Title Insurance

Some Frequently Asked Questions
about Title Insurance.

Why do I need title insurance?

Owning real estate is one of the most precious values of freedom in this country. Get the assurance that the property you are buying will be yours. Other than your mortgage holder, no one else should have any claims or restrictions against your home.
Title insurance eliminates any risks and losses caused by faults in title from an event that occurred before you owned the property.

How does title insurance differ from other types of insurance?

Title insurance is different from other types of insurance in that it protects you, the insured, from a loss that may occur from matters or faults from the past. Other types of insurance such as auto, life or health cover you against losses that may occur in the future. Title insurance does not protect against any future faults.Another difference is that you pay a one-time premium. A title insurance policy will protect you from risks or undiscovered interests.

There are two principal forms of title insurance:
The lender’s policy
The homeowner’s policy

Q. What is a lender’s policy?
A. Lender’s policy protects the mortgage holder. If there is a fault in title that results in a loss, the mortgage holder will be paid back.
Q. What is a homeowner’s policy?
A.A homeowner’s policy protects you, the purchaser, against a loss that may occur from fault in your ownership or interest you have in the property. You should protect the equity in your new home with a title policy.

What does a homeowner’s policy provide?

Protecting from financial loss due to demands that may be charged against the title to your home, up to the cost of the title policy.

Payment of legal costs if the title insurer has to defend your title against a covered claim.

Payment of successful claims against the title to your home covered by the policy, up to the cost of the policy.What “hidden risks” are protected under a title policy?

False impersonation of the true owner of the property by the seller or other persons previously in title.

Forged deeds, releases and other documents.

Deeds by persons of unsound mind.

Deeds by minors

Invalid documents completed by an expired power of attorney

Invalid deeds delivered after the death of the grantor

Deeds by supposedly single persons but actually married

Fraud

Claims for unpaid estate inheritance and gift taxes against prior owners of your home.

Unrecorded easements – giving one party the right to enter another party’s property

Undisclosed descendents of former owners of your home or the land on which it is situatedHow long does my coverage last?

Once purchased, title insurance remains in effect for as long as you own your property. Title insurance adds security and peace of mind to homeownership.

Financing your Home

Financing your Home

What can I afford?
Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don’t want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts. It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and pre-qualify you for a loan.

The price you can afford to pay for a home will depend on six factors:
Gross income.
The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
Your outstanding debts
Your credit history
The type of mortgage you select
Current interest rates

Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI.

The ratio should fall between 28 and 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to income ratio should be in the 34 to 38 percent range.

What do I do if I get turned down for a loan ?
Increasing numbers of loan applicants are finding ways to buy their own home despite past credit problems, a lack of a credit history or debt-to-income ratios that fall outside of traditionally acceptable ranges. Ask the lender for a full explanation, then appeal the decision in writing.

What is the first step when looking for a home loan?
Most experts recommend that you should get pre-qualified for a loan first. By being pre-qualified, you will know exactly how much house you can afford. Almost all mortgage lenders now pre-qualify people, and many of them can even do it on the internet.

You can also do your own affordability calculations; most recent consumer books on home buying include steps to doing so, as do various real estate Internet sites.

How do you qualify as a first time buyer?
In general, lenders define first time home buyer as someone who has not owned any real estate – whether a personal residence, vacation home or investment property – during the past three years. Lenders verify an applicant’s status by examining their income tax returns, checking to see that the individual did not take any deductions for mortgage interest or property taxes.

Appraisals & Market Value Q & A

How is the value of my home determined ?
You have several ways to determine the value of a home. An appraisal is a professional estimate of a property’s market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house.

A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analysis in the hopes of winning your business.

You can also get a comparable sales report for free from private companies that specialize in real estate data. You also can find comparable sales information available on various real estate Internet sites.

What exactly is bad credit?
There are numerous types of credit report problems that would cause a lender to reject your application for a loan. Such problems include: missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes. Other black marks on a credit report include having a judgment filed against you (perhaps for non-payment of spousal or child support) or collection activity.

If you feel that your credit report is wrong, experts say it’s best to take it up with the organization or company claiming you owe them money. But if you’ve been late paying your bills regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration. You can order a copy of your own credit report by calling the three major agencies: Experian at (800) 392-392-1122, Equifax at (800) 685-1111 and Trans Union at (312) 408-1050.

Save Darfur

Did you know that 2.5 million people have been driven from their homes in Darfur, Sudan? Each day, they face threats that are hard for us to even imagine including rape, disease, and starvation.

These people need our help to put an end to the genocide and they need it NOW. Please join us in taking the first step to stopping the violence.

Click here to sign the Save Darfur Coalition’s petition urging President Bush and UN Secretary-General Ban to take immediate steps to stop the killing.

Together, we can make a difference in the lives of millions of people in the region who desperately need outside help.

The Save Darfur Coalition is urging President Bush and the UN Secretary-General to prevent further killings, displacement, and rape by deploying UN peacekeepers, strengthening the understaffed African Union force that is already in Darfur, establishing and enforcing a no-fly zone, increasing humanitarian aid, and ensuring access for delivery of food, medication and other essential supplies.

Please do not stand by while the violence continues – you can make a difference. Click here now to get involved.

Then please forward this message to your friends and family and ask them to join you.

If you’d like to make a donation to support the campaign, click here now.

Thanks for your help.

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Donate to Help Save Darfur
Help build the political pressure needed to end the crisis in Darfur by supporting the Save Darfur Coalition’s crucial awareness and advocacy programs. Click here now to make a secure, tax-deductible online donation: http://www.SaveDarfur.org/Donate

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The Save Darfur Coalition is an alliance of over 175 faith-based, advocacy and humanitarian organizations whose mission is to raise public awareness about the ongoing genocide in Darfur and to mobilize a unified response to the atrocities that threaten the lives of more than two million people in the Darfur region. To learn more, please visit http://www.SaveDarfur.org.

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Wall Street Closing

Today is Good Friday, when Christians honor the day that Jesus Christ was crucified on the cross.

It’s called “good” because, according to Christian doctrine, on this day Jesus was crucified for the redemption of our sins. The term “good” (used in English and Dutch) is probably a corruption of the term “God’s Friday.” It’s called “Holy Friday” in Latin America. Slavs and Hungarians call it “Great Friday.” In Germany, it is “Friday of Mourning.” And in Norway, it’s “Long Friday.”

 

But why is the stock market closed?

  

The New York Stock Exchange, the Nasdaq and all regional stock exchanges are closed on Good Friday because of a long-standing tradition of respect for Christian holidays. This tradition is even stronger outside the United States…

 

When I lived in Latin America in the 1960s, I remember cities that virtually closed down on Good Friday and prohibited driving an automobile!  While it’s business as usual in retailing here in the U.S., the stock exchanges maintain a strong historical tradition of staying closed.

 

Here is the 2007 holiday schedule at the NYSE (you can put this email in your “keeper” folder for future reference):

 

January 1             New Year’s Day

January 2            National Day of Mourning

January 15            Martin Luther King, Jr. Day

February 19             Washington’s Birthday (observed)

April 6              Good Friday

May 28                        Memorial Day

July 4               Independence Day

September 3            Labor Day

November 22            Thanksgiving Day

December 25            Christmas

 

Several things are notable about this list.

 

First, whenever a president dies, the exchanges select a day of mourning. January 2nd was chosen as the day to mourn the passing of President Gerald Ford. 

Second, the stock exchanges, particularly the NYSE on Wall Street and the London Stock Exchange in England, close on Christian holidays – today and Christmas.

 

Third, Wall Streeters are very traditional. They have refused to change Washington’s Birthday observance to President’s Day. Until 1953, they observed Lincoln’s birthday (February 12), Columbus Day (October 12), Veterans Day (November 11), and often Election Day (the first Tuesday of November). 

 

Although the NYSE closed on the funeral day of Martin Luther King Jr. in 1968 – the first time they did so in honor of a private citizen – the Exchange resisted adding Martin Luther King Day until 1998, years after it was declared a national holiday. (The Exchange did close to honor the death of J. P. Morgan in 1913, but only for two hours.)

What Could Close the Markets Unexpectedly?

Since 1953, the exchanges have attempted to reduce the number of official closing days, knowing that investors want the markets open as long as possible.

 

There is growing pressure, with the Internet and computerized trading, that markets can be open 24/7. Personally, I like a break from the gyrations of the stock market, and I fear the day when I will be in church one Sunday morning meditating when suddenly my cell phone rings telling me that the stock market has crashed.

I recently reviewed all the reasons the New York Stock Exchange closed since 1885. I was surprised by the number of unexpected closings, such as: 

·            Computer failures

·           Circuit breakers (the NYSE is required to stop trading when the market declines by a certain percentage)

·           Power failures, especially in the 1970s

·            Hurricanes

·           War (the exchange was closed for 5 months in 1914 at the beginning of World War I, but was never closed for World War II).

·            Terrorist attacks (September 11-14, 2001) 

 

The biggest concern is that when the markets are closed, you can’t get at your money. Your account is frozen, and there’s nothing you can do about it. And when the markets reopen, the value of your accounts may drop sharply.

What to do? Always keep a month’s worth of spending cash (banknotes) stored safely at home and/or a safe deposit box. Buy some gold and silver coins (pre-1965 silver dimes, quarters, halves and dollars, known as “junk” silver). They will maintain their value, and may even increase in value, during a financial crisis.

 

Fixer-uppers

Fixer-uppers

The oft heard phrase “Buyer Beware” is never more appropriate than when considering the purchase of a fixer-upper. You really need to know exactly what youre getting into before buying.

Its commonly believed that fixer-upper properties represent easy money that is ripe for the taking – that you can buy it, do a little work on it in your spare time, and then resell quickly for a large profit. Usually, this simply isn’t the case. Although, with proper planning and foresight, good profits can be made by buying “distressed” properties at less than market value, making appropriate improvements and repairs, and then reselling. And for many first time buyers who intend to live in the house while working on it, buying a fixer-upper can be the very best option. Its less risky buying a fixer-upper when you can live in the house while fixing it. And of course, by living in the house for at least 24 months you should be able to avoid paying regular income taxes on the profits.

The most important thing to know before making a decision on such a purchase is what needs to be fixed. Any time you are spending money on improving a home with the notion of selling it later, strive to spend your money on things that buyers can easily see. Things like new paint and removing trash from the property cost little but have instant impact on curb appeal. Houses that have only cosmetic problems like peeling paint, a trashy yard, bad carpet or wallpaper are the best bet. This is especially true for the first time buyer looking to live in the house for a while before reselling. Fixing and cleaning cosmetic issues is fairly easy and inexpensive. It virtually always gives gives a good return on investment, particularly when you can do the work yourself. Kitchen and bathroom remodeling usually pays a nice return. Dont be afraid of buying a fixer-upper in need of this kind of repair. Properties with structural damage, or a floor plan that requires major work to remedy, usually cant be “fixed up” at a profit.

  Always have an inspection for hidden damage performed by a home inspector or construction professional before buying a fixer-upper. Make sure that satisfactory completion of such inspections are a condition of purchase in any contract you sign. Then be sure to negotiate to try and get the seller to pay for all or part of the cost of needed repairs uncovered by the inspection. Often, sellers will be willing to lower the sales price to sell the home “as is” instead of paying for the repairs.

Be careful that you dont over pay. Especially if you plan to resell quickly, paying too much up front can doom your plans for quick profit. Research the market for reselling and have an exit plan for selling the house in place before making an offer.

Reverse Mortgages

Mortgage solves seniors’ cash problems

Tax-free income hard to beat

Are you or someone you know a senior citizen homeowner who is “house rich” but “cash poor?” If so, a reverse mortgage can solve the problem if the homeowner is at least 62, needs tax-free income with no monthly payments, and plans to stay in his or her house or condo at least five years.

WHAT IS A REVERSE MORTGAGE? Just the opposite of an amortized mortgage, which requires the borrower to make monthly payments over 15 to 30 years, a reverse mortgage pays money to the borrower whenever needed and requires no repayment until the homeowner sells the home, moves out for longer than 12 months or dies.

When one of those events occurs, the reverse-mortgage principal and accrued interest “matures” and becomes payable in full. If the homeowner dies, the heirs can sell the home, pay off the reverse mortgage and keep the remaining equity. Or, if the heirs want to retain the residence, they can obtain a new mortgage to pay off the reverse mortgage.

Contrary to widespread myth, the reverse-mortgage lender does not “own” the home. The lender can never force the senior citizen homeowner to sell or move out. The reason is reverse mortgages are “non-recourse” without any personal liability. Only the residence is responsible for eventual repayment, even if it loses market value or the borrower lives to be 110.

To qualify for a reverse mortgage, the homeowner must be at least 62. If any co-owner is younger than 62, the residence is not eligible unless the under-62 co-owner signs a quitclaim deed conveying his/her interest to the over-62 co-owner. When there are two co-owners, both aged 62 or older, reverse-mortgage eligibility is based on the age of the youngest co-owner.

Advanced age is an advantage when obtaining a reverse mortgage. The reason is the borrower’s life expectancy determines the amount the homeowner can receive. For example, due to a shorter life expectancy, an 80-year-old homeowner will qualify for larger reverse-mortgage payments than will a 62-year-young “whippersnapper.”

THREE TYPES OF REVERSE-MORTGAGE PAYMENTS. Reverse-mortgage borrowers have a choice of how to receive their money. The alternatives are (1) lifetime monthly income (called “tenure”); (2) a lump sum for any purpose (such as a new roof or a trip around the world); and/or (3) a credit line for future borrowing (except in Texas). Most reverse-mortgage borrowers select the credit line.

Or, the senior citizen homeowner can select any combination of these choices, such as one-half monthly payments, one-fourth lump sum and one-fourth credit line. Borrowers can change their choice at any time by notifying the loan servicer.

A REVERSE MORTGAGE MUST BE A FIRST MORTGAGE. Because a reverse mortgage has a growing balance, due to principal advances and accrued interest, it must be recorded as a first mortgage.

If the home has an existing first mortgage, it can be paid off with a reverse-mortgage lump sum. As a very general rule, if the existing first mortgage plus any other liens such as a home equity loan or an IRS tax lien exceed 40 percent of the home’s market value, the residence usually will not be eligible for a reverse mortgage.

Many senior citizen homeowners obtain reverse mortgages to pay off their existing mortgage balances. The happy result is they get rid of their monthly mortgage payments, thus increasing their monthly cash flow, since a reverse mortgage requires no monthly payments.

FOUR REVERSE-MORTGAGE ELIGIBILITY CRITERIA. The three major nationwide reverse-mortgage lenders are very different, but they all use the same eligibility criteria to determine how much cash the senior homeowner can obtain.

The criteria are: (a) the adjustable interest rate at the time the reverse mortgage is originated (all reverse mortgages use adjustable interest rates); (b) the age of the youngest homeowner (minimum age is 62); (c) the lender’s appraised market value of the home; and (d) the lender’s maximum mortgage limit.

The borrower’s income and credit rating don’t matter, but the homeowner must not be currently involved in a bankruptcy, and the residence must meet minimum standards.

THE THREE MAJOR NATIONWIDE REVERSE-MORTGAGE LENDERS. Each of the three major nationwide reverse-mortgage lenders offers very different programs.

The most popular, with approximately 90 percent of the market, is the FHA plan. However, the major FHA drawback is the low lending limits, which vary by county. Borrowers owning homes in expensive communities are often disappointed with FHA.

Higher lending limits, currently up to $417,000, are offered by the Fannie Mae “Home Keeper” reverse mortgage. But the cash available is often less than the FHA program.

However, Fannie Mae is the only lender offering a “reverse mortgage for home purchase” where the senior citizen home buyer won’t have any monthly payments.

Financial Freedom Plan (FFP) offers reverse mortgages with no maximum limit for their “jumbo cash account.” The result is owners of homes worth more than $500,000 can usually obtain the largest amount with an FFP reverse mortgage.

HOW TO DETERMINE HOW MUCH CASH YOU CAN OBTAIN. Because there are three major variables to consider — the homeowner’s age, the home’s fair market value, and the reverse-mortgage lender’s maximum lending limit — computing the available cash from each of the three major programs requires a computer.

The best Web site to estimate this amount is www.FinancialFreedom.com. Enter your ZIP code, birth date, approximate market value of your home, and total of any existing mortgages and/or other liens, such as a home equity loan. The calculator will then compare all three reverse-mortgage programs, and provide the maximum amount available from each, including “growth rates” for the FHA and FFP plans.

WHERE TO FIND LOCAL REVERSE-MORTGAGE REPRESENTATIVES. Most traditional mortgage lenders do not offer reverse mortgages because of the specialized knowledge required. Before a senior citizen homeowner can obtain one, all three major lenders require independent counseling so the borrower understands the reverse mortgage pros and cons.

The largest reverse-mortgage originators are Financial Freedom Plan (which offers all three major reverse-mortgage programs), Wells Fargo Mortgage, Seattle Mortgage and GMAC Mortgage.

The Web site of the National Reverse Mortgage Lenders Association (NRMLA), at www.ReverseMortgage.org, has lots of great information that answers typical reverse-mortgage questions. However, the NRMLA calculator is incomplete because it compares only the FHA and Fannie Mae programs. It does not include the more generous FFP program, although FFP is a member of NRMLA and subscribes to its code of ethics.

The NRMLA Web site includes state-by-state lists of local reverse-mortgage originators who subscribe to the NRMLA code of ethics. But a major list disadvantage is that only names and phone numbers, plus lender Web sites, are included so prospective borrowers don’t know if the representative is nearby or across the state.

REVERSE-MORTGAGE DISADVANTAGES. Reverse-mortgage tax-free cash sounds wonderful to senior citizen homeowners who have large home equities but not enough income. However, the reality is the homeowner will be borrowing on that equity.

Prospective heirs often discourage obtaining a reverse mortgage because the homeowner will be “spending” the heir’s home-equity inheritance. However, many potential heirs encourage their senior citizen parents to obtain a reverse mortgage so they can fully enjoy their “golden years” with financial comfort.

Some reverse-mortgage borrowers object to the substantial upfront loan fees. FHA and Fannie Mae “cap” these fees at about 2 percent of the amount borrowed, plus third-party charges for appraisal fees and lender’s title insurance. Because of these fees, which are quite reasonable when amortized over five or more years, it usually doesn’t pay to obtain a reverse mortgage if the homeowner plans to stay less than five years.

Reverse mortgages have no effect on Social Security or Medicare payments. However, senior homeowners receiving SSI (Supplemental Security Income), Medicaid (Medi-Cal in California) or other welfare payments should know those benefits can be reduced if the recipient does not spend their entire reverse-mortgage income each month.

More information is available in my new special report, “Everything You Need to Know About Reverse Mortgage Pros and Cons for Senior Citizen Homeowners,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com

Pros and Cons of Condos

The Pros and Cons of Condos

Condominiums and townhouses offer an affordable option to single-family homes in most areas. But consider these facts before you buy.

1. Storage. Some condos have storage lockers, but usually there are no attics or basements to store belongings.

2. Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you hate yard work, this may be the perfect option for you.

3. Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.

4. Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home.

5. Security. Many condos have keyed entries and or even door attendants. Plus, you’ll be closer to other people in case of an emergency.

6. Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees agreed to by the condo board, whether or not you’re interested in the amenity or not.

7. Resale. The ease of selling your unit is more dependent on what else is for sale in your building, since units are usually fairly similar. Single-family homes usually are more individual.

8. Freedom. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.

9. Proximity. You’re much closer to your neighbors in a condo or townhome. If possible, try to meet your closest prospective neighbors before making a decision.

 

10 Questions to Ask Your Condo Board

 Before you buy, contact the condo board with the following questions. In the process, you’ll learn how responsive—and organized—its members are. 

1.      What percentage of units is owner-occupied? What percentage is tenant-occupied? Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale. 

2.      What covenants, bylaws, and restrictions govern the property? What grandfather clauses are in place? You may find, for instance, that those who buy a property after a certain date can’t rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. And have an attorney review property docs, including the master deed, for you. 

3.      How much does the association keep in reserve? How is that money being invested? 

4.      Are association assessments keeping pace with the annual rate of inflation? Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area. 

5.      What does and doesn’t the assessment cover—common area maintenance, recreational facilities, trash collection, snow removal? 

6.      What special assessments have been mandated in the past five years? How much was each owner responsible for? Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy. 

7.      How much turnover occurs in the building? 8.      Is the project in litigation? If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly. 

9.      Is the developer reputable? Find out what other projects the developer has built and visit one if you can. Ask residents about their perceptions. Request an engineer’s report for developments that have been reconverted from other uses to determine what shape the building is in. If the roof, windows, and bricks aren’t in good repair, they become your problem once you buy. 

10.  Are multiple associations involved in the property? In very large developments, umbrella associations, as well as the smaller association into which you’re buying, may require separate assessments. 

Charm City Home Statistics

metropolitan-regional-information-systems.doc

BUYING A HOME ‘AS IS’

 

Protect yourself when buying home ‘as is’ Don’t be afraid of contingencies Friday, March 30, 2007 By Robert J. Bruss Inman News Whether you are a home buyer or seller during the peak 2007 spring home sales season of April through June, you will probably encounter the term “as-is” sale. Just as used-car dealers sell thousands of automobiles “as is” without any warranty or representations, houses and condominiums are sold using the same term.But an “as is” home sale is different. Thanks to state laws and court decisions, a real estate “as is” sale is far more complicated than the sale of an “as is” used car. Purchase Bob Bruss reports online. An automobile “as is” sale means “buyer beware.” However, the best way to describe a real estate “as is” sale means “trust, but verify,” as the late President Reagan said many times when referring to political situations. WHAT IS AN “AS IS” HOME SALE? Simply stated, an “as is” home sale means the seller must disclose to the buyer all known defects, but the seller will not pay for any repairs. Does an “as is” home sale mean the seller doesn’t have to disclose known defects and can conceal them, as the seller of a used car might do? The answer is “definitely not.” Although two or three states still seem to follow the old common-law rule of “caveat emptor” (let the buyer beware), the modern law today in most states has evolved to “Let the home seller beware of the buyer and the buyer’s lawyer.” In other words, even “as is” home sellers must reveal to the buyer all material defects of which they are aware. But “as is” sellers do not have to make any warranties or representations, and need not pay for any repairs to correct material defects. WHY MANY HOMES ARE SOLD “AS IS.” The reason many older homes are sold “as is” is because the seller doesn’t want to pay for any repairs. For example, if I were selling my house “as is” today, I would have to disclose the wood garage door is slightly warped and doesn’t close tightly. As an astute buyer, you would surely observe this 1-inch gap at one corner. But the automatic door opener functions well and does its job. I would leave it up to the buyer to decide if he or she wants to install an expensive new garage door, but I’m not going to waste money repairing or replacing the still-good existing door. There are at least four major reasons some home sellers want to sell “as is”: (1) the seller doesn’t have the money to correct the disclosed defects and prefers to let the buyer fix the problems; (2) the buyer is likely to renovate an older “fix up” house so the seller would be wasting money on minor repairs; (3) the seller has owned the house many years and doesn’t insist on earning top dollar; and (4) the seller doesn’t want the hassle and inconvenience of fixing the problem. Possible additional reasons for “as is” home sales include the seller (1) recently acquired the residence by inheritance or purchase and is reselling for a quick profit; (2) hasn’t lived in the property and is not aware of its problems; and (3) doesn’t want any responsibility for fixing problems that might occur after the sale closes. HOME WARRANTY POLICIES OFFER LITTLE PROTECTION. When purchasing an “as is” house, buyers should not be lulled into a sense of security if the seller offers a one-year home warranty policy as a sales incentive. Such policies have many exclusions and offer little real protection against serious home defects. Home warranty companies are “pros” at using the pre-existing-condition exclusion. Although they are eager to accept the seller’s or realty agent’s policy cost of $400 or more, these companies are notorious for refusing to repair or replace items by claiming the defect existed at the time of the home sale but was not yet manifest. Buyers who collect anything from a home warranty company should consider themselves very fortunate. HOW “AS IS” HOME BUYERS CAN PROTECT THEMSELVES. Knowing the key reasons many home sellers elect to sell “as is,” home buyers can benefit from such sales if they know how to protect themselves. Rather than reject such a home sale, usually advertised “as is” in the local MLS (multiple listing service), savvy buyers welcome such profit opportunities. The best way for a buyer to protect against an unscrupulous seller who “forgot” to disclose a serious but known home defect is for the buyer to include a professional inspection contingency clause in the purchase offer. Buyers of every house and condominium should include such an inspection clause making the purchase offer contingent on the buyer’s approval of their professional home inspector’s report. That means, after the home seller accepts the buyer’s purchase offer, the buyer hires a professional inspector and then approves or disapproves their written report. Home buyers should be wary of inspectors recommended by the real estate agent. Such an inspector might be known as “easy” and not a “deal killer.” Ask such inspectors recommended by a realty agent about their experience, background and professional memberships. An excellent credential is an experienced independent inspector who belongs to one of the professional home inspections organizations. Personally, I recommend members of the American Society of Home Inspectors (ASHI) because of their tough membership requirements. Local ASHI members can be found at www.ashi.com or 1-800-743-ASHI. WHEN “AS IS” MEANS A BARGAIN PURCHASE. As explained, there are many legitimate reasons for selling a house or condo “as is” after all known defects are disclosed so the buyer can consider them when making a purchase offer. Many home sellers are not fully aware of their home’s defects. For example, years ago I bought a run-down, fixer-upper, “as is” house that obviously needed work. It had been listed for sale at least six months. The seller was an estate. Noticing many defects, I made a very “lowball” purchase offer, thinking it would be rejected. To my shock, it was accepted. But my offer included a professional inspection contingency clause. I accompanied my professional inspector, as home buyers should always do. He discovered several problems of which I was not aware. We discussed them and he estimated the approximate repair costs (ethical home inspectors are not in the repair business but they usually know if a problem is expensive or inexpensive to fix). When I received the complete written inspection report a few days later, I showed it to the listing agent. He asked me point blank “OK. How much of a repair credit do you want?” Based on my inspector’s very rough estimate, I said $25,000. Later that day, the estate representative agreed to a $25,000 repair credit, which more than covered my fix-up costs. “AS IS” HOME-BUYER ALTERNATIVES. Even when buying an “as is” home where the seller fully discloses all known defects, as in my home purchase explained above, a professional inspector will often discover unexpected serious defects. When that happens, the buyer has several alternatives. One is to cancel the purchase and obtain an immediate full refund of the buyer’s good faith deposit. But a better alternative is to use the professional home inspector’s written report to re-open negotiations to obtain a repair credit for the estimated cost of correcting the unexpected problems. Especially in a slow “buyer’s market,” many home sellers are so glad to receive any purchase offer they will gladly agree to credit the buyer with the estimated repair cost. A repair credit is usually better than a price reduction because the mortgage amount is usually not affected. Another advantage of a repair credit is the buyer can shop around after the sale closes and often reduce the actual repair cost. SUMMARY: Just because a house or condo is offered for sale “as is” does not mean it should automatically be rejected. But buyers should be very cautious of “as is” sales, realizing the seller might not have disclosed all known defects. However, savvy buyers insist on a written disclosure of all known defects and a purchase offer contingency clause for the buyer’s approval of a professional home inspector’s written report. For more details on “as is” home sales, please contact a local real estate attorney. (For more information on Bob Bruss publications, visit his Real Estate Center). *** What’s your opinion? Send your Letter to the Editor to copyright 2007 Inman News

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