Homeowners react to falling real estate values
Many struggling after losing access to HELOCs

Ilyce Glink
Inman News

I'll admit to it: When home prices were soaring in my neighborhood, it made me feel really smart.

Like so many millions of other homeowners, we concluded that we chose the right house in the right neighborhood at the right time. And as the years went by, and all of us on the block could count our home appreciation month by month, all this paper equity made us feel financially secure, as in "Now we know how we're going to pay our college tuition bills down the road."

But as they say, easy come, easy go. Home prices in our neck of the woods have been falling just as they've been falling around the country.

The Case-Shiller Home Price Index released in April showed home prices in the top 10 metropolitan areas declined more than 13 percent since last year. Home prices declined in the top 20 markets, but if you were a single-family homeowner living in Las Vegas, Phoenix or Miami, you really got swatted: Single-family home prices in those cities declined by one-fifth.

Worse, many economists don't believe we've seen a bottom on housing prices. Some estimate home prices could drop a total of 25 percent from their recent highs.

We've lived in our house for nearly 15 years, so if the price comes down even 20 to 25 percent, there's still an excellent chunk of appreciation to fund the college dreams of our pre-teens. And, we've been working hard to pay down our mortgage balance, adding to our equity. I still feel like we made a good choice.

But if you bought your home in the last two to three years, all of your financial hopes and dreams, not to mention a good dose of self-esteem, may have evaporated overnight.

And, if you bought your house hoping to make a fast $50,000, you may find now that your home is worth $50,000 to $100,000 less than you paid for it. It may even be worth less than your mortgage balance. This is fine as long as you don't have to sell and you can afford your mortgage payment and plan to live in your home for some time to come.

If that news wasn't bad enough, I've been hearing from readers around the country who are in shock that their home equity lines of credit have been shut off. Apparently many readers missed the fine print on their loan documents that said the lender has the right to shut down the line of credit if their homes fell in value.

(And for those of you who are able to sell short -- that is sell your home for less than what you owe the lender -- and you don't have the lender forgive whatever part of the mortgage balance you can't pay, you may find that the lender may come after you for its loss or the private mortgage insurer that paid the lender its loss may come knocking at your new rental-house door to recoup that money.)

This is what a stuck housing market looks like. Nobody feels that smart anymore. The question is: What's going to get help?

At its most recent Open Market Committee meeting, the Federal Reserve Bank lowered the short-term interest rates that banks charge each other for overnight loans another 25 basis points, to 2 percent. The collective groan you heard was from anyone living on a fixed income, who knows that the paltry sum they're earning on their savings accounts and CDs isn't enough to keep up with inflation, let alone the fast-rising cost of basic necessities.

But longer-term mortgage interest rates haven't quite fallen along with CD rates. And while you can get a 30-year loan for around 6 percent if you have excellent credit, which is a terrific mortgage interest rate if you look at it from a historical perspective, it isn't low enough to compensate for the other mitigating factors.

The dramatic drop in home equity has spooked home sellers. Foreclosure rates have skyrocketed, hitting new records. Banks are still taking weeks and weeks and weeks to parse offers from prospective buyers. Buyers are getting fed up and are moving on to make other low-ball offers. Interest-rate locks are expiring, but if you have a jumbo loan (over $417,000), in some cases you're looking at a rate above 7 percent, even if you have good credit (and more like 9 percent if you have mediocre credit).

Fighting through all this to get a deal done is like wading through Jell-O. Just ask any real estate agent who hasn't torn his or her hair out yet.

If the real estate news wasn't bad enough, consumers have been spooked by rising prices on the basic necessities of life. The cost of gas is roughly the same as the cost of a gallon of milk. (If you want to buy a gallon of organic milk, it'll cost nearly double.) Stories in the media about how consumers are selling family heirlooms on craigslist and eBay to put peanut butter and jelly on the table are laid out next to stories about how low consumer confidence has fallen. Yuck.

The good news is that eventually, we'll move through the recession. We'll get through the presidential election (traditionally a drag on any real estate market), and people will start buying homes again.

Starting up a real estate market is a lot harder than getting the stock market rolling. But once it gets rolling, everyone is going to feel a whole lot better.

One final thought: If your lender has shut off your home equity line of credit (HELOC), you can request (and pay for) an appraisal to prove to the bank you have enough equity to support the HELOC. Or, if values in your area haven't gone down or you still have equity in your home, you can find another lender and get a different HELOC.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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Home buyer sues when appraiser misses leaky roof
Why suit was thrown out despite court's ruling

Tom Kelly
Inman News

It's been more than 13 years, but "the leaky roof" case in Washington state is still at the top of the list when it comes to defining and understanding the basic responsibilities of appraisers and inspectors. It's also become the prime ammunition used by defense attorneys in seeking restitution for their clients.

A recent example surfaced a few months ago when a Seattle-area woman made an offer on an older one-story, weekend home in the Cascade Mountains. It was more updated than the typical cabin -- insulated floors, energy-saving windows and a new septic system. She did not have the home inspected by an accredited home inspector. However, when she discovered the roof leaked, she began to mount a case against the appraiser.

Should real estate appraisers really be held accountable if their report does not disclose a leaky roof?

An important case on the issue -- Schaaf v. Highfield -- centers on the sale of a home in Bremerton, Wash., that had a leaky roof. John Schaaf, the buyer, alleged that Paul Olson, an appraiser hired by the United States Department of Veterans Affairs, conducted a negligent appraisal of the home that did not reveal the leaky roof to Schaaf.

The trial court held that a VA appraiser owes no duty to a prospective purchaser like Schaaf. The appeals court, however, held that a real estate appraiser owes a "duty of care" to third parties like Schaaf. Olson, though, was not held liable in this case because Schaaf did not rely on Olson's appraisal when he bought the house.

In addition, Schaaf said that he already knew that the home needed a new roof before he bought it. According to court papers, Schaaf stated that he "offered the lower price because the house was 16 years old and thought the house would need a new roof."

Just what does this mean to appraisers? Are they expected to be experts in the field of home repairs? Would not a leaky roof be more in line with the responsibilities of a home inspector?

"I believe we are expected to be accountable in areas of valuation," said Bill King, an independent appraiser. "But what levels of expertise are we expected to have in other areas?"

A typical appraisal on a single-family home costs about $400-$750, more for huge homes with specific amenities like timber, a swimming pool, view or waterfront. An appraisal is an estimate, or opinion, of value the market would bring if the property were offered for sale. The appraisal usually includes comparable sales from other homes in the immediate area.

Appraisals are often confused with a comparative market analysis, or CMA. Real estate agents use CMAs to help home sellers determine a realistic asking price. Experienced agents often come very close to an appraisal price with their CMAs, but an appraiser's report is much more detailed -- and is the only valuation report a bank will consider when deciding whether or not to lend the money.

Times have not been easy for appraisers. Fluctuating interest rates and flat appreciation have meant fewer jobs for "outside fee" appraisers not linked to a lender's in-house staff. And, with more disgruntled homeowners blaming appraisers for lower valuations, some conventional appraisers have looked elsewhere for income.

Attorneys who have studied and cited the Schaaf case state that while the court ruled that duty was owed to the third party, the appraiser was let off the hook because Schaaf did not see the report until more than a year later. It also brings up the issue of detrimental reliance -- you can't rely on something to your detriment when you already know about it.

One of the main issues in Schaaf v. Highfield was the possible exception of liability for an appraiser hired by the VA. Should there be a loophole when the government was involved? And, was duty owed only to the VA or to the veteran/buyer?

According to the court, "when a prospective house purchaser applies to the Veterans Administration for a loan guaranty and the Veterans Administration hires an appraiser to appraise the house solely because of the prospective house purchaser's application, the appraiser owes a duty of care to the prospective house purchaser. Federal statutes and regulations do not preempt the appraiser's common-law duties owed to the purchaser."

But will any appraiser ever be an expert in leaky roofs?

To get even more valuable advice from Tom, visit his Second Home Center.

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Seniors, leave apartment painting for the pros
Tips on packing belongings, hiring painters, choosing paint

Bill and Kevin Burnett
Inman News

Q: What is the cheapest, quickest way to paint a full studio apartment? I am a senior with limited physical and financial resources.

My problem is common to many urbanites: In San Francisco, landlords are not obliged to repaint apartments, no matter how long the tenant has lived there. So they don't. Many of us have grown out of our places, but because of rent control and high rents elsewhere, moving is not a viable option.

Here are some of the things I need to know:

1. Do I ask painters to include in their estimate the packing and unpacking of the hundreds of books, art materials, office items, etc. -- or do I hire a crew to do that? If so, how do I find one?

2. I will need dozens of boxes. Can these be rented? Is there a recycled boxes source? I may be able to store everything in the house hallway. If not, what are those large soft-walled storage crates that I see outside people's homes? Is that service available without relocation? Is it expensive?

3. The painting must happen over the weekend, as that is when I have somewhere local to stay. Do painting contractors charge more to work over a weekend?

4. Is there a quick-drying paint that doesn't smell?

A: The quickest, cheapest way to paint a small apartment is to do it all yourself. By acting as your own packer and painter you can control the time it takes to pack, prep and paint. The cost will be a few gallons of paint, some rudimentary tools (a paintbrush and a roller) and perhaps some packing boxes if you can't find enough of them at the local grocery store.

But because you are a senior with financial and physical limitations, we'll try to give you some suggestions that can keep the costs down and make the job go smoothly. We'll assume that you are hiring painters to do the painting. The actual paint job should take just one day. The challenge for you will be in dealing with your books, art and other stuff. We'll try to answer your specific questions in the order in which you've posed them.

1. Don't ask the painters to pack and unpack boxes. Painters paint. That's all. To save money boxing up your belongings is something you should do yourself. If you find you can store the boxes in the hallway, we suggest you enlist some strong young backs to hoist the boxes. Your church or the local senior center may be able to suggest a source of this labor.

If you insist on hiring the packing out, we suggest you contact a local moving company to perform the service. They can provide the boxes and, if you wish, store your property during the painting and return it when the job is done.

2. Boxes are available at moving companies -- even self-serve outfits like Ryder and U-Haul have boxes to buy. For some freebies, try a grocery store or a liquor store. We're not familiar with the soft-sided storage of which you speak. For portable storage containers try PODS (Portable on Demand Storage, www.pods.com). If you decide to use a portable storage container, check out the local regulations if you plan to leave it on the street.

3. Painting contractors will work weekends. As for price, get three estimates from licensed painting contractors. Make sure to let each know from the beginning the scope of the work and that you want it done on a weekend.

4. Most water-based paints are quick-drying. While there will be some odor, the smell will dissipate over time and once fully cured there will be no odor at all. Low-VOC and no-VOC (volatile organic compound) paints generally are low-odor products. For a discussion of low- and no-VOC paints and a list of manufacturers go to www.eartheasy.com/live_nontoxic_paints.htm.

We hear your lament about having to repaint a place you're living in. The easiest interior paint job is one where there is nothing in the house. You might take solace that in our experience moving is much worse than painting.

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Best way to divvy up house after failed relationship
Before quitclaiming share, make sure compensation is fair

Ilyce Glink
Inman News

Q: My domestic partner of 11 1/2 years and I have split up. We purchased a house in 1999. While I am on the deed, I am not on the mortgage but have been contributing towards the monthly payments the entire time we've owned the property.

She wants me to sign a quitclaim so that she can refinance the mortgage in order to get a more affordable payment for herself. Am I entitled to anything? Will she have to buy my half of the ownership? Thank you for your assistance.

A: I'm assuming that you and your domestic partner didn't take the basic, but savvy, step of preparing a business partnership agreement that outlined your financial responsibilities and ownership interests in your real estate property.

While I'm sure you thought your relationship would last forever (who doesn't think that?), the reality is about 50 percent of marriages end in divorce and it's likely that domestic partnerships are at least as susceptible to break-ups as traditional marriages.

If you had a partnership agreement, it would have outlined what each of you brought to the purchase of the property, who contributed what, what percentage of the property each of you owned, and what would happen if you broke up or dissolved your partnership down the line. When nonmarried partners purchase property, I strongly suggest that they invest a few hundred dollars in a partnership agreement that covers all of these issues.

From what you've told me, it sounds as though you're in a pretty good position. You're listed on the deed, but you're not responsible for the mortgage. I would suggest that if your partner wants you off the deed, you and she should have to agree on some sort of financial sum that represents your share of the equity in the property.

If you own the property equally, you can ask a real estate agent to give you an estimate of what the property would sell for in the current market. You can even hire an independent appraiser (cost: around $250 to $350) to appraise the property.

Then, subtract the mortgage from the value of the property and include those costs that you would have had to have paid if you and your partner had sold the home. The costs of the sale might include real estate brokerage commissions, transfer taxes and other fees that a seller ordinarily pays to sell a home. What's left is a number that you can either split in half (or nearly in half, depending on whether you are factoring in the other costs of sale), or you can subtract the cash that each of you put down on the property and then divide the equity that remains.

This may not be an easy conversation for you and your ex-partner to have, but it's a necessary one. You should also discuss how the transfer of ownership will take place. I suggest that it happen at the refinancing table. You can find a mortgage lender who will work with you and arrange to have your share of the equity paid to you at the closing, which is where you will sign away your ownership interests in the property.

While you likely didn't work with a real estate attorney when you purchased the house (that's the person who would've drawn up the partnership agreement), you should consult with one now to make sure that this process goes smoothly and you wind up with everything you're owed.

Q: I have a neighbor who burns freshly cut and wet grass constantly. The spot she burns in is directly across the street from my house, it's on the very back corner of her property very far from her house.

The smoke is horrible and the smell is disgusting. It has caused me to have two asthma attacks just this week. I can't let the kids out to play. We either have to leave the area or stay inside with all the windows closed. The fire lasts for at least a week. It smolders and then a wind will come along and it will start kicking up smoke again. The smell lasts the entire week.

We have tried to talk to her, but it didn't do any good. She has at least two acres of yard and she cuts her grass almost daily and bags and burns every bit of it. Her burning starts in the early spring and continues through fall.

We live in a neighborhood in the country so there are no city laws that apply to us. The county law states there will be no open burning: "No person shall cause, suffer, allow, or permit open burning of refuse composed of animal, fruit, or vegetable matter, garbage, offal, or any other nauseous matter of organic or inorganic matter at any time except within a furnace or incinerator, and then not in a manner which permits the escape or discharge of noxious odors."

And yet, my neighbor said that the county health department said she could burn as much landscape waste as she wants. Is there anything we can do to stop this? Thank you very much.

A: Why are you taking her version of what the county health department says as the gospel? You already know what the law says, and if what you've quoted is accurate, it seems that she should not be burning grass clippings.

Instead of fuming silently, a better idea would be to pay a visit to your county's health and building departments. Have a conversation in person about what your neighbor is burning and ask them whether it is against the law. You can provide photos or even a video for them to see. While your neighborhood may be in an unincorporated part of the country, your neighbor should still be subject to county ordinances.

Getting her to follow them may be tougher. You can push the county to enforce its rules and perhaps they will fine your neighbor, but she still may not stop. At that point, you should sit down with a real estate attorney who can advise you as to your legal options, if there are any. In addition to the local ordinance, there may be other laws that your attorney may be aware of that could be used to challenge your neighbor's burning of her yard waste by your home.

Finally, even if you are right and your neighbor is wrong, you may just have to consider selling and moving if the burning of her yard waste is making you physically ill. The most important consideration should be your good health.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

***

What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

Best way to divvy up house after failed relationship
Before quitclaiming share, make sure compensation is fair

Ilyce Glink
Inman News

Q: My domestic partner of 11 1/2 years and I have split up. We purchased a house in 1999. While I am on the deed, I am not on the mortgage but have been contributing towards the monthly payments the entire time we've owned the property.

She wants me to sign a quitclaim so that she can refinance the mortgage in order to get a more affordable payment for herself. Am I entitled to anything? Will she have to buy my half of the ownership? Thank you for your assistance.

A: I'm assuming that you and your domestic partner didn't take the basic, but savvy, step of preparing a business partnership agreement that outlined your financial responsibilities and ownership interests in your real estate property.

While I'm sure you thought your relationship would last forever (who doesn't think that?), the reality is about 50 percent of marriages end in divorce and it's likely that domestic partnerships are at least as susceptible to break-ups as traditional marriages.

If you had a partnership agreement, it would have outlined what each of you brought to the purchase of the property, who contributed what, what percentage of the property each of you owned, and what would happen if you broke up or dissolved your partnership down the line. When nonmarried partners purchase property, I strongly suggest that they invest a few hundred dollars in a partnership agreement that covers all of these issues.

From what you've told me, it sounds as though you're in a pretty good position. You're listed on the deed, but you're not responsible for the mortgage. I would suggest that if your partner wants you off the deed, you and she should have to agree on some sort of financial sum that represents your share of the equity in the property.

If you own the property equally, you can ask a real estate agent to give you an estimate of what the property would sell for in the current market. You can even hire an independent appraiser (cost: around $250 to $350) to appraise the property.

Then, subtract the mortgage from the value of the property and include those costs that you would have had to have paid if you and your partner had sold the home. The costs of the sale might include real estate brokerage commissions, transfer taxes and other fees that a seller ordinarily pays to sell a home. What's left is a number that you can either split in half (or nearly in half, depending on whether you are factoring in the other costs of sale), or you can subtract the cash that each of you put down on the property and then divide the equity that remains.

This may not be an easy conversation for you and your ex-partner to have, but it's a necessary one. You should also discuss how the transfer of ownership will take place. I suggest that it happen at the refinancing table. You can find a mortgage lender who will work with you and arrange to have your share of the equity paid to you at the closing, which is where you will sign away your ownership interests in the property.

While you likely didn't work with a real estate attorney when you purchased the house (that's the person who would've drawn up the partnership agreement), you should consult with one now to make sure that this process goes smoothly and you wind up with everything you're owed.

Q: I have a neighbor who burns freshly cut and wet grass constantly. The spot she burns in is directly across the street from my house, it's on the very back corner of her property very far from her house.

The smoke is horrible and the smell is disgusting. It has caused me to have two asthma attacks just this week. I can't let the kids out to play. We either have to leave the area or stay inside with all the windows closed. The fire lasts for at least a week. It smolders and then a wind will come along and it will start kicking up smoke again. The smell lasts the entire week.

We have tried to talk to her, but it didn't do any good. She has at least two acres of yard and she cuts her grass almost daily and bags and burns every bit of it. Her burning starts in the early spring and continues through fall.

We live in a neighborhood in the country so there are no city laws that apply to us. The county law states there will be no open burning: "No person shall cause, suffer, allow, or permit open burning of refuse composed of animal, fruit, or vegetable matter, garbage, offal, or any other nauseous matter of organic or inorganic matter at any time except within a furnace or incinerator, and then not in a manner which permits the escape or discharge of noxious odors."

And yet, my neighbor said that the county health department said she could burn as much landscape waste as she wants. Is there anything we can do to stop this? Thank you very much.

A: Why are you taking her version of what the county health department says as the gospel? You already know what the law says, and if what you've quoted is accurate, it seems that she should not be burning grass clippings.

Instead of fuming silently, a better idea would be to pay a visit to your county's health and building departments. Have a conversation in person about what your neighbor is burning and ask them whether it is against the law. You can provide photos or even a video for them to see. While your neighborhood may be in an unincorporated part of the country, your neighbor should still be subject to county ordinances.

Getting her to follow them may be tougher. You can push the county to enforce its rules and perhaps they will fine your neighbor, but she still may not stop. At that point, you should sit down with a real estate attorney who can advise you as to your legal options, if there are any. In addition to the local ordinance, there may be other laws that your attorney may be aware of that could be used to challenge your neighbor's burning of her yard waste by your home.

Finally, even if you are right and your neighbor is wrong, you may just have to consider selling and moving if the burning of her yard waste is making you physically ill. The most important consideration should be your good health.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

***

What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.