Q–I began house-hunting almost a year ago. I got pre-approved for a mortgage. Then I contacted a buyer’s agent recommended by a friend. The buyer’s agent mailed me some listings, then e-mailed some more. We looked at a variety of houses that helped me zero in on my likes and dislikes, which I shared with my buyer’s agent. I also went to open houses and searched the Internet regularly for listings.
During the busy home sales season last spring, I called my agent as soon as I saw a new listing I wanted to visit. But I’d often get a call back that the house had already been sold. I’m wondering if my buyer’s agent wasn’t paying attention, or maybe he was working with other buyers who could pay higher than my price range.
What should I do to find a home to buy?
A–If you haven’t found a home to purchase in almost a year, and you are pre-approved for a mortgage, something is wrong. I’m presuming homes in your price range are available in the community where you want to buy.
Because your buyer’s agent hasn’t found you a suitable home to purchase after almost a year of searching, my suggestion is to begin working with another buyer’s agent. Your first buyer’s agent is probably tired of you and you are probably tired of him. Start fresh with a different agent.
Discuss with your new buyer’s agent your home purchase requirements. Be realistic; the perfect home doesn’t exist.
2000 was an especially difficult year for home buyers due to limited home supply, a very competitive market in many communities and lots of buyers in the marketplace. But this is an excellent time of year to buy. Because the economy has slowed down you won’t have much competition from other buyers until the market picks up after Super Bowl Sunday.
Q–After reading the many complaints in your columns about how hard it is to cancel private mortgage insurance (PMI) after buying a home, we thought it would be impossible for us to buy with a low down payment without PMI. Then we met a sales agent at a cocktail party who referred us to an excellent mortgage broker.
The mortgage broker took our application and got us preapproved to buy a home with a 5 percent cash down payment and without the dreaded PMI. She arranged a first mortgage for 75 percent of the purchase price and a 20 percent second mortgage home equity credit line from the same lender. We got a low interest rate on the first mortgage and the 9.5 percent prime rate on the second.
If we had taken a 95 percent PMI mortgage, we would have a high interest rate, plus monthly PMI costs. The nice thing about that second mortgage is it is a home equity loan, so we can pay it off and still have it available as a credit line. I just thought you might like to share this plan with other prospective home buyers who want to avoid PMI.
A–Thank you for sharing your mortgage broker success story. PMI has enabled millions of home buyers to purchase residences with low or no down payments. But the PMI industry has made it so difficult to cancel PMI that PMI loans have acquired a bad reputation with home buyers, realty agents and mortgage brokers.
Congress passed a new law requiring PMI cancellation for new PMI loans originated after July 1, 1999, when the loan-to-value ratio drops below 78 percent. But that process can take several years, and it doesn’t apply to older PMI home loans.
You were smart to avoid the PMI hassle, thanks to your astute mortgage broker. In addition to your 75-20-5 plan, another popular PMI avoidance method is an 80 percent first mortgage, a 10 percent second mortgage and a 10 percent down payment, called 80-10-10.
I especially like your lender’s idea of giving you a 20 percent home equity loan credit line, which is a good deal for both you and the lender. Too bad more lenders don’t offer such plans.
Q–I have been looking at a vacant house for about two years. It is in a great neighborhood. What do I need to do to find out how to buy this house?
A–I think you’re really asking how to find out who owns that vacant house. The easiest way is to phone or visit the county or city tax collector’s office to learn the owner’s name and address where the tax bills are sent. Also check to see if the tax bills have been paid. If they are unpaid, the owner might be in financial distress and anxious to sell.
Depending on what you learn, you might want to contact a local title insurance company or a title attorney to learn what liens, such as mortgages, judgment liens, income tax liens and mechanics’ liens, affect that home. You will probably have to pay a research fee to learn this information, although some title insurers offer a “property profile” without charge. A real estate attorney then can further advise as to your next step.
Q– My younger sister just received a letter from the landlord of the apartment complex from which she moved two weeks ago. It says she will not be getting her $300 security deposit back, and she owes an additional $380 for “damage” done to the apartment. They list $10.82 for light bulb replacement, plus $455 for replacement of the carpet, demanding she pay the balance. My sister lived in the apartment only 18 months and is sure the carpet was in good condition when she moved out. It needed cleaning, but not replacement. Should she write the landlord a letter? Or should she preemptively take the landlord to small claims housing court?
A–Landlords are required to promptly account for or to return tenant security deposits after a tenant vacates. Tenants must pay for damages, but not normal wear and tear. Your sister cannot be expected to pay for carpet replacement unless she damaged the carpet so badly it cannot be satisfactorily cleaned for the next tenant.
The burden of proof is on the landlord. He must account for your sister’s $300 deposit, such as with photos showing the carpet cannot be cleaned and must be replaced.
If your sister sues the landlord for return of her $300 deposit, the landlord might counterclaim for damages. She should be prepared to prove the apartment was left in good condition with no damages. This matter should have been settled by an inspection with the landlord at the time your sister moved out, rather than requiring a court lawsuit.
Thankfully, the amount involved is not large. If the landlord turns the matter over to a collection agency for the $380 in dispute, it could seriously harm your sister’s credit report. If I were your sister, I would sue the landlord for the $300 security deposit. If he counterclaims for the alleged $380 additional and wins, she isn’t any worse off than currently if a collection agency takes over.
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PLEASE NOTE: Real estate laws vary from place to place. Be sure to check the laws of your state and municipality before making decisions on real estate matters.
Write to Robert Bruss at Tribune Media Services, 435 N. Michigan Ave., Chicago, IL 60611.
