DeBarbieri
Associates Inc

Today's Top Real Estate News

Q: We are trying to decide how to proceed on a possible roof repair. Our shake roof is a little more than 20 years old, and one roofer said he thought it would last five more years.

A few years ago we had a handyman replace a row of ridge caps that were missing or broken. We noticed recently that some more ridge cap shakes were split or damaged, and we contacted a licensed roofing contractor to replace these.

He only replaced a few ridge caps in each area instead of the whole row. He also nailed down some of the older caps that were split next to the shingles he replaced.

We spoke to another roofer who said that it is not good to replace individual ridge cap shingles. He said the whole row should have been replaced. This contractor is going to take a look and give us a bid on replacing all the ridge caps.

Which of these approaches is correct? How do we know when we need a new roof and what kind of repairs are needed to prolong the life of our shake roof?

A: You'll know you need a new roof when it starts to leak. Take a trip into the attic each year after the first good rain and look for signs of water stains on the sheeting (the wood that is attached to the rafters). If you see signs of water, the roof is about dead.

You'll probably be able to have the problem area patched, but that will be only a short-term fix -- a new roof is in your near future.

Although both are almost always cut from Western red cedar, the terms shake and shingle are not interchangeable. Shingles are thinner than shakes and are smooth-sawn.

Shakes are thicker and may be smooth-sawn for a more formal look or hand-split for a more rustic look. In a roofing application, shakes will last at least 50 percent longer than shingles.

We agree with the roofer who suggested replacement of the entire ridge cap. Here's why: The ridge cap -- the point where two flat sections join -- is the weak link in an otherwise properly installed shake roof.

Kevin has a taper-sawn shake roof on his house. It's a gable roof on both the garage and the main building. The roof is 15 years old and mostly in great shape. But the ridge cap needs some help.

When a cedar shake roof is brand-spanking new, the wood has high moisture content. As the roof ages, the shakes acclimatize and lose moisture. They expand and contract with the weather.

In the rainy season the wood swells; in the hot summer sun the shakes shrink (say that 10 times fast).

Eventually, the movement causes cracks in the shakes. In addition, exposing the surface of the shakes to the ultraviolet rays of the sun causes decomposition and the shakes lose some surface over time.

The average useful life of a cedar shake roof is 25 to 30 years, depending on the climate, although we've seen some last as long as 50 years. This longevity is due to the natural decay resistance of cedar and the roof application process.

Cedar naturally contains tannins that resist fungus and insects. As to the application process, when properly done, each course of shakes is interwoven with roofing felt, which creates a three-ply wood roof with tarpaper between each ply.

On gable, gambrel or hip roofs, the point where two flat sections of roof meet is the ridge. While the rest of the roof consists of layers of flat shakes, the ridge is made of two shakes stapled together and overlapped to cover the point where the two sections of roof meet. The joint where those shakes are stapled together is the weak spot.

Over the years, with the inevitable expansion and contraction, the ends of the shingles crack and the staples fail. When this happens, there's a fair to middlin' chance the roof will leak at the ridge.

When ridge cap pieces become so deteriorated they need replacement, we think the best practice is to replace the entire run. Replacing ridge shakes piecemeal will most likely require revisiting the project many times, which invites damaging material that is in good shape.

It's better to do the job once and right than to continue to replace material that was going to fail anyway.

Contact Bill and Kevin Burnett:
E-mail	Letter to the Editor

The checkered beginnings of reverse mortgages made them a difficult sales proposition to seniors. In the early years, some programs gave the lender a bigger share in the home than the homeowner, the amount of available money that could be tapped was too low, and the fees were too high.

Toss in the fact that seniors are wary by nature, often have little to risk, and view paying off the roof over their head as the ultimate measure of success and pride.

Now, many of the chuckholes on the road to reverse mortgage acceptability have been filled. If you doubt that, simply check with the investors on Wall Street, who are more than willing to pay a premium to buy these assets, creating a secondary mortgage market for the once-orphaned loans.

A reverse mortgage historically has enabled senior homeowners to convert part of the equity in their homes into tax-free funds without having to sell the home, give up title, or take on a new monthly mortgage payment.

Reverse mortgages are available to individuals 62 and up who own their home. Funds obtained from the reverse mortgage are tax-free.

The biggest lift to reverse-mortgage credibility came in 1989, when the Federal Housing Administration agreed to insure the Home Equity Conversion Mortgage (HECM), which not only allowed owners over 62 to stay in their homes for as long as they wished but also protected the owner in the event the lender went out of business.

HECMs now account for nearly every reverse mortgage written today. Other private reverse-mortgage "jumbo" funds have virtually evaporated given the present credit crisis. More than 130,000 HECMs were originated last year.

AARP reported that approximately 93 percent of applicants were satisfied with the process.

The next boost for reverse mortgages toward acceptance was a single national loan limit (presently $625,500) and then onset of fixed-rate products (presently about 5.5 percent).

However, not every homeowner qualifies for the maximum. A borrower's age, along with prevailing interest rates, determine the actual amount of the HECM. Older borrowers qualify for the greatest amounts.

The Housing and Economic Recovery Act of 2008 approved the HECM for purchase program. The move allows older homeowners to make a large downpayment on a new home and then utilize the reverse mortgage as permanent financing.

The same law reduced the maximum loan fee on reverse mortgages to 2 percent on the initial $200,000 of the home's value and 1 percent on the balance thereafter, with a cap of $6,000. Previously, HECM fees were capped at 2 percent of the home's value or the county lending limit, whichever was lower.

However, given investors' appetite for reverse mortgage securities, many of those fees have been eliminated or significantly reduced. Why did this happen and what does it mean for consumers?

In a nutshell, Wall Street sees reverse mortgages as a more predictable asset class, and the mortgages have finally reached a supply threshold that allows for group discounts to lenders -- many of whom pass the savings on to consumers.

For example, national lender Seattle Mortgage offers several new products on the fixed-rated HECM:

• No servicing fee (approx $3,000 in additional cash available).
• Reduced upfront mortgage insurance premium (can be up to 2 percent of claim amount).
• No origination fee/no servicing fee (equal to up to $6,000 in origination fee, and $3,000 in servicing fee savings).

The savings to a borrower vary depending upon home value, but all options result in greater loan proceeds to the borrower.

Sunwest Mortgage Company is among a variety of lenders to announce reductions in fees for servicing, origination, mortgage insurance premium (MIP), and title insurance fees.

"The reduced fee options aren't necessarily going to be available for long," said Sarah Hulbert, senior vice president and reverse-mortgage manager at Seattle Mortgage.

"It's a great time for seniors contemplating a reverse mortgage to begin the process. It's all a function of how the secondary markets value reverse mortgages. If they begin paying less for the fixed-rate HECM, we very well may see some of the fees return."

If you are senior in the market for a reverse mortgage, or an adult child doing the research for Mom or Dad, the good news is that fees have come down dramatically. The puzzling news (not to be confused with "bad") is that there could well be some costs in today's advertised "no-cost reverse mortgages."

Make sure you understand the up-front costs and those incurred down the road.

Reverse mortgages have hit the mainstream. With that comes a variety of combinations and sliding scales.

Tom Kelly's book "Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border" was written with Mitch Creekmore, senior vice president of Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com.

Contact Tom Kelly:
E-mail	Letter to the Editor

Q: If I sign a "Buyer Representation Agreement -- Exclusive" (form), can I cancel it at a later date? --Igor, California

A: That depends. Every year, more and more buyer's brokers require their clients to sign an exclusive buyer representation agreement before they invest lots of time and gas money into the enterprise of helping them house hunt.

Sometimes this is because the agent has been burned by disloyal clients seeing a home with them, but then writing the offer with their cousin the agent, or with the listing agent, in an effort to get a rebate.

Other times, it's because the broker's office requires it, or because the agreement (like the California form you reference, the "Buyer Representation Agreement -- Exclusive" form) very clearly specifies the things an agent does and doesn't do, and allows the buyer and broker to agree in advance to forms of alternative dispute resolution, like mediation and arbitration.

In other cases, agents simply use these forms as a convenient, logical entree to the discussion of how agents get paid, why it's important for the agent to actually write the offer, and other details of the buyer-broker relationship, so that the buyer is clear on exactly how it all works (and many homebuyers are not clear on this at the outset!).

On my very first transaction, the buyers (friends of mine) decided to go window shopping at open houses one Sunday when I was going out of town. I offered them a stack of my business cards, but they said, "No, no, we're just looking. We're not serious yet." They went out and -- pursuant to Murphy's Law -- found the home of their dreams.

Despite their expression that they had an agent, the listing agent wrote up an offer on their behalf. Immediately, they left and ran to call me in their excitement!

They were thrilled, and knew I would be, too -- they didn't have the faintest clue that, by writing the offer with the listing agent, they had essentially decided they would no longer be working with me. They were flabbergasted, dismayed and apologetic when I explained what had happened to them.

They didn't get the house, so it ended up being a non-issue. But forever after, I informed my clients up front how real estate relationships and compensation worked.

Perhaps the best feature of the form you're considering whether to sign is its flexibility. In the first paragraph, it allows you and your agent to enter start and end dates for the contract. I'd encourage you to start out with a very short-term agreement, especially if you have doubts as to whether this agent is "your" agent.

To satisfy your agent's (realistic) concern about being used to show houses, and then you buying a house with another agent, why don't you sign the first agreement with a very short term -- a weekend, say, or even a couple of weeks.

That way, you can have a clear conversation that this is really a trial, relationship-building period for you both. Then, when you feel a bit more comfortable, you can sign one for a longer period of time.

Most agents I know who use these agreements agree that they would never want to work with a client who decided not to work with them, and they have a professional policy of releasing clients upon request.

However, I'd encourage you to negotiate and sign an addendum that gives both you and the broker a 48-hour exit clause. If either one of you feels like breaking up with the other, you give a notice. That would provide 48 hours for the disgruntled party to cool off and make an effort to work it out, but would not bind either of you unreasonably to someone you don't want to work with.

Happy house hunting!

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	E-mail	Letter to the Editor

In the heady days of the housing boom, so-called FHA loans ended up being the lonely guy sitting on the sidelines.

After all, at that time the mortgage market had a free-flowing and apparently limitless pipeline of funds for borrowers who had little to no money for a downpayment. Demand for the Federal Housing Administration's programs to help first-time and low-income buyers dwindled.

That was then, as they say. This is now, when lending policies have gotten considerably more stringent in the wake of the housing downturn.

Suddenly, the government program that's been around since 1934 is looking a lot more attractive to a lot more people: The agency went from being involved with just 464,000 loans in 2007 to 2 million loans in fiscal 2009, according to a recent speech by its commissioner, David Stevens.

Its share of the market, depending on the region, is 30 to 50 percent.

So, for many homebuyers, FHA is the name of the game these days. Five things to know about FHA mortgages:

1. The FHA doesn't make loans, it insures them. Participants in FHA-insured mortgages get their loans through conventional lenders whose standards meet the FHA's.

The agency's guarantees mean that lenders can be confident that they won't lose money on the loans and can make more of them -- thus, in theory, helping to keep the housing market flowing.

2. FHA loans are attractive to many borrowers because they require as little as 3.5 percent down, compared to the so-called conventional market, which these days typically requires 10 percent down or more for competitively priced rates.

They're relatively easy to qualify for: The FHA places no income restrictions. Borrowers can have middling credit histories. In addition, FHA policies allow borrowers to include gifts from family members in their downpayments.

Currently, the FHA doesn't set a qualifying credit score for borrowers, according to FHA spokesman Lemar Wooley.

"We don't really have a hard minimum score requirement," he said. "We ask our lenders to look at the entire credit picture, with the major requirement being the ability to repay the loan."

However, Wooley said, a 580 score (on an 850-point scale) is set to become the minimal requirement, though an implementation date has not been set. Currently, applicants with scores below 500 do need to increase their downpayments to 10 percent, he said.

The FHA allows borrowers to allocate as much as 43 percent of their income to housing and long-term debt costs, which in the mortgage business is called a back-end ratio; conventional loans vary slightly in that cap, although they generally limit their borrowers to a back-end allocation that's several percent less.

3. FHA's insurance isn't free: Homebuyers with FHA-insured loans will pay an upfront premium at the time of closing (2.25 percent of the purchase price) and then for an extended period will make monthly payments to cover the annual cost of the insurance, 0.5 percent of the amount of the loan, Wooley said.

4. As popular as they are these days, FHA-insured loans aren't for all borrowers.

"I'm not a big fan of government loans," said Dale Robyn Siegel, a White Plains, N.Y., mortgage broker and author of "The New Rules for Mortgages" (Penguin/Alpha).

Siegel says that if conventional loan paperwork is significant, the FHA's is even more daunting. In addition, the FHA is strict about the physical state of the home that's being purchased.

"If the property isn't in good condition, FHA might reject it," Siegel said. "If the FHA borrower is lower-income, and then has lower savings after they close (on the house), you have less money to fix it. So the house needs to be in better condition, out of the gate."

Another potential roadblock: FHA limits the sizes of loans it will insure, from about $271,000 in low-cost areas to nearly $730,000 in high-cost areas.

5. Many borrowers these days think FHA is the only game in town, but it isn't, Siegel said.

"I would always say, 'Get a second opinion,' " she said.

She said some borrowers with bruised credit presume they'd be ineligible for loans in the conventional market, though that's not necessarily so. Borrowers with downpayments of less than 20 percent from those lenders still would have to get mortgage insurance from a private source, she said.

Siegel said the threshold for getting an FHA loan sounds more generous than it would turn out to be in the marketplace. "The FICO score (that FHA will permit) is 580, but good luck, try and get it approved," she said.

More information on FHA-insured mortgages, including its state-by-state listings of mortgage limits, is available at fha.gov.

In the heady days of the housing boom, so-called FHA loans ended up being the lonely guy sitting on the sidelines.

After all, at that time the mortgage market had a free-flowing and apparently limitless pipeline of funds for borrowers who had little to no money for a downpayment. Demand for the Federal Housing Administration's programs to help first-time and low-income buyers dwindled.

That was then, as they say. This is now, when lending policies have gotten considerably more stringent in the wake of the housing downturn.

Suddenly, the government program that's been around since 1934 is looking a lot more attractive to a lot more people: The agency went from being involved with just 464,000 loans in 2007 to 2 million loans in fiscal 2009, according to a recent speech by its commissioner, David Stevens.

Its share of the market, depending on the region, is 30 to 50 percent.

So, for many homebuyers, FHA is the name of the game these days. Five things to know about FHA mortgages:

1. The FHA doesn't make loans, it insures them. Participants in FHA-insured mortgages get their loans through conventional lenders whose standards meet the FHA's.

The agency's guarantees mean that lenders can be confident that they won't lose money on the loans and can make more of them -- thus, in theory, helping to keep the housing market flowing.

2. FHA loans are attractive to many borrowers because they require as little as 3.5 percent down, compared to the so-called conventional market, which these days typically requires 10 percent down or more for competitively priced rates.

They're relatively easy to qualify for: The FHA places no income restrictions. Borrowers can have middling credit histories. In addition, FHA policies allow borrowers to include gifts from family members in their downpayments.

Currently, the FHA doesn't set a qualifying credit score for borrowers, according to FHA spokesman Lemar Wooley.

"We don't really have a hard minimum score requirement," he said. "We ask our lenders to look at the entire credit picture, with the major requirement being the ability to repay the loan."

However, Wooley said, a 580 score (on an 850-point scale) is set to become the minimal requirement, though an implementation date has not been set. Currently, applicants with scores below 500 do need to increase their downpayments to 10 percent, he said.

The FHA allows borrowers to allocate as much as 43 percent of their income to housing and long-term debt costs, which in the mortgage business is called a back-end ratio; conventional loans vary slightly in that cap, although they generally limit their borrowers to a back-end allocation that's several percent less.

3. FHA's insurance isn't free: Homebuyers with FHA-insured loans will pay an upfront premium at the time of closing (2.25 percent of the purchase price) and then for an extended period will make monthly payments to cover the annual cost of the insurance, 0.5 percent of the amount of the loan, Wooley said.

4. As popular as they are these days, FHA-insured loans aren't for all borrowers.

"I'm not a big fan of government loans," said Dale Robyn Siegel, a White Plains, N.Y., mortgage broker and author of "The New Rules for Mortgages" (Penguin/Alpha).

Siegel says that if conventional loan paperwork is significant, the FHA's is even more daunting. In addition, the FHA is strict about the physical state of the home that's being purchased.

"If the property isn't in good condition, FHA might reject it," Siegel said. "If the FHA borrower is lower-income, and then has lower savings after they close (on the house), you have less money to fix it. So the house needs to be in better condition, out of the gate."

Another potential roadblock: FHA limits the sizes of loans it will insure, from about $271,000 in low-cost areas to nearly $730,000 in high-cost areas.

5. Many borrowers these days think FHA is the only game in town, but it isn't, Siegel said.

"I would always say, 'Get a second opinion,' " she said.

She said some borrowers with bruised credit presume they'd be ineligible for loans in the conventional market, though that's not necessarily so. Borrowers with downpayments of less than 20 percent from those lenders still would have to get mortgage insurance from a private source, she said.

Siegel said the threshold for getting an FHA loan sounds more generous than it would turn out to be in the marketplace. "The FICO score (that FHA will permit) is 580, but good luck, try and get it approved," she said.

More information on FHA-insured mortgages, including its state-by-state listings of mortgage limits, is available at fha.gov.

Contact Inman News:
E-mail	Letter to the Editor

In May 2009, Candace Booth filed a Chapter 7 bankruptcy petition. Her outstanding debts were mortgages against a home she was in the process of trying to rent or sell, credit cards and an auto loan.

Booth had paid cash outright for her personal residence in March, 2009 by liquidating her retirement and brokerage accounts and obtaining a small amount of money from her daughter, according to court records.

In her bankruptcy petition, Booth listed her personal residence as being protected as a fully exempt homestead property under Florida Constitution Article X, Section 4(a)(1) and Florida Statute Sections 222.01 and 222.02.

Prior to the recession, Booth had been in business as a natural health consultant and also received some income via social security. Her business reportedly dried up during the recession, and by the time she filed for bankruptcy relief, she was earning $8 an hour working part-time in her daughter's business, and had a negative net monthly income, according to court records.

After the evidentiary hearing in the bankruptcy court, the bankruptcy trustee filed an objection to Booth's bid for homestead protection of her residence.

The trustee argued that Booth had purchased the property using non-exempt assets with the intent to "hinder, delay, or defraud" her creditors, as barred by 11 U.S. Code Section 522(o).

The federal bankruptcy court for the Middle District of Florida overruled the trustee's objection and found that Booth's personal home did in fact have homestead protection and could not be liquidated to pay her creditors.

First, the court explained that to defeat Florida's homestead protection, the Trustee would have to show one or more "badges," or indicators, of fraud and extrinsic evidence of Booth's intention to defraud her creditors at the time she purchased the home.

The court rejected the trustee's argument that the following actions of Booth provided sufficient indicia of her intent to "hinder, delay or defraud her creditors," so as to invalidate homestead protection on her personal residence.

Recounting the unraveling of Booth's financial stability fact-by-fact, the court determined that the sequence of events showed Booth's innocent intent. Booth had obtained the home equity line of credit for her daughter's use in financing her business; and her daughter had committed to making the monthly credit line payments, the court found.

Only when the economic downturn impacted her daughter's business and prevented her from continuing to make the payments did Booth realized that the indebtedness on the line of credit had risen to $39,000, the court also found.

Booth quickly realized that she could not make the payments on the mortgage and the line of credit on her then-home and still cover her living expenses. She consulted a mortgage broker and was advised that she could not refinance the home due to its drop in value; a real estate broker she talked with advised her to sell or rent that home, and instructed her to move out of the property to maximize the chances of it selling.

He also reportedly advised her to purchase the second home to ensure herself a place to live. She was never advised by either professional that the option of a short sale existed, according to court documents.

Booth charged some living expenses and expenses of preparing the home for sale to her credit cards, but the court found that she did so with the full intention of repaying them.

When her own business deteriorated in April and May of 2009, she became unable to pay her bills. Booth, a 64-year-old woman, testified that she was panicked about having a place to live and didn't think the matter through properly when she decided to buy a new home rather than simply pay off her mortgages with the funds from her liquidated retirement and brokerage accounts.

Because the court found Booth's testimony to be credible, it refused to find that she had the intent to defraud her creditors when she purchased her personal residence. Accordingly, the trustee's objection to Booth's home's protection from her creditors under the Florida homestead statute was overruled.

DEAR BENNY: I fell behind on my mortgage last fall due to the replacement of an HVAC system. I thought I missed two payments. I called my lender and asked for some help. (The lender) told me that I did not qualify. I made two full payments, but my last payment was returned.

Approximately one week later I received a notice from a law firm that I was in foreclosure with a sale date coming up in less than one month.

Although I have asked, I have never received a statement from my lender detailing my payment history. I sent a note to the law firm disputing the debt and requested a copy of the original loan documents, along with the amount past due. Does the lender have to produce the original document prior to a foreclosure sale? The foreclosing attorney seemed to feel that this was a non-issue. --Preston

DEAR PRESTON: You have raised several issues. First, you disputed the debt. Under the Fair Debt Collection Practices Act (FDCPA), if a consumer gets a letter from a debt collector (which includes lawyers), that letter must state:

"This letter is an attempt to collect a debt. Any information obtained will be used for that purpose. Federal law gives you 30 days after you receive this letter to dispute the validity of the debt or any part of the debt. If you do not dispute the validity of the debt, or any portion thereof, the debt will be assumed to be valid by this office.

"If you do dispute it -- by notifying me in writing within the 30-day period -- we will, as required by law, obtain and mail to you verification of the debt."

So, in your case, if this was the first letter you received about the default, it would appear that the lawyer violated the law. You may still be in default on your loan, but it may help you to at least postpone the foreclosure sale. You should write the lawyer, advising him or her that there is a violation of FDCPA, and that you insist on getting verification of the debt.

If that does not work, you should immediately get an attorney to assist you. You may have to file suit not only to enjoin the foreclosure sale, but to add a complaint against the attorney. The law provides monetary relief for violations of the act, as well as attorney fees should you succeed.

Next, you asked whether the lender must have the original loan documents -- especially the promissory note that you signed when you first obtained the mortgage loan. This is a hotly debated legal issue all over the United States. In the past, mortgage lenders would bundle a number of loans and sell them to such organizations as Fannie Mae and Freddie Mac.

It is called "securitization." In many instances, no one really knows where the original notes are; they may be buried in some New York City vault, or for that matter anywhere in the world where an investor purchased the bundle.

Although securitization was one of the factors that caused the mortgage meltdown a couple of years, I won't discuss this in my column. However, many judges throughout the country have taken the position: "No note, no foreclosure"

This is not universal, since some judges have not agreed with that position. Perhaps some day, the U.S. Supreme Court will tackle that issue. But in the meantime, get a lawyer in your state to review your state law (including any cases in this area). If there are cases in your state that will assist you, by all means use this as a defense to the foreclosure action.

DEAR BENNY: I am fed up with paying taxes to our greedy and burdensome governments. If I can find somebody I trust and we both don't have liens, can I sell my property for a minuscule amount and the second party sell his to me for a minuscule amount to reduce property taxes? In a year or less, we could sell back to each other. Is this legal? --Willard

DEAR WILLARD: I understand and feel your pain about having to pay taxes. However, if you go this route, you and your trusted friend may end up with a smaller place in which to live -- namely, a prison cell.

No, it is not at all legal. You are defrauding the government, and both parties to such a scheme could face prosecution.

My understanding of most state recorders of deeds is that they will impose a recordation/transfer tax on the assessed value of the property, and not necessarily on the actual sales price. In your case, unless you can explain why you are selling your house for such a low (minuscule) price, you both will still have to pay the full transfer and recordation tax in order to swap properties.

Next, regarding the property tax, once again, my understanding is that taxing authorities use their assessed value -- and not necessarily the purchase price. So I am not at all sure you would be gaining anything by using this process.

And, more important, if you both were to re-exchange properties within a short period of time (say one or two years), I suspect that you will get caught. With every jurisdiction now using computerized programs, it is a lot easier for the government to find out what you both have done.

Equally important: You will have to file your annual federal income tax showing your new address. The IRS will want to know about the sale, and that will also trigger a possible investigation.

It is a creative idea, but I cannot recommend it.

DEAR BENNY: In a recent article, a reader wanted to know whether it is better to make extra monthly mortgage payments or pay a larger sum at the end of the year. I suggest monthly payments. However, you failed to advise the reader to check to make sure there is no prepayment penalty in the contract.

If there isn't a prepayment penalty, I would suggest they ask for an amortization schedule and verify the balance of their loans before making extra payments. This way they can follow along on their amortization schedule to make sure that they and the bank continue to have the same balance during the existence of the loan.

This is how they should go about making payments. Once they have their amortization schedule, verified the balance with the bank and made sure there is no prepayment penalty, they should make their regular payment monthly and then pay the principal payment of the next month's scheduled payment and show "PP" for prepayment beside that payment on their schedule.

At the beginning of the loan the principal payment is very small and you can usually pay off several months to years of your loan in just one payment. This way you avoid all that large interest amounts each month.

I did this on each of my mortgages when buying my current house. Each time I refinanced my mortgage, I requested an amortization schedule and a non-prepayment penalty clause to shorten my repayment time. I was able to wipe away two to three years of payments with just an extra $100-$120 for the first prepayment alone.

So making a prepayment monthly saves you more in the long run than making one single payment at the end of the year and also eliminates more years of payment.

I hope this helps, but I would like to remind the persons who do this to make sure that they keep track of their prepayments on their amortization schedule as well as making a note on their checks that they send to their banks. --Connie

DEAR CONNIE: You make several good suggestions. First, when prepayment penalties are involved, it's true that a lender will charge you extra moneys if you want to pay off the loan before its maturity date, or will not let you pay it off at all before it comes due.

However, from my experience, any prepayment penalty deals with paying off the loan in full -- and not just making extra payments every year. You are correct, however, that home borrowers should confirm whether there is any such penalty. The promissory note that you sign is where you will find that information.

Second, whether or not you decide to make extra monthly payments, it is a good idea to get an amortization schedule from your lender. You can also get that online, just by typing "amortization tables" into your favorite search engine.

When you get the IRS Form 1098 from your lender each year showing how much you paid for mortgage interest and real estate taxes, make sure it is completely accurate. If the lender makes a mistake and the numbers are too low, you could lose valuable tax deductions.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

Contact Inman News:
E-mail	Letter to the Editor

DEAR BARRY: We recently hired a contractor to enlarge our living room. But there is a dip in the wood flooring where the addition meets the original construction. When the work was still in progress, we noticed that the old and new floor surfaces were uneven, but the contractor told us it would not be noticeable once the wood flooring was installed.

Now that the work is finished, it is very noticeable, and the contractor refuses to take responsibility and fix it. What recourse do we have since we have already paid him for the completed work? --Amber

DEAR AMBER: The contractor's refusal to correct the problem is entirely unreasonable because you pointed out the unevenness before the hardwood was installed. At that time, it was his responsibility to make adjustments in the subfloor before installing the finished flooring. Low places could have been filled, and high places could have been leveled by sanding or grinding the surfaces.

These would have been normal repair procedures for a contractor or tradesperson who is knowledgeable about construction and takes pride in his work. When your contractor made excuses rather than adjustments, he undertook full responsibility for the unsatisfactory outcome. He gave you false assurances, and now he should stand by his word.

If he refuses your fair request to correct the problem, he should receive a strongly worded letter from a construction defect attorney. A consumer complaint should also be filed with the state agency that licenses contractors. And you should have the work inspected by a qualified home inspector to provide documentary evidence of your position.

DEAR BARRY: I bought a 7-year-old home and completely remodeled the interior. Then the rains came, and leaking at the doorways damaged my new wood floors. My home inspector never warned me that this might happen.

So I hired another home inspector, and he showed me that the pavement around the house is sloped toward the building causing water intrusion at the doors. When I contacted the builder about this, he said I should call the paving contractor, but the paving contractor went out of business. So who is responsible for the thousands of dollars I spent to repair the water damage? --Jean

DEAR JEAN: First of all, the builder cannot dismiss the issue by laying it at the feet of the subcontractor who poured the concrete. Builders and general contractors are ultimately responsible for work that is done by the subcontractors they choose. "The buck stops here" is the maxim by which a builder must operate. Your builder should address this issue.

Your first home inspector also shares some liability. Drainage conditions around a building are among the primary considerations in the course of a home inspection. If the ground or pavement is visibly sloped toward the building, this should have been disclosed in the inspection report.

You should contact the inspector and ask for a reinspection of the drainage conditions around the building. You should also find out if the inspector carries errors and omissions insurance. It may be time for him to file a claim. But this should not let the builder off the hook.

To clarify these liability issues and the builder's responsibilities, get some advice from a construction defect attorney.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

Contact Barry Stone:
E-mail	Letter to the Editor

Book Review
Title: "The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams"
Author: Trent Hamm
Publisher: FT Press, 2010; 272 pages; $19.99

When it comes to personal financial advice, the field of books and blogs and gurus is cluttered.

And when it comes to changing human behavior -- especially ingrained money patterns around indebtedness, spending and saving -- it takes a very special touch to move the needle.

This genre is somewhat formulaic: tell a relatable story of inspiration, throw some action steps in and wrap it in a catchy brand -- fini.

But what's not so simple is truly capturing the heart and mind of a debt-ridden reader and striking upon the precise mix of words that flick their mental and behavioral switches so that they do something, and eventually many things, differently today, tomorrow, next week and next year than they did before they opened your book.

Paradoxically, blogger and author Trent Hamm's book,"The Simple Dollar: How One Man Wiped Out His Debts and Achieved the Life of His Dreams," manages to achieve this not-so-simple, but very worthy aim.

Every word, action item and story told in this book, the literary manifestation of Hamm's stripped-back brand, blog and message, is fully infused with a tone of straightforward, profound simplicity.

"Debt is a prison you choose." "Life is more unpredictable than you think ... and almost all planning ignores that fact." "Focused debt repayment changed our lives." Hamm shares his (sometimes unconventional) epiphanies, the story of how he arrived at them, and then provides very immediate, powerful tips.

Here's his story, in (very brief). Hamm was saddled with debt so large he feared opening the mail when his lovely wife found that -- surprise! -- she was pregnant.

A tearful breakdown at the sight of his infant son and the thought of how his debt would impact his child's life served also as the breakthrough that propelled Hamm to begin a systematic program of slashing expenses, rethinking his family's above-its-means lifestyle and selling stuff to reduce his debt, an exercise he eventually began to blog about.

In the long-term, Hamm ended up with zero debt and the resulting freedom to become a full-time writer and family man.

It is Hamm's utterly relatable, everyman-turned-extraordinary story; his willingness to share the action steps he gleaned along his path that make "The Simple Dollar" interesting, readable and actionable.

Hamm is just a regular guy, like you and me, whose love for his son inspired him to get out of the debt hamster wheel and the resulting career rat race trap.

But it is his tone and voice that place his advice in that small slice of money advisories that simply make you want to follow it. Super simple. No perspective on the finance industry to push or investment theory to espouse.

Just: Here's what I did, why I did it, and why it will work for you. And here's how to get started, and how to stay inspired. You literally read it and just want to do some of this stuff, stat.

Another strength of Hamm's advice: it is immediate. Every chapter concludes with five steps to achieve the top-level aim discussed in the chapter, and many of the steps can be executed or started that very day.

Momentum-builders? Check. Some steps speak directly to the challenges of maintaining that momentum, staying the course -- probably the toughest part of this type of major behavior change.

Finally, Hamm thinks about and writes about his money, his debt and his life in a very real-world way that many financial advisers ignore. So many pundits assume that debt reduction is a worthy goal in and of itself, and that no additional motivation for taking the challenge of eliminating debt is necessary. Not so.

Hamm's tack is much more reality-based, especially for Generations X, Y and Z: debt traps you. It limits your options. It forces you to do work of a particular type, for a particular amount of time, in a particular location and for a particular employer that is very likely not what you would choose if you could choose freely.

The potential freedom from these traps is a source of virtually endless motivation for a sustained debt-elimination regimen.

"The Simple Dollar" offers real-world advice for real people looking to free themselves from their debt and the limitations it places on the rest of their lives.

Appropriately, the advice contained therein does relate to, but is certainly not limited to financial advice.

There is much in "The Simple Dollar" about shifts in the way you view yourself, your life, your time, your family and your future, as well as the way you approach topics ranging from the grand, like your life goals and your relationship with your partner, to the petit, like cooking, eating, buying books and shopping for clothes.

For it's uber-applicable steps, I would recommend "The Simple Dollar" strongly to anyone who struggles with debt, or spending less than they make. But I would go further and insist that you read this book if you are interested in creating an alternative, sustainable lifestyle without necessarily having a 9-to-5 job.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	E-mail	Letter to the Editor

"I received a confidential note from a firm claiming that they can eliminate my second mortgage. I am inclined to believe them because the value of our home is now less than the amount of the first mortgage. Is this an opportunity or a scam?"

The answer to your question is not clear, but the misinformation in the note they sent you suggests a need for caution. The note says "that your second mortgage ... may be eliminated due to a significant decrease in property values in your area ..." In fact, the decline in the value of your home does not in any way eliminate the second lien on your property or your legal obligation to pay the second mortgage.

The only way to eliminate the obligation is to negotiate a deal with the second mortgage lender to remove it. When a borrower has negative equity, a second mortgage lender may be willing to relinquish its claim for a fraction of the amount owed because the alternative may be to lose it all.

Some borrowers with negative equity remain current on the first mortgage but stop paying the second. This puts the second mortgage lender between a rock and a hard place. If the second mortgage lender forecloses, it will get nothing, but if it doesn't foreclose, it allows the borrower a free ride and might encourage other borrowers who are "underwater" to do the same.

Second mortgage lenders who would like to extricate themselves from situations like these may be receptive to a proposal that would leave them with something rather than nothing. This might be a cash payment, an unsecured note for some or all of the loan balance, a share in future house appreciation, or some combination of these.

The second mortgage lender in this situation has one bargaining chip. The borrower won't ever be able to sell the house without paying off the second mortgage, and the payoff amount will include all accrued interest and penalties. It would be foolish for the borrower to ignore this.

The company that contacted you wants you to authorize them to negotiate with the second mortgage lender on your behalf. While they can't do anything for you that you can't do for yourself, a professional who has done it before might be worth the cost. Before I took that plunge, however, I would do my homework on the firm, which would include interviewing past clients.

My involvement in an Internet scam

In April, an ad appeared in the "RentsBuy Classifieds" section of a real estate website in Vientiane, Laos. In part, the ad said "Apply For Your Loan Today: I am a private money lender and I render financial assistance to interested people that are God-fearing and will not take advantage of my money and run away with it … contact me at guttentag_loans@hotmail.com ..." It was signed by Dr. Jack Guttentag of the Guttentag Loan Investment Company.

The ad was seen by a local man who asked for more details. He was immediately contacted by the fake Guttentag who asked for contact information, and asked him how much he wished to borrow.

The Laotian said he needed $320,000 and the fake Guttentag then sent him an application form. The form was skimpy compared to those used here -- it asked nothing about collateral or credit, but it did ask, "Are you a trustworthy person?"

The terms of the $320,000 loan were included in the packet with the application form. The rate was 4 percent and the term 15 years, with a monthly payment (accurately calculated) of $2,367. The borrower reported a monthly income of $2,000, but in the e-mail exchanges between the Laotian and the fake Guttentag, income adequacy was never mentioned as a possible problem.

What did come out in these exchanges was a requirement that the Laotian pay an advance fee of $950. This was a legal requirement insisted on by the fake Guttentag's legal counsel, who had prepared the most elegant-looking loan agreement I have ever seen.

The deal began to unravel (and the real Jack Guttentag entered the picture) when the victim decided to see if he could find the website of the Guttentag Loan Investment Company, and instead found me. On hearing his story, I did a little online research and found, not surprisingly, that the fake Jack Guttentag resided in Nigeria, the scam capital of the world.

This was not a message the Laotian wanted to hear. His first impulse was to enlist my aid in persuading the fake Jack Guttentag to deliver the loan that had been promised him!

It took awhile for me to convince him that nobody will make a loan of $320,000 to someone with an income of $2,000 a month, no collateral and no credit record. Legitimate lenders, furthermore, receive their fees at the time the loan is closed, not in advance.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

Contact Jack Guttentag:
E-mail	Letter to the Editor

During the recession in 2001, a strong home-sale market was instrumental in pulling the economy back on track. The opposite may be the case now. The economy, particularly employment, needs to improve before the housing market stabilizes.

Low interest rates are helping the home-sale market today, but the housing market is far from stalwart. Unemployment is high; mortgage qualification is difficult; and most buyers can't afford to buy a new one without selling their existing home first, creating a logjam in the repeat homebuyer segment of the market.

Interim or bridge financing that buyers used routinely in the past to buy a new home before selling their current home is virtually nonexistent in today's market. An interim loan is a loan secured on your current home to generate cash for a downpayment on a new home.

Homeowners who have a home equity line of credit (HELOC) secured against their property can tap unused funds to convert equity to cash in order to buy a new home before selling first.

HOUSE HUNTING TIP: Seller financing could be the answer for some homebuyers. One possibility would be to ask the sellers of the home you want to buy to carry financing until you sell your home.

If the sellers have no mortgage secured against the property -- i.e., they own it free and clear -- they might be willing to carry a first mortgage. Compared to other investment options, 5 percent or so from a buyer with good credit and a decent downpayment could be attractive if the seller doesn't have an immediate need for the proceeds from the sale.

As with all terms of a purchase agreement, the terms of seller financing are negotiable -- everything from the interest rate, when the loan is due, how and when payments are made, the amount of the late fee, etc.

Interest on the mortgage can accrue and be due when the loan is paid off. Or payments can be amortized and paid monthly. Particularly with a first mortgage, sellers will probably want to receive periodic payments. However, it lowers the buyers' carrying costs while they own two homes if the seller will defer payments until the note is paid off.

A more common scenario than a seller-carry first mortgage would be to find sellers of a home you'd like to buy who have enough equity to carry a second mortgage secured either against your current home or on the home you are buying from them.

This wouldn't work if the sellers have already committed their proceeds from the sale, like to the purchase of another home.

If the sellers carry a second mortgage on your home, it should not require approval of your first mortgage lender. However, you would need to be able to qualify for a first mortgage on the new home. In order to be approved for that loan, your overall debt-to-income ratio will be scrutinized by the lender's underwriters.

The underwriters will factor in the cost of the seller-carry financing into your overall debt. Most lenders will also want the term or due date of the seller's loan to be not less than five years from closing. Check with your mortgage broker or lender before making an offer that will include seller financing to find out what the first lender on the new home will require.

The sellers will want their loan paid off when your current home sells. The first mortgage lender might allow a seller-carry second mortgage with a due date in five years or when your home sells, whichever occurs first.

THE CLOSING: The lender wants to make sure the buyers aren't faced with a large balloon payment due months after closing.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."

Contact Inman News:
E-mail	Letter to the Editor

Most of us equate grieving with the emotional process that follows a death of a loved one. In fact, to grieve is to mourn and process any grave loss.

At this stage in the game, the average American has lost tens or hundreds of thousands of dollars' worth of the value of their home, with 25 percent having lost so much that they now owe more than their home is worth, according to the Wall Street Journal.

I've been both an observer (in some cases) and participant (in others) in the evolution of this grief throughout this recent market decline, as it has played out in the lives of those around me and in the trending topics I'm asked to weigh in on online.

And it struck me recently that what I've been observing can perhaps be best understood and analyzed in the rubric provided by the five stages of grief, first articulated by Elizabeth Kübler-Ross, author of the seminal work, "On Death and Dying."

Originally, these were intended to apply to help understand the human emotions that play out when you or a loved one has recently passed away or been diagnosed with a terminal illness.

As the model matured, though, even Kübler-Ross herself began to understand that these stages were applicable to many other types of catastrophic losses and tragedies outside of the realm of death and dying.

Kübler-Ross's steps, as applied to losing a home's value -- or even losing the home altogether -- might look like this:

Stage 1: Denial. "Eh, the market'll bounce back pretty quick." "The government/banks/Bush/Obama/Fed won't let it get much worse." "The Realtors have a powerful lobby." "Markets go up and down -- market cycles are par for the course."

Stage 2: Anger. "Are you kidding me?!" "My place is worth 50 percent of what I paid for it?!" "This is all a conspiracy -- the government/banks/Bush/Obama/Fed were all in on this." "Those idiots who took those stated-income loans/those idiots who walk away from their homes are responsible for this whole mess." "It doesn't pay to do the right thing and pay your bills on time, I guess."

Stage 3: Bargaining. This is submitting a loan modification application that begs for a major principal reduction, or insisting that your real estate agent must have pulled the wrong comparables to arrive at such a low value. Bargaining is about delaying or postponing the inevitable foreclosure, for many who have taken hits to their income or are facing looming payment increases.

Stage 4: Depression. Those who are missing payments may stop opening the mail or answering the phone entirely. Guilt blossoms here, as does the tendency to "awfulize" and focus on the feeling that their credit will never recover, they'll never be able to find another place to live, they'll never get another home, they've lost everything, etc.

Those who aren't missing payments, but are realizing the serious extent of their lost value, may mentally spin on the feeling that they're trapped: they'll never be able to move. They'll never be able to refinance. These feelings are not reality-based, but it feels very real to them at the time.

Stage 5: Acceptance. In this context, acceptance often includes an acknowledgment that you may have made some mistakes in your earlier mortgage decision-making. It often also includes a detachment and a dis-identification from your home.

You no longer see it as your everything, who you are, or your biggest asset. You may begin to see it as your biggest liability or, more neutrally, simply a building, a belonging, a place to live -- but certainly not the only place you could live or home you could or will ever own.

At the acceptance stage, efforts to save it at any means necessary start to seem an immature flight of fancy, and your intention may shift to saving your other financial assets. In this stage, those committed to living in their homes stop railing at what is unfair and begin to express gratitude that they can still afford to make their monthly payments, when so many cannot.

But this is also the stage when people start consulting attorneys and accountants to help them decide whether to walk away.

In my observations, the manner, speed and severity at which a homeowner experiences these stages of grieving has a lot to do with how hard their local market and their home's value was hit, and with what else was going on for in their scenario, what other what other simultaneous personal catastrophes they were experiencing in the realm of their finances. Did they suffer through a long, drawn out loan-mod limbo?

Denial and bargaining might stretch out for as long as your bank seems like they are considering your workout package, and their bargaining and anger phases tend to fall in reverse order. Anger erupts only after they realize the futility of all the effort you put into the bargaining vis-a-vis your loan-mod application.

These folks tend to go from anger to acceptance with lightning speed -- many even walking away from their homes or surrendering them via deeds-in-lieu of foreclosure -- proportionally as fast as their loan mod process was slow.

Were there dozens of other foreclosures on the block or in the complex? If so, the anger stage might be more like an intense rage that banks weren't doing more to help your neighbors stay in their home, snowballing into an avalanche taking your home's value down, too.

Lost a job? Your mortgage rate adjusted and payment increased, but the value reduction made it impossible to refinance?

Any of these such events that renders someone unable to even make their mortgage payment can force owners quickly out of denial and hold them much longer in depression.

What would Kübler-Ross recommend? She would point out the eventual acceptance that most will arrive at is a blessing that ends the suffering of the earlier stages. But she might also speak on her belief that "everything in this life has a purpose, there are no mistakes, no coincidences, all events are blessings given to us to learn from."

Kübler-Ross thought this sentiment applicable even to -- perhaps especially to -- the tragedies. In the real estate sense, the tragedies could be losing value in your home or losing the home altogether. The treatment for this grief? Find the lessons, accept them, and keep on living.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	E-mail	Letter to the Editor

When you're looking for a way to keep just part of your house cool this summer, you might want to consider a mini split air conditioning system. These systems strike a happy medium between individual window or wall air conditioners and central air conditioning, in terms of size, installation cost and operating cost.

All air conditioners work the same way, whether they're self-contained in a small window unit or set up in a larger split system. There are three basic components to the system: a compressor, a condenser and an evaporator.

A refrigerant material enters the compressor as a cool, low-pressure gas. In the compressor it is compressed, changing it to a hot, high-pressure gas. It then enters the condenser, where the heat dissipates and the gas changes to a cooler, high-pressure fluid.

It then passes into the evaporator through a tiny hole, causing the liquid's pressure to drop. The liquid changes back into a gas, and as it does so it absorbs heat from the air around it. Now a low-pressure gas again, it returns to the compressor and the cycle is repeated.

How a mini split system works

Unlike central air conditioning, mini split systems don't have any duct work. Systems such as these have been very popular in Europe, Japan and other parts of the world for a long time, and are just starting to gain popularity here in the U.S. They can cool one or more interior spaces without the cost of cooling the entire house.

They're perfect for keeping the bedrooms cool at night without spending energy dollars to cool the rest of the house, or for cooling just the family room, living room, man cave or other areas of the house where a lot of activity takes place.

There are three basic components to the mini split system. An outdoor unit houses the condenser and compressor. It sits on a small poured or prefabricated pad, alongside the house in a location that's convenient to the location of the interior unit(s). This is also one of the big advantages over window or in-wall air conditions, since it isolates all the noise outside of the house.

Inside the house, there's an evaporator unit that gets mounted on the wall. Since cool air naturally falls, the evaporator unit is typically mounted fairly high on the wall, usually just a short distance down from the ceiling, so it doesn't disrupt furniture placement. And unlike window air conditioners, it doesn't disrupt natural ventilation or views, or create potentially dangerous obstacles to egress in an emergency.

Depending on the size and design of the system, two or more interior evaporator units can be connected to a single exterior condenser unit, and some systems can handle up to four.

For example, in a three-bedroom house you could install one in each of the bedrooms, operated off a single exterior unit. The interior units are whisper-quiet, so they're ideal in a bedroom environment. And the other big advantage is that the occupant of each bedroom can set his or her own temperature, regardless of the settings of the other units.

The third component of the system is the line set that connects the interior and exterior units. For each indoor unit there are two pipes -- one for the liquid refrigerant and one for the gas -- plus a condensate drain line, an electrical line and a thermostat line.

All of these are usually bunched together in one 3-inch or larger flexible conduit, which simplifies the installation.

What are the disadvantages?

Nothing's ever perfect. With the mini split system, the primary downside is the cost. If you already have a central heating system, you'll probably find that it's actually less expensive to simply add central air conditioning to your existing system. However, if you're starting from scratch, these systems should prove less expensive than central air when you factor in all the duct work.

If you're an avid do-it-yourselfer, you may find this to be another disadvantage. These aren't really designed with the home handyman in mind. In fact, in some cases doing the installation yourself may adversely affect your warranty.

However, running the line set between the interior and exterior locations can often require drilling, removal of drywall, patching and painting, and other tasks that you might want to undertake yourself to save money. Same with trimming landscaping and pouring the pad for the exterior unit.

Talk with the contractor and see what tasks you can handle on your own, and how much the savings might be.

Remodeling and repair questions? E-mail Paul at paulbianchina@inman.com. All product reviews are based on author's actual testing of free review samples provided by the manufacturers.

Contact Paul Bianchina:
E-mail	Letter to the Editor

Q: We tragically lost our home in California to foreclosure in 2008, after doing everything we could to try to keep it. A check was given to us in exchange for the keys. Sometime later we received a lien for the back HOA dues owed. Is that legal?

If the bank takes back the home, does that mean that the HOA dues would be paid by the bank or negotiated with the buyer? --Laurence

A: Sorry to hear that you've had such a tough time, Laurence. First, let me explain one item of your letter that's somewhat unrelated to your actual question for the readers I know are wondering. Many banks offer foreclosed homeowners a move-out assistance payment known in the industry as "cash-for-keys" to leave the property in good condition when they vacate. It sounds like that's the check you received.

But onto your question -- unfortunately, your situation is quite common. Many foreclosed homes in developments managed by homeowners associations (HOAs) are months' or years' worth delinquent on their HOA dues at the time of the foreclosure.

Given that foreclosure takes six months or longer in most areas, the vast majority of owners facing foreclosure are very aware that it's coming. The vast majority of these people stop paying their property taxes and HOA dues when they realize that they're going to lose their home.

The type and extent of HOA collection efforts, which are legal, depends on the terms of any agreements that you signed when you bought the property, the laws of your state, and the factual scenario surrounding your home, especially after you lost it. Let me outline the landscape of this for you.

Virtually everywhere, HOAs are authorized under state law and the terms of the complex or subdivision's covenants, conditions and restrictions (CC&Rs) to place a lien on the property once your dues fall delinquent by a certain amount (usually a certain time period, like 90 days behind).

However, this lien is placed against the home itself, not your personal property, salary or bank account.

The HOA may require the lien to be removed before the title to the property can be transferred to a new buyer, which would mean either the bank or the next buyer would have to pay the lien off to close the deal (many banks do in fact pay these types of liens off when they resell a property after foreclosure).

However, you should be aware that it's totally in the bank's own discretion whether or when it tries to sell your former home. In some instances, the bank does not even attempt to resell the property for months or even years following a foreclosure.

And it may do nothing to pay off the delinquent dues until it absolutely has to -- which is when escrow closes on its resale of the home.

Under the terms of many HOA agreements and CC&Rs, the HOA may pursue a variety of traditional collection efforts -- including siccing a collection agency on you or taking you to court -- until the back dues are paid. The HOA doesn't care who pays them -- you, the bank or even the eventual buyer -- but it does have the right to take legal means to collect the money until someone pays.

Your next step should be to closely read the lien you received a copy of -- it is probably a lien against the home, not a levy against your personal property or bank accounts. Paying the lien off to clear the property is no longer your responsibility -- the bank will deal with that.

However, do be aware that the HOA can and may pursue you for the delinquency personally, if it chooses to do so before someone else pays it.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
Facebook	Twitter	E-mail	Letter to the Editor

Q: One of my tenants has asked for permission to keep a dog as a "companion animal." He gave me a letter from his doctor, but it's so poorly written that I suspect it's fake, even though it's on a letterhead. This guy also seems perfectly normal to me. How can I challenge the legitimacy of this letter without getting into legal trouble? --William D.

A: When a tenant claims to have a disability and asks for special treatment, landlords are within their rights to ask for documentation of two things: that the tenant legally qualifies as a person with a disability, and that the accommodation sought will enable the tenant to live safely and comfortably in the rental.

(If the tenant's disability and need for the accommodation are obvious -- for example, the tenant uses a wheelchair that won't fit through a doorway -- then landlords should skip the request for proof.)

In the past, this documentation almost always took the form of a letter from a doctor. In recent years, however, the U.S. Department of Housing and Urban Development (HUD) has broadened the acceptable sources of confirmation to include, for example, "third-party professionals." Most often, this term is understood to mean medical professionals.

Landlords are not forbidden from using their common sense when evaluating the documentation a tenant provides. First, however, keep in mind that your impressions of your tenant as "normal" must be put aside. The way this person appears to you is irrelevant. The only evidence you can rely on is what the tenant's doctor, therapist or other professional provides.

It's not difficult to concoct fake letterhead and write a letter purporting to be from a doctor. But there's an easy way to check, first, that this doctor really exists. Doctors are licensed in every state, and the state licensing board will be able to tell you whether someone with this name is licensed.

Most of the time, all you need do is enter the name and see if there's a match in the licensing board's website database. If there's no match, there's no such doctor and you've got your answer.

But what if a doctor by that name exists in your state, and you think the letter-writer simply used his or her name? Here you must tread carefully, because you do not want to be seen as impeding your tenant's request or harassing your tenant. Don't demand another letter or ask to speak personally with the doctor.

It may be reasonable, however, to call the doctor's office, explain who you are and why you are calling, and simply ask for confirmation that the doctor wrote the letter.

Even if the letter is legitimate, you may run up against an objection based on the Health Insurance Portability and Accountability Act (HIPAA), the federal law that protects the privacy of medical information. In that event, consider writing a letter to the doctor, attaching a copy of the letter the tenant provided, and ask for confirmation that the doctor wrote the letter.

If the letter is legit, the doctor should have no problem vouching for its accuracy. But if you've uncovered a scam, you can be sure you'll hear about it, and that the doctor -- whose identity has been stolen, after all -- will be getting in touch with the authorities to look into your tenant.

Q: When I worked in the U.S., I had an apartment with a year's lease, and I got a $200 "concession" when I signed up. Halfway through the lease, my company in Germany transferred me back home, and I had to break the lease. I found a new tenant to take over right away, and the management company approved and signed her up -- for a whole year.

Now the company is telling me that it will deduct the concession from my deposit, because I didn't finish the entire lease term. But the company got a new tenant, and for an additional six months! This doesn't seem fair. --Gertrude K.

A: On first blush, it doesn't seem fair at all. Although you broke the lease, you did the legwork to find an acceptable replacement, saving the management company the time and expense of advertising, showing and handling the turnover. In addition, the company got an extra six months of continual renting.

The company may have incurred some screening expenses in connection with verifying that your offered replacement was appropriate, but that's about it. If challenged, it would probably justify the concession claw-back on that basis.

But the real question is: What did the lease clause say with respect to the concession? If it specified that the concession would be rescinded upon the tenant's unjustified departure, you might be out of luck right there.

A careful tenant in your situation and faced with such a clause would ask management to forgo the claw-back in light of your re-renting success, and would obtain a written agreement to do so. But it doesn't sound like you followed that route.

Though it's a long shot, the concession itself may have been improperly described in the first place. In Illinois, for example, any rent concessions must be described in the lease, in letters not less than one-half inch in height, consisting of the words "Concession Granted," including a memorandum on the margin or across the face of the lease stating the amount or extent and nature of each such concession.

Failure to comply is a misdemeanor in Illinois (765 Ill. Comp. Stat. 730/3).

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com.

Contact Janet Portman:
E-mail	Letter to the Editor

Everyone intuitively understands that properties sitting alongside a body of water -- whether it is an ocean, lake, river or even a stream -- command a premium over and above a similar property away from the waterfront, even if it is in the same development.

Waterfront/non-waterfront land price comparisons are the easiest to understand, but they are not the only premiums that get established. What type of premium is placed on mountain-view land or properties sitting alongside fairways in a golf resort? And do all lakefront properties get the same benefit in terms of pricing?

David Wyman, a lecturer at Clemson University and a candidate for a doctorate degree at the University of Aberdeen in Scotland, along with a compatriot, Stephen Sperry, decided to take a look at those questions. They had found the perfect contained laboratory to do their studies.

Not far from their residences in South Carolina can be found a local reservoir, Lake Keowee. It's a considerable body of water covering 18,500 acres, measuring 23 miles in length and boasting 300 miles of shoreline.

"It's crystal clear, blue water with the Blue Ridge Mountains in the background," gushed Wyman. "It's absolutely gorgeous."

The beauty of the setting, as can be expected, attracted builders of one sort or another, one of which created a development called The Reserve at Lake Keowee, a 3,900-acre lakeside, golf-course community.

"Earlier in this decade, this place, like many others in the United States, started to experience incredible price appreciation, so what I was originally looking at was ... why is one lot worth $1 million and another just $200,000?" Wyman explained.

"What we found was that there was an incredible variation of special factors in regard to different types of lots, different slopes or even different shore lines. All those added up to be different ways to value property."

When comparing different premium lots, on the golf course, with mountain views or on waterfronts, the most expensive pieces of dirt are still those at the water's edge. However, not all lake waterfront properties value equally.

The most expensive waterfront lands were labeled "point lots," and they were almost peninsula-like in that they jutted into the water, offering up big, wide, 180-degree views.

"These wide-open views are the most valued," says Wyman. At the Reserve, a point lot was valued at $1.75 million at peak, which was before the financial/housing crises that began in 2007. Recently, a point lot sold for $1.5 million (not much in the way of price depreciation over the recession years).

A second category of waterfront land was called "deep-water lots," and referred to land that showed a limited view of about 300 feet. Today, those lots sell for $750,000 to $800,000. Depreciation here, too, has been mild.

Finally, there was something called "cove lots," which in a self-explanatory way means a home built on an inlet of water, or cove, with limited views. Often there is land blocking the view of the larger body of water. At peak these lots sold for $500,000, but prices have since settled into the $300,000 range.

At the Reserve, the developer carved out a small number of plots with wonderful, unobstructed views of the Blue Ridge Mountains. These were less expensive than point lots and deep-water lots, but more pricey that cove lots. At peak, these lots sold for about $450,000 and that price has come down gently, about 10 percent to 15 percent over the past four years.

The Reserve at Lake Keowee was planned around a Jack Nicklaus-designed golf course, so pitched into this mix were a large number of golf plots. Here, too, Wyman and Sperry felt the need to differentiate.

The lots with prime views, especially over the putting green and beyond to the fairway, were called Pine Golf Views. They were sold originally in the range of $300,000 to $350,000. Today, they'd sell for $275,000.

The non-prime fairway sites, called Fairway Golf Views, sold four years ago for $300,000. Now they sell for $200,000.

Finally, in the development were a large number of interior lots with no views and no waterfront. At one time these sold for $140,000, but as Wyman notes, today they are almost impossible to sell. No one wants them.

"If you really wanted to get rid of an interior lot, it might go for $70,000," says Wyman. "These are the dog lots and historically they are interesting because at the height of the boom, in 2005 and 2006, prices skyrocketed. Now, here in 2010, real estate agents won't even list them. They are a dime a dozen."

If there is anything Wyman wants readers of the study to take with them, it's not only that developers have to be very specific when creating price variations due to, among other factors, topography and access to water, but for investors, the premium-quality properties not only hold their value better but are easier to sell because high-end buyers have the cash to make a purchase during times when there is little credit.

Wyman also noted that properties with the residence already constructed are taking longer to sell than properties that are still in a natural state, which is probably because speculators who still have capital buy raw land but users who want to live in the houses unfortunately don't have the money readily available to buy what is essentially a second home.

"If you're a user/buyer and have the money, wait until you are ready to use the property before buying," says Wyman. "If you are an investor, then you should wait until you can get a special deal. There's no hurry for the latter type of buyer -- banks are holding onto troubled properties (and) not actively advertising foreclosures."

He adds, "If there is a house on the property, it is more likely to deteriorate in value, so push for a better deal."

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade," has been ranked as a top-selling real estate investment book for the Amazon Kindle e-reader.

Contact Steve Bergsman:
E-mail	Letter to the Editor