DEAR BOB: My stubborn mother, 78, owns her home free andclear, is alert and in quite good health. The house is worth about $450,000.When I recently visited her (I live about 1,500 miles away so don’t get to seeher often), I was shocked at how run down her house has become. The roof leaks.I could smell the mold. She finally admitted to me, after a glass or two ofchampagne at Sunday brunch, that she has outlived her assets, except for SocialSecurity and a small pension. When I suggested a reverse mortgage, which youoften recommend, she said her banker recommends a home equity loan to pay for anew roof and other repairs. She wants to stay in her house “forever,”especially because she loves her garden. What do you suggest? –Thomas R.
DEAR THOMAS: The big drawback of a home equity credit lineis it requires monthly payments of at least interest only. If your mother is onlimited income, how will she be able to afford the monthly interest payments?
Purchase Bob Bruss reports online.
As you know, I often suggest a senior citizen reversemortgage should be obtained only if the homeowners expect to stay in their homeat least five years. The key reason is the up-front reverse mortgage fees arequite expensive unless amortized over five years or longer.
A reverse mortgage could solve your mother’s financialproblems by providing a lump sum for a new roof and other repairs, and perhapseven for a frivolous expenditure such as a trip around the world or a new car.Then she can use the balance of her entitlement to provide a credit line orlifetime monthly income, as she chooses.
To locate reputable local reverse mortgage originators foryour mother, I suggest you go on the Internet to
NO HOMEOWNER INSURANCE FOR MOLD DAMAGE
DEAR BOB: A few months ago we started noticing a mysterysmell in our home, which was built in the 1960s. It doesn’t have a basement. Atfirst, we got used to it. But when friends visit, they try to be polite butthey often comment about the smell. Finally, a neighbor said, “I bet youhave mold under the house or in the walls.” Long story short, we hired a”mold inspector” who said there was a leak in the flashing around ourchimney, which was causing extensive mold as the water drips under the house.We had the roof flashing repaired, but the smell persists. Our homeowner’sinsurance company refuses to pay to remove the mold beneath the house. Do wehave any recourse? –Marge W.
DEAR MARGE: Most homeowner insurance policies now excludecoverage for damage caused by mold and fungus unless you purchased a specificmold/fungus endorsement at extra cost.
Consider yourself fortunate if you and your family membershave not suffered any adverse health reaction to the mold. Most homes have somemold, but usually not serious. Without insurance, however, you are on your ownto remediate the mold. Of course, when you sell the house, you must disclosethe mold problem to your buyers.
HOW ARE CONDO MONTHLY FEES DETERMINED?
DEAR BOB: My parents are closing on the purchase of acondominium next month. I think they will be paying too high a monthly feerelative to other units in the complex with larger square footage. Are condomonthly fees based on square footage or the price paid for the condo? –Sue S.
DEAR SUE: Condominium homeowner association monthly fees aredetermined by the method specified in the conditions, covenants, andrestrictions (CC&Rs). Many condo CC&Rs set the monthly fees based onunit square footage. Others use the number of bedrooms. Still others use a flatfee system.
I have never heard of monthly fee assessments based on thepurchase price of the individual condo unit. Please read the CC&Rs (or askthe homeowner association treasurer how the monthly fees as assessed).
NO RECOURSE IF BORROWER DIDN’T READ THE LOAN DOCUMENTS
DEAR BOB: My wife and I refinanced our house. We were verydisappointed to discover our new loan allows for negative amortization, whichwas never disclosed to us by the mortgage broker who was recommended by a closerelative. We trusted the mortgage broker. Originally, we wanted to take out$50,000 to pay some debts, but were convinced to borrow the maximum of 80percent of market value. We admit we made a big mistake in not reading themortgage documents before signing. Now we feel we were misled big time. Whatcan we do to make the mortgage broker responsible to the full limit the lawwill allow? –Segundo C.
DEAR SEGUNDO: Sorry, you have no legal recourse against themortgage broker for not disclosing the negative amortization possibility ofyour home loan. It is up to home loan borrowers to read their mortgagedocuments before signing.
For readers not familiar with negative amortization, thatterm means the interest rate on an adjustable-rate mortgage can increase fasterthan the borrower’s monthly payment adjusts. The result can be unpaid interestis added to the mortgage balance. In the future, don’t be so trusting of yourrelatives.
WITHOUT CO-OWNER’S SIGNATURE, HOME CAN’T BE SOLD
DEAR BOB: My son’s wife deserted him and their two daughtersover a year ago. She pays her $400 half of the mortgage and is now living inthe same county with another man, but is incommunicado with her address andphone unknown. My son cannot keep up with the home expenses and I have assistedhim. But Realtors will not accept a listing for the sale of the house withouther cooperation. Can he get a court order to force her to agree to a sale of the$350,000 residence, which has a mortgage of about $90,000? –Paul R.
DEAR PAUL: Presuming there has been no divorce or legalseparation agreement, and both spouse’s names are on the title, your son’slegal recourse is a partition lawsuit to force the sale of the house. He shouldconsult a real estate attorney to be certain the wife is properly served with asummons and complaint.
STEPPED-UP BASIS APPLIES TO INHERITED RENTAL PROPERTY
DEAR BOB: You often mention inherited real estate and”stepped-up basis” to market value. I am 81 and plan to leave myrental condo to my stepson when I pass on. I have deducted about 10 years ofdepreciation on this property. If he sells it, will that depreciation be”recaptured” and taxed? –Mary W.
DEAR MARY: No. As I often say, death is the ultimate taxshelter. After you die and leave your rental condo to your stepson by will orin your living trust, he will receive a new “stepped-up basis” tomarket value on the date of your passing.
Uncle Sam will be grieving upon your death and he willforgive any depreciation recapture tax that you would have to pay if you sellthat rental condo before you die. For more details, please consult your taxadviser.
DON’T TAKE ZILLOW.COM ESTIMATED MARKET VALUE SERIOUSLY
DEAR BOB. My wife and I bought our home on Oct. 4, 2005, for$660,000. The Zillow.comestimated market value is $812,000. But our neighbor’s house has a $653,000estimated Zillow value. Our home is described as two bedrooms, 1.5 baths, and1,853 square feet. It actually has 2.5 baths and is 2,200 square feet. How canZillow place such a high market value on our home? In my opinion, the”Zestimate” is valueless. –Robert T.
DEAR ROBERT: The Zillow.com Web site is fascinating because it offers free “Zestimate” marketvalues for approximately 60 million U.S. residences based on recent comparablenearby home sale prices and public records. But there is no guarantee ofaccuracy.
What I find remarkable about Zillow is it offers maps, oraerial photos, showing the residence location.
Personally, my home is located on an odd-shaped hillyparcel, but the aerial photo clearly outlines in yellow my lot boundaries. Foranother property I own, Zillow shows a map with nearby landmarks such as majorstreets, a lake, creek, and even a railroad track.
Zillow is a great Web site to show where a residence islocated in relation to adjacent properties, plus an estimated market value. Atleast the free price is right.
The new Robert Bruss special report, “How to Obtain theBest Appraisal of Your House or Condo,” is now available for $5 fromRobert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet delivery at
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News