and it can also be textured. When complete, the stucco should be about an inch thick.
A large stucco job is a messy process. Count on vegetation being damaged by dropped stucco, workman's feet and scaffolding. In addition, the wood shingle molding around windows and doors should be replaced with wood stucco molding. Stucco molding is milled with a groove to allow the wet stucco to "key" into the molding.
Replacing what seem to be perfectly good wood shingles with stucco is a huge and expensive undertaking. Absent a compelling reason to make the change, we'd counsel against it.
source: mortgage101.com
However, our daughter and son-in-law are buying our home, and their friends said the ugliest thing about this house is the wood shingles. They think they will take the shingles down and put up stucco. Is that possible?
A: Beauty is in the eye of the beholder, and these friends seem to want to indulge their sense of beauty at significant expense to your daughter and son-in-law.
Replacing cedar shingles with stucco is certainly possible, but be prepared to part with a large chunk of change for the gargantuan job it will be to make the switch. We're always amused to see "friends" try to spend someone else's money. Although we're sure the intentions are good, the money sunk into stuccoing the house could be better used in other places.
You got the deal of the century with your $800 shingle treatment. Expect to pay more to do it again -- but replacing the shingles with stucco is exponentially more expensive.
The extra cost is in the increased number of steps and expert labor required in the stucco process versus the relatively few steps and less skilled labor required to treat the shingles.
Assuming the shingles are in good shape, the job is pretty simple. Clean the shingles with a pressure washer to remove any dirt and debris. Let them dry. Then spray or brush on another coat of preservative. That's it.
On the other hand, replacing the shingles with stucco is a multistep process requiring skilled labor.
Removing the shingles isn't rocket science, but once the shingles are off, the rest of the job should be left to the pros.
Each shingle must be pried off with a bar -- a flat shovel works well. Once off, the split shingles should be dispatched to the landfill. When all of the shingles are gone, the many thousands of nails and any building paper that remains stuck on the wood sheathing must be removed.
Start wrapping the entire house in 15-pound building felt. Make sure to overlap the courses so that any water that penetrates the stucco will be wicked away from the sheathing. Next, apply the lath. Stucco lath is steel mesh that is nailed to the sides of the house, over the building felt. If the lath looks like chicken wire, special nails equipped with a cardboard spacer are used to hold the lath away from the wall.
A perforated metal strip known as a weep screed is attached at the bottom of the wall. The weep screed performs two functions: It acts as a base for the wet stucco, and when the stucco is dry, allows any moisture to drain away from the wall.
Once the lath is on, it's time for the first coat of stucco, known as the scratch coat. Stucco consists of sand, lime, Portland cement and water mixed either by hand or in a mixer to the consistency of thick mud. A job this size requires a mixer.
The scratch coat is applied by trowel, which forces the wet stucco into the lath, forming "keys." The scratch coat should be approximately 3/8 inch thick. Once the scratch coat sets up, it's important to spray the surface intermittently with water so the surface doesn't dry too quickly. Slowing the curing process makes for a stronger job that is resistant to cracks.
Let the scratch coat cure for a day or two and repeat the process by applying a second coat of stucco, known as the brown coat. The brown coat should also be about 3/8 inch thick. The brown coat provides a flat uniform layer to apply the finish coat.
Allow the brown coat to cure for a couple of days, again spritzing it regularly, and then apply the finish coat. Color can be added to the finish coat and it can also be textured. When complete, the stucco should be about an inch thick.
A large stucco job is a messy process. Count on vegetation being damaged by dropped stucco, workman's feet and scaffolding. In addition, the wood shingle molding around windows and doors should be replaced with wood stucco molding. Stucco molding is milled with a groove to allow the wet stucco to "key" into the molding.
Replacing what seem to be perfectly good wood shingles with stucco is a huge and expensive undertaking. Absent a compelling reason to make the change, we'd counsel against it.
source: mortgage101.com
New-home defects often missed
Dear Barry,
Is it necessary to get my own home inspection on a newly constructed home, or should the inspection by the city inspector be accepted as adequate? --Dean
Dear Dean,
Some readers may wonder why this subject, in varying forms, is recurrent in this column. It is because questions about inspecting new homes are asked so frequently and because the answer is vital to anyone who plans to buy a new home.
Experienced home inspectors have learned that all new homes have defects of one kind or another, regardless of the quality of construction or the integrity of the builder. This is because human imperfection prevents anything as large and as complex as a home from being constructed flawlessly.
A commonly held fallacy is that all construction defects will be discovered by municipal building inspectors. This view is highly mistaken, but not because of professional shortcomings on the part of those inspectors. The purpose, scope, time allotment and procedures for municipal inspections are not the same as for home inspections.
Municipal inspectors inspect primarily for code compliance, not for quality of workmanship. They can cite a builder for improper structural framing or for noncomplying drain connections, but a poorly fitted door, an uneven tile countertop and slipshod finish work are not included in the list of concerns.
Municipal inspectors rarely inspect an attic or a subarea crawl space. They come to the job site with a clipboard and a codebook, not with a ladder and overalls. Construction defects in such areas can escape discovery.
Municipal inspectors typically inspect a roof from the ground or possibly from the builder's ladder. From these perspectives, roof defects are not always apparent. And final inspections are performed before the utilities are turned on, so municipal inspectors cannot determine if or how well the appliances and fixtures truly work. They don't test outlets for ground and polarity because this can be done only after the power supply is turned on. Nor, without power, can they test the performance of GFCI or AFCI safety breakers.
The lack of utilities also prevents the testing of plumbing fixtures such as sinks, showers, tubs and dishwashers, and of gas fixtures such as furnaces, fireplaces and water heaters.
As repeatedly expressed in this column, those who buy new homes should not forego the benefits of a thorough home inspection. Just be sure to find an inspector with years of experience and a reputation for thoroughness.
Dear Barry,
Our home was built in 1978 and, until recently, had acoustic "cottage cheese" ceilings. My friend helped to scrape off the ceiling texture and a week later developed a sore throat. Now he fears that he has been adversely affected by breathing asbestos. Is this a valid concern? --Amy
Dear Amy,
Scraping a 1978 ceiling without having it tested for asbestos was not a wise course of action. However, there are no short-term health effects associated with asbestos exposure. The only documented cases of asbestos-related disease involve people who were subject to repeated, long-term exposure. The damaging effects attributed to asbestos are lung cancer, asbestosis and mesothelioma.
Your friend's recent sore throat is not likely to be asbestos-related.
source: mortgage101.com
Is it necessary to get my own home inspection on a newly constructed home, or should the inspection by the city inspector be accepted as adequate? --Dean
Dear Dean,
Some readers may wonder why this subject, in varying forms, is recurrent in this column. It is because questions about inspecting new homes are asked so frequently and because the answer is vital to anyone who plans to buy a new home.
Experienced home inspectors have learned that all new homes have defects of one kind or another, regardless of the quality of construction or the integrity of the builder. This is because human imperfection prevents anything as large and as complex as a home from being constructed flawlessly.
A commonly held fallacy is that all construction defects will be discovered by municipal building inspectors. This view is highly mistaken, but not because of professional shortcomings on the part of those inspectors. The purpose, scope, time allotment and procedures for municipal inspections are not the same as for home inspections.
Municipal inspectors inspect primarily for code compliance, not for quality of workmanship. They can cite a builder for improper structural framing or for noncomplying drain connections, but a poorly fitted door, an uneven tile countertop and slipshod finish work are not included in the list of concerns.
Municipal inspectors rarely inspect an attic or a subarea crawl space. They come to the job site with a clipboard and a codebook, not with a ladder and overalls. Construction defects in such areas can escape discovery.
Municipal inspectors typically inspect a roof from the ground or possibly from the builder's ladder. From these perspectives, roof defects are not always apparent. And final inspections are performed before the utilities are turned on, so municipal inspectors cannot determine if or how well the appliances and fixtures truly work. They don't test outlets for ground and polarity because this can be done only after the power supply is turned on. Nor, without power, can they test the performance of GFCI or AFCI safety breakers.
The lack of utilities also prevents the testing of plumbing fixtures such as sinks, showers, tubs and dishwashers, and of gas fixtures such as furnaces, fireplaces and water heaters.
As repeatedly expressed in this column, those who buy new homes should not forego the benefits of a thorough home inspection. Just be sure to find an inspector with years of experience and a reputation for thoroughness.
Dear Barry,
Our home was built in 1978 and, until recently, had acoustic "cottage cheese" ceilings. My friend helped to scrape off the ceiling texture and a week later developed a sore throat. Now he fears that he has been adversely affected by breathing asbestos. Is this a valid concern? --Amy
Dear Amy,
Scraping a 1978 ceiling without having it tested for asbestos was not a wise course of action. However, there are no short-term health effects associated with asbestos exposure. The only documented cases of asbestos-related disease involve people who were subject to repeated, long-term exposure. The damaging effects attributed to asbestos are lung cancer, asbestosis and mesothelioma.
Your friend's recent sore throat is not likely to be asbestos-related.
source: mortgage101.com
Remove gummy floor tiles, fix plaster walls
Q: I have two questions about remodeling my old house. First, I need to remove some floor tiles from an oak hardwood floor prior to refinishing it. There are no asbestos issues, but the tiles are pretty well stuck down with a black, gooey material. Any suggestions? Second, I have plaster walls in a small room and would like to apply a light texture to cover some minor cracks. What should I use? Thanks! --Dan W., via e-mail
A: For your floor tiles, a heat gun should be your best bet. Commercial heat guns are available from retailers of floor-covering supplies and from some home centers, or you can rent one at most rental yards. The important thing is to provide adequate ventilation and to work slowly in one very small area at a time. DON'T OVERHEAT ANYTHING -- working too fast or with too much heat can create a very definite fire hazard! As you heat the tile, use a small, stiff scraper or putty knife to lift the softened adhesive as well as the tile, taking care to avoid gouging the wood. Wear gloves, and clean the scraper frequently with a rag while the glue is still soft.
For texturing your plaster, you have a couple of options. You could rent a texture hopper and compressor from any rental yard and spray on drywall texture, but this requires a little bit of practice first, and you have to completely mask off all surfaces not being textured. In your case, an easier solution would be to add some texture mix to the paint you're going to use on the walls. The texture is similar to fine sand, and you save time and money by applying both the paint and the texture at the same time. All of the above materials are available from most home centers and paint stores.
Q: I know that protective eyewear is important, but I haven't been able to find anything that fits me comfortably. Do you have any suggestions? --Nick D., via e-mail
A: Unfortunately, problems with comfort are all too common, and this is the main reason many people -- even professional contractors -- don't wear safety eyewear as often as they should. My best suggestion is to avoid the home centers and discount houses and instead check out a retailer in your area that specializes in professional safety equipment; they can usually be found in the Yellow Pages under Safety Equipment and Clothing. Go in personally, and try on all of the different protective eyewear they carry. Some people have found that ventilated glasses work, others use different forms of goggles, and still others have good luck with face plates that flip up out of the way when not in use. The only way to find something that works for you is to try on different ones, then buy one or two and use them on the job. It's well worth the investment in both time and money!
Q: I own a 1929 home, and I think I read somewhere that airless paint sprayers have the tendency to fill in all the grooves in old wood siding, leaving the surface totally flat. I need to paint my house and I don't want to loose the "vintage" look of the old siding, but I can certainly appreciate the time savings of spraying instead of having to use a brush. I enjoy your column, and would appreciate your opinion for "this old house" of mine. --Dave T., via e-mail
A: If done correctly, airless sprayers put on a fairly light and very uniform coat of paint. They actually apply less paint than a brush or a roller typically does, so I would see no risk that any desirable features on your old siding would be filled in. I have used airless sprayers on many types of siding with fairly subtle surfaces, and the airless didn't do anything to diminish the appearance of the grain pattern.
You might, however, want to practice a little bit first. If you have an unobtrusive spot on the house -- or on a shed, garage, etc. -- you might want to try the airless out there first to get a feel for it and see what you think of the results. You can also try it on an old piece of plywood or siding that has similar grooves.
If you do feel the sprayer is putting on too thick of a paint film, you might try a common painting technique called back-rolling, which combines the speed of spraying with some of the advantages of rolling. With back-rolling, you first apply the paint to the surface with the sprayer, then immediately go back over it with a paint roller. Use a low-nap roller and don't dip it directly into the paint, simply use it to "press" the paint against the surface. Back-rolling actually evens out the paint film and helps it adhere more tightly to the surface underneath -- a real advantage over old, dry wood -- and should help to preserve the subtle grain features by rolling out any areas where the paint has been sprayed on too thick.
source: mortgage101.com
A: For your floor tiles, a heat gun should be your best bet. Commercial heat guns are available from retailers of floor-covering supplies and from some home centers, or you can rent one at most rental yards. The important thing is to provide adequate ventilation and to work slowly in one very small area at a time. DON'T OVERHEAT ANYTHING -- working too fast or with too much heat can create a very definite fire hazard! As you heat the tile, use a small, stiff scraper or putty knife to lift the softened adhesive as well as the tile, taking care to avoid gouging the wood. Wear gloves, and clean the scraper frequently with a rag while the glue is still soft.
For texturing your plaster, you have a couple of options. You could rent a texture hopper and compressor from any rental yard and spray on drywall texture, but this requires a little bit of practice first, and you have to completely mask off all surfaces not being textured. In your case, an easier solution would be to add some texture mix to the paint you're going to use on the walls. The texture is similar to fine sand, and you save time and money by applying both the paint and the texture at the same time. All of the above materials are available from most home centers and paint stores.
Q: I know that protective eyewear is important, but I haven't been able to find anything that fits me comfortably. Do you have any suggestions? --Nick D., via e-mail
A: Unfortunately, problems with comfort are all too common, and this is the main reason many people -- even professional contractors -- don't wear safety eyewear as often as they should. My best suggestion is to avoid the home centers and discount houses and instead check out a retailer in your area that specializes in professional safety equipment; they can usually be found in the Yellow Pages under Safety Equipment and Clothing. Go in personally, and try on all of the different protective eyewear they carry. Some people have found that ventilated glasses work, others use different forms of goggles, and still others have good luck with face plates that flip up out of the way when not in use. The only way to find something that works for you is to try on different ones, then buy one or two and use them on the job. It's well worth the investment in both time and money!
Q: I own a 1929 home, and I think I read somewhere that airless paint sprayers have the tendency to fill in all the grooves in old wood siding, leaving the surface totally flat. I need to paint my house and I don't want to loose the "vintage" look of the old siding, but I can certainly appreciate the time savings of spraying instead of having to use a brush. I enjoy your column, and would appreciate your opinion for "this old house" of mine. --Dave T., via e-mail
A: If done correctly, airless sprayers put on a fairly light and very uniform coat of paint. They actually apply less paint than a brush or a roller typically does, so I would see no risk that any desirable features on your old siding would be filled in. I have used airless sprayers on many types of siding with fairly subtle surfaces, and the airless didn't do anything to diminish the appearance of the grain pattern.
You might, however, want to practice a little bit first. If you have an unobtrusive spot on the house -- or on a shed, garage, etc. -- you might want to try the airless out there first to get a feel for it and see what you think of the results. You can also try it on an old piece of plywood or siding that has similar grooves.
If you do feel the sprayer is putting on too thick of a paint film, you might try a common painting technique called back-rolling, which combines the speed of spraying with some of the advantages of rolling. With back-rolling, you first apply the paint to the surface with the sprayer, then immediately go back over it with a paint roller. Use a low-nap roller and don't dip it directly into the paint, simply use it to "press" the paint against the surface. Back-rolling actually evens out the paint film and helps it adhere more tightly to the surface underneath -- a real advantage over old, dry wood -- and should help to preserve the subtle grain features by rolling out any areas where the paint has been sprayed on too thick.
source: mortgage101.com
House bill may worsen climate for subprime borrowers
In the wake of the subprime crisis, the market has turned against all except "cream-puff borrowers" -- those with no weaknesses. The cream-puffs can borrow today on pretty much the same terms as before the crisis. But borrowers with blemishes on their applications are paying much higher prices and face a much higher risk of being turned down altogether.
As if that is not bad enough, The Mortgage Reform and Anti-Predatory lending Act of 2007 (HR 3915), now winding its way through Congress, would worsen their plight. That is not the intention, of course, but the law of unintended consequences has a home in the home loan market.
Blemished borrowers have one or more of the following risk factors: They can make only a very small or no down payment; they cannot fully document their income and assets; their property is something other than a single-family home; their loan is intended to raise cash or to purchase an investment property; they have low credit scores; their income is low relative to their expected total obligations; and their mortgage carries an adjustable rate that will result in substantially higher payments in a few years.
During the go-go years (2000-2005), the mortgage market was extraordinarily tolerant of risk factors. It was not unusual to see five of them present in an accepted mortgage, a phenomenon termed "risk layering." Lending to a borrower who had no money for a down payment, who could not document adequate income and had a poor credit history was a kind of market insanity associated with the rapid run-up in house prices. Inflation of house prices converts even the worst loans into good loans. When the housing bubble burst in 2006, the chickens came home to roost in the form of mortgage defaults, which are rising to levels not seen since the depression of the 1930s.
Markets tend to overreact. Just as the housing bubble was accommodated by insanely liberal lending terms, the pendulum has now swung toward Scrooge-like stringency. The price increments associated with risk factors are now two to three times as high as they were a year ago, and risk layering has gone way down. Roughly speaking, if you have two risk factors, the price is substantially higher, and if you have three, the deal is rejected.
A major provision of HR 3915 establishes "minimum standards for mortgages," which include requirements that borrowers have an "ability to repay" and that they receive a "net tangible benefit" from a refinancing. What these rules have in common, in addition to their discriminatory impact on borrowers already victimized by misfortune, is their vagueness and lack of specific operational guidelines. In an article I wrote recently on the net-tangible-benefit rule, I gave example after example where the ultimate determinant of whether or not there was a net benefit to the borrower could not be known by the lender without reading the mind of the borrower.
The inability to know whether or not they are in compliance creates risk for lenders, which must translate into higher costs for borrowers. But HR 3915 also provides a way to avoid this risk. It offers a "safe harbor," which is a presumption that the standards have been met, provided that the loan at issue is a "qualified mortgage" or a "qualified safe harbor mortgage."
A "qualified mortgage" is one with an interest rate that does not exceed the rate on Treasury securities or an average mortgage rate by more than 3 percent or 1.75 percent, respectively. On second mortgages, the maximum spreads are 5 percent and 3.75 percent.
A "qualified safe harbor mortgage" is a loan that is fully documented, is not a negative amortization ARM, and either meets an income adequacy test, has a fixed payment for at least five years or is an ARM with a margin of less than 3 percent. The overlap between a qualified mortgage and a qualified safe harbor mortgage will be very high.
The combination of vague standards and a safe harbor means that lenders will classify loans with regard to whether or not they belong to the safe harbor. Loans that do not belong will pay a higher price or not be made. Loans that won't qualify for the safe harbor are those with the most significant blemishes.
The safe harbor removes some of the sting from the imposition of vague standards, because most loans will qualify for the safe harbor. But not all will qualify -- a new subclass of mortgages will be created that will either be priced even worse than they are now or will disappear. These are mortgages with multiple blemishes. Already clobbered by the market, they will get the coup de grace from Congress.
source: mortgage101.com
As if that is not bad enough, The Mortgage Reform and Anti-Predatory lending Act of 2007 (HR 3915), now winding its way through Congress, would worsen their plight. That is not the intention, of course, but the law of unintended consequences has a home in the home loan market.
Blemished borrowers have one or more of the following risk factors: They can make only a very small or no down payment; they cannot fully document their income and assets; their property is something other than a single-family home; their loan is intended to raise cash or to purchase an investment property; they have low credit scores; their income is low relative to their expected total obligations; and their mortgage carries an adjustable rate that will result in substantially higher payments in a few years.
During the go-go years (2000-2005), the mortgage market was extraordinarily tolerant of risk factors. It was not unusual to see five of them present in an accepted mortgage, a phenomenon termed "risk layering." Lending to a borrower who had no money for a down payment, who could not document adequate income and had a poor credit history was a kind of market insanity associated with the rapid run-up in house prices. Inflation of house prices converts even the worst loans into good loans. When the housing bubble burst in 2006, the chickens came home to roost in the form of mortgage defaults, which are rising to levels not seen since the depression of the 1930s.
Markets tend to overreact. Just as the housing bubble was accommodated by insanely liberal lending terms, the pendulum has now swung toward Scrooge-like stringency. The price increments associated with risk factors are now two to three times as high as they were a year ago, and risk layering has gone way down. Roughly speaking, if you have two risk factors, the price is substantially higher, and if you have three, the deal is rejected.
A major provision of HR 3915 establishes "minimum standards for mortgages," which include requirements that borrowers have an "ability to repay" and that they receive a "net tangible benefit" from a refinancing. What these rules have in common, in addition to their discriminatory impact on borrowers already victimized by misfortune, is their vagueness and lack of specific operational guidelines. In an article I wrote recently on the net-tangible-benefit rule, I gave example after example where the ultimate determinant of whether or not there was a net benefit to the borrower could not be known by the lender without reading the mind of the borrower.
The inability to know whether or not they are in compliance creates risk for lenders, which must translate into higher costs for borrowers. But HR 3915 also provides a way to avoid this risk. It offers a "safe harbor," which is a presumption that the standards have been met, provided that the loan at issue is a "qualified mortgage" or a "qualified safe harbor mortgage."
A "qualified mortgage" is one with an interest rate that does not exceed the rate on Treasury securities or an average mortgage rate by more than 3 percent or 1.75 percent, respectively. On second mortgages, the maximum spreads are 5 percent and 3.75 percent.
A "qualified safe harbor mortgage" is a loan that is fully documented, is not a negative amortization ARM, and either meets an income adequacy test, has a fixed payment for at least five years or is an ARM with a margin of less than 3 percent. The overlap between a qualified mortgage and a qualified safe harbor mortgage will be very high.
The combination of vague standards and a safe harbor means that lenders will classify loans with regard to whether or not they belong to the safe harbor. Loans that do not belong will pay a higher price or not be made. Loans that won't qualify for the safe harbor are those with the most significant blemishes.
The safe harbor removes some of the sting from the imposition of vague standards, because most loans will qualify for the safe harbor. But not all will qualify -- a new subclass of mortgages will be created that will either be priced even worse than they are now or will disappear. These are mortgages with multiple blemishes. Already clobbered by the market, they will get the coup de grace from Congress.
source: mortgage101.com
Builder's price-dropping bad for home values
DEAR BENNY: We bought a brand-new home in January for $709,000, but the builder is now selling similar homes in our community for $200,000 less. My neighbors and I are thinking of seeking legal advice because they are deliberately bringing the values down. --Steve
DEAR STEVE: I don't defend developers and builders, and in fact have filed my share of lawsuits for clients against them. But I cannot agree that your builder is deliberately bringing the values down. The real estate market is in bad shape, and property values in many parts of the country are depressed. Developers are using all sorts of gimmicks and come-ons (such as free plasma TV sets, or two-year free car rentals) to entice to sign contracts.
I haven't researched this area of the law in several years, but my recollection is that you will have a hard time convincing a judge that the developer is in the wrong. The judge could, of course, issue an injunction, directing that the sales price be higher -- but what good would that do if no one wants to buy?
One common thread that runs through real estate law is that real estate values are unpredictable and that no one can guarantee escalation of prices. If property values go up, you cannot be ordered to give all or some of your gain back to the developer. Similarly, if values go down, why should the developer be required to pay you any money?
I completely understand your position and your frustration. The only saving grace is that sometime in the future your house will appreciate in value.
DEAR BENNY: Could you tell us the pluses and minuses of owning and operating a bed-and-breakfast home, including tax advantages? --Rich
DEAR RICH: I know very little about bed-and-breakfasts, other that they generally are owned and operated on a "mom and pop" basis, and rely heavily on advertising and word of mouth for their customers. Some make money and others barely bring in enough income to pay the monthly mortgage. Out of curiosity, I searched the Internet and found a large number of Web sites in this area.
As or the tax advantages, they would be treated just like any other business.
If you really want to pursue this, do you want to buy an existing business or start one in your own home? Ask your accountant to run the numbers, and give him or her all of the information you have obtained, including your projections of income and expenses. Your accountant should then be able to explain the tax consequences.
DEAR BENNY: My water utility pipes run through my neighbor's property. We have an easement agreement and title. He wants to change where the pipes are, and change the easement. Can he do this? --Marlene
DEAR MARLENE: There are two parts to your question. First, can he change the location of the pipes? He would have to contact the local water authority for permission. There also may be other governmental agencies that would have to get involved before permission can be granted.
But assuming that permission is obtained, what's your position on all this? Does it really matter to you where the pipes lie, so long as your water flow is not impacted? Is the neighbor going to pay the cost of relocating the pipes? Clearly, you should not have to be asked to spend any money for the convenience of your neighbor.
Can your neighbor unilaterally change the easement? I did a little legal research and generally the answer is no. However, in some states, where the change is minimal in nature -- and in no way impacts on your ability to use the easement -- the courts have allowed a unilateral change. You will have to talk with your own attorney about this.
However, if you will not be affected, why not be neighborly and cooperate?
DEAR BENNY: I bought a property in early 1980 and put it in my daughter's name. I have been paying the real estate taxes on it, doing all of the maintenance work, and have been renting it out. Can I claim that rental property is now mine? --Bill
DEAR BILL: Sorry, the title is in your daughter's name and since she obviously is over the age of majority, she can do with it what she wants. She can also claim back rent for whatever period of time your state statute of limitations provides.
Who has been declaring income and deducting real estate taxes and other expenses over these many years? If and when the property is sold, who plans to declare and pay the capital gains tax? You and your daughter should talk to your own separate attorneys. You possibly could be facing some difficult IRS problems.
DEAR BENNY: There is a landowner in the subdivision in which I live who has a land clearing/construction company he is running from his home. The property is zoned residential-agricultural. A couple of years ago this landowner was bringing in waste cleared from other sites and dumping it in a ravine on his property behind his home. The county found out and fined him. Since then he has subdivided his property and sold part and built a new home on another part. He is continuing the dumping operation on his property. The subdivision covenants state that dumping is prohibited. Outside of the covenants, is this activity legal?
The covenants also state that landowners will pay a yearly road maintenance fee, but, despite several notices, the owner has not paid his share of the fees. The covenants also state that no commercial businesses can be run out of the landowner's homes. Unfortunately, the county does not enforce the covenants. What can be done to correct these problems? It should be noted that this landowner is abusive and has threatened his neighbors with retaliation, and the neighbors are afraid to confront him. --Cindy
DEAR CINDY: One of the major problems of community living is that all too often owners get intimidated and are afraid to take action -- even when there are clear illegal activities going on.
You should take two steps: Arrange to meet with your county supervisor and explain that this dumping activity is continuing. If the county took action earlier, it may now consider bringing criminal charges against that owner.
You should also retain a real estate attorney in your area. Hopefully, you can convince at least a few of your neighbors to contribute to a legal defense fund.
Is there a formal organization such as a board of directors in your community? If so, they should ask their attorney to investigate and take all appropriate legal action.
If you do not have the support of your neighbors, my only advice is to either accept the problems or move out of the community.
DEAR BENNY: My wife and I, along with her sister, are joint owners of their deceased mother's home. After the mother's death, we got an appraisal to establish a stepped-up valuation. My wife and I are in the process of buying out her sister's share. Are we entitled to get a new appraisal and receive a stepped-up valuation at that time? --Grant
DEAR GRANT: You can always pay for an appraisal. But if the price you and your wife are paying the sister is based on the stepped-up valuation, the sister will not have any capital gains tax to pay, and the tax basis for you and your wife will be the value at the date of the mother's death.
You are not entitled to a second stepped-up basis, because the sister did not die.
DEAR BENNY: I won the bid at public auction for a house. I was required to make a deposit of $20,000, and now the home's occupant will not allow my appraiser into the property to do an appraisal. Without the appraisal, no one seems to be able to do the loan without 30 percent down. Is it possible to have a mortgage company do a drive-by appraisal with the purchaser making only a 5 percent deposit on the loan? --Lionel
DEAR LIONEL: Congratulations! I hope you got a good price for the house.
But I seriously question why you are pursuing this matter if there is an "occupant" still in the house? Even if you are able to get a loan and take title, how will you get that person out of the house? You may have to bring an eviction action in your local landlord-tenant court, and that is both time-consuming and expensive.
Have you been able to access the house? Do you know its condition? Often, when a home is foreclosed upon (or even auctioned) the occupant takes (or destroys) a lot of the fixtures and equipment.
Have you discussed this with the auctioneer? When the auction was conducted, were there any conditions attached to the process, such as "it would be the responsibility of the successful bidder to deal with the occupant"?
And who is the occupant? Is he the current owner or just a trespasser?
This should be the responsibility of the auctioneer and/or the person who initiated the auction. If the current homeowner was the sponsor of the auction, it makes no sense that your appraiser is not permitted access. I would think that the owner would like to get rid of the house as soon as possible.
This just does not make sense and you should investigate this fully.
source: mortgage101.com
DEAR STEVE: I don't defend developers and builders, and in fact have filed my share of lawsuits for clients against them. But I cannot agree that your builder is deliberately bringing the values down. The real estate market is in bad shape, and property values in many parts of the country are depressed. Developers are using all sorts of gimmicks and come-ons (such as free plasma TV sets, or two-year free car rentals) to entice to sign contracts.
I haven't researched this area of the law in several years, but my recollection is that you will have a hard time convincing a judge that the developer is in the wrong. The judge could, of course, issue an injunction, directing that the sales price be higher -- but what good would that do if no one wants to buy?
One common thread that runs through real estate law is that real estate values are unpredictable and that no one can guarantee escalation of prices. If property values go up, you cannot be ordered to give all or some of your gain back to the developer. Similarly, if values go down, why should the developer be required to pay you any money?
I completely understand your position and your frustration. The only saving grace is that sometime in the future your house will appreciate in value.
DEAR BENNY: Could you tell us the pluses and minuses of owning and operating a bed-and-breakfast home, including tax advantages? --Rich
DEAR RICH: I know very little about bed-and-breakfasts, other that they generally are owned and operated on a "mom and pop" basis, and rely heavily on advertising and word of mouth for their customers. Some make money and others barely bring in enough income to pay the monthly mortgage. Out of curiosity, I searched the Internet and found a large number of Web sites in this area.
As or the tax advantages, they would be treated just like any other business.
If you really want to pursue this, do you want to buy an existing business or start one in your own home? Ask your accountant to run the numbers, and give him or her all of the information you have obtained, including your projections of income and expenses. Your accountant should then be able to explain the tax consequences.
DEAR BENNY: My water utility pipes run through my neighbor's property. We have an easement agreement and title. He wants to change where the pipes are, and change the easement. Can he do this? --Marlene
DEAR MARLENE: There are two parts to your question. First, can he change the location of the pipes? He would have to contact the local water authority for permission. There also may be other governmental agencies that would have to get involved before permission can be granted.
But assuming that permission is obtained, what's your position on all this? Does it really matter to you where the pipes lie, so long as your water flow is not impacted? Is the neighbor going to pay the cost of relocating the pipes? Clearly, you should not have to be asked to spend any money for the convenience of your neighbor.
Can your neighbor unilaterally change the easement? I did a little legal research and generally the answer is no. However, in some states, where the change is minimal in nature -- and in no way impacts on your ability to use the easement -- the courts have allowed a unilateral change. You will have to talk with your own attorney about this.
However, if you will not be affected, why not be neighborly and cooperate?
DEAR BENNY: I bought a property in early 1980 and put it in my daughter's name. I have been paying the real estate taxes on it, doing all of the maintenance work, and have been renting it out. Can I claim that rental property is now mine? --Bill
DEAR BILL: Sorry, the title is in your daughter's name and since she obviously is over the age of majority, she can do with it what she wants. She can also claim back rent for whatever period of time your state statute of limitations provides.
Who has been declaring income and deducting real estate taxes and other expenses over these many years? If and when the property is sold, who plans to declare and pay the capital gains tax? You and your daughter should talk to your own separate attorneys. You possibly could be facing some difficult IRS problems.
DEAR BENNY: There is a landowner in the subdivision in which I live who has a land clearing/construction company he is running from his home. The property is zoned residential-agricultural. A couple of years ago this landowner was bringing in waste cleared from other sites and dumping it in a ravine on his property behind his home. The county found out and fined him. Since then he has subdivided his property and sold part and built a new home on another part. He is continuing the dumping operation on his property. The subdivision covenants state that dumping is prohibited. Outside of the covenants, is this activity legal?
The covenants also state that landowners will pay a yearly road maintenance fee, but, despite several notices, the owner has not paid his share of the fees. The covenants also state that no commercial businesses can be run out of the landowner's homes. Unfortunately, the county does not enforce the covenants. What can be done to correct these problems? It should be noted that this landowner is abusive and has threatened his neighbors with retaliation, and the neighbors are afraid to confront him. --Cindy
DEAR CINDY: One of the major problems of community living is that all too often owners get intimidated and are afraid to take action -- even when there are clear illegal activities going on.
You should take two steps: Arrange to meet with your county supervisor and explain that this dumping activity is continuing. If the county took action earlier, it may now consider bringing criminal charges against that owner.
You should also retain a real estate attorney in your area. Hopefully, you can convince at least a few of your neighbors to contribute to a legal defense fund.
Is there a formal organization such as a board of directors in your community? If so, they should ask their attorney to investigate and take all appropriate legal action.
If you do not have the support of your neighbors, my only advice is to either accept the problems or move out of the community.
DEAR BENNY: My wife and I, along with her sister, are joint owners of their deceased mother's home. After the mother's death, we got an appraisal to establish a stepped-up valuation. My wife and I are in the process of buying out her sister's share. Are we entitled to get a new appraisal and receive a stepped-up valuation at that time? --Grant
DEAR GRANT: You can always pay for an appraisal. But if the price you and your wife are paying the sister is based on the stepped-up valuation, the sister will not have any capital gains tax to pay, and the tax basis for you and your wife will be the value at the date of the mother's death.
You are not entitled to a second stepped-up basis, because the sister did not die.
DEAR BENNY: I won the bid at public auction for a house. I was required to make a deposit of $20,000, and now the home's occupant will not allow my appraiser into the property to do an appraisal. Without the appraisal, no one seems to be able to do the loan without 30 percent down. Is it possible to have a mortgage company do a drive-by appraisal with the purchaser making only a 5 percent deposit on the loan? --Lionel
DEAR LIONEL: Congratulations! I hope you got a good price for the house.
But I seriously question why you are pursuing this matter if there is an "occupant" still in the house? Even if you are able to get a loan and take title, how will you get that person out of the house? You may have to bring an eviction action in your local landlord-tenant court, and that is both time-consuming and expensive.
Have you been able to access the house? Do you know its condition? Often, when a home is foreclosed upon (or even auctioned) the occupant takes (or destroys) a lot of the fixtures and equipment.
Have you discussed this with the auctioneer? When the auction was conducted, were there any conditions attached to the process, such as "it would be the responsibility of the successful bidder to deal with the occupant"?
And who is the occupant? Is he the current owner or just a trespasser?
This should be the responsibility of the auctioneer and/or the person who initiated the auction. If the current homeowner was the sponsor of the auction, it makes no sense that your appraiser is not permitted access. I would think that the owner would like to get rid of the house as soon as possible.
This just does not make sense and you should investigate this fully.
source: mortgage101.com
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