TheState.com: Real Estate - Wire

Real estate Q&A

Fri, 28 Nov 2008 08:20 EST

Q. We have homeowners' association bylaws that were agreed upon between new homeowners and the construction company in a newly established subdivision. The construction company went bankrupt and no longer has any ties to this community. The lots have been sold and homes built. Much of the agreement concerned practices while the community was being built. The items explained the construction company's rights and the homeowners'; how the homes had to be built, etc.

I think at this point, that document is no longer valid. If any of those items would be contested, would it stand up in court? Don't we have to develop a new covenant that pertains to current conditions? We hired a management company but I don't see any concern with this issue.

A. The homeowners' association covenants or bylaws were established by the developer when the development began. Because of this, construction issues were prominent in the covenants as the development process had to be managed. The covenants supplied by the developer were prepared to determine design and construction matters and as a starting point to help the homeowner's association establish management polices.

However, the bylaws were designed to be augmented with new rules to address the operation of the association and common area issues. These covenants can be changed by the homeowner's association to meet the current needs of managing the development. As the need for new rules develops, the homeowners' association board - in consultation with the management company and an attorney - will bring forth changes to the bylaws.

(Dr. Thomas Musil is the director of the Shenehon Center for Real Estate in the Opus College of Business at the University of St. Thomas in Minneapolis. He has more than 25 years of experience in real estate as a broker, analyst, consultant and expert witness in real estate litigation and arbitration disputes. E-mail questions to: tamusil(at-sign)stthomas.edu. Please include your name, city and state.

Real estate Q&A

Thu, 20 Nov 2008 08:15 EST

Q. My husband and I are considering purchasing a house near the campus of the university our son attends. We would rent the house to college students. We have never managed property as landlords before, and we live about four hours from the university. We are wondering what special issues we should consider in this type of investment and what types of improvements might be required, such as sprinkler systems or fire escapes. The properties we are considering have rental income that should more than cover the mortgage and taxes.

A. The installation of a sprinkler system would likely be cost-prohibitive. You must pay close attention to the legal maximum number of tenants allowed, all zoning, housing, and building codes.

If your son is going to manage the property, I suggest that all of you attend a short course in residential property management. Courses like this are available at community colleges and landlord associations. Topics like tenant rights, leases, property management practices, taxation, tenant screening, and maintenance practices are critical to understand. Managing a property will take time and create a good deal of headaches for your son. Is he ready for this?

Acquiring residential rental housing is complex. Knowledge of local real estate markets, financing, evaluating the physical condition of the property, building and housing codes are just a few of the critical areas. I would take time to evaluate the market and rental trends prior to buying a property. While this may prove to be a good investment and augment your son's education, renting to college students has many challenges. Have you son live in a dorm or near campus first so that he obtains an understanding of the area.

California wildfires highlight lack of mobile home insurance

Thu, 20 Nov 2008 08:25 EST

As fire tore through Oakridge Mobile Home Park in Sylmar, Calif., on Friday, some of its residents likely knew they would bear the entire burden of rebuilding.

About 500 mobile homes were destroyed in the fire. While it's unclear how many were uninsured, about one-fourth of mobile homes in California - 82,000 - don't carry insurance, according to a Sacramento Bee analysis of 2007 census data. Another 200,000 houses don't carry insurance.

"It's hard to determine why someone wouldn't get insurance on their home," said Tully Lehman, a spokesman for the Insurance Information Network of California, a nonprofit education organization. "Maybe they assume a disaster will never happen to them."

It's a problem that plagues Northern California wildfire hot spots, too. In Butte County, site of several large wildfires this year, about 8 percent of homes don't carry insurance.

That fact became painfully obvious.

Buying? Selling? What to look for in a real estate agent

Thu, 20 Nov 2008 08:15 EST

When picking a real estate agent, think of yourself as an employer hiring for your company: Require a good resume, check references and do a thorough interview.

As CEO, you must recruit the best talent. Buying or selling a house is just like a business deal - and you need the right lieutenant to get the job done.

Agents should be familiar with neighborhoods and selling trends. You want someone who will go above and beyond to make things happen in this slow real estate market.

One of the best ways to find a good agent is to ask friends and family. They often can provide names of people they have worked with and liked. Checking newspaper ads, going to open houses and writing down agent names listed on For Sale signs in your neighborhood (especially ones that say "Sold") also might help you locate agents.

But the process doesn't stop there. Once you have a list of names, be sure to interview the candidates so you can determine which one will best meet your needs.

Buying frenzies! Mortgages! Monopoly teaches real crisis

Thu, 20 Nov 2008 08:25 EST

If people want to understand what's happening with this foreclosure crisis, they should just play Monopoly.

That was the word from my Uncle Mark on a recent Sunday night, after a group of five of us finished a spirited two-hour game of Monopoly, the popular board game from Parker Brothers.

He had a point. Though the game started benignly enough, it soon devolved into a bitter competition with family members scheming against one another - and, yes, groveling for loans.

Here's a breakdown of the game and its lessons:

The strategy of most players seemed to be to buy property early. This meant cash reserves soon dwindled, but players accrued a spattering of properties, most of them unrelated.

More lenders offer mortgage relief programs

Thu, 20 Nov 2008 08:20 EST

With no end to the foreclosure epidemic in sight, mortgage lenders have begun to do something they previously resisted: rewriting the terms of mortgage loans.

The about-face is a bow to political pressure and reality: The number of foreclosed properties flooding the market is dragging down home values across the country, a process that could lead to even more home foreclosures.

Two new tenets form the basis of the recent, bank-announced homeowner relief programs: streamlining and outreach. Bank of America, Citigroup Inc. and J.P. Morgan Chase say they will contact mortgage holders who are in or heading toward default, and offer to rework their loans with affordable monthly payments. Many even spell out a preapproved workout in that first letter.

The new approach is borrowed from an FDIC program at the failed IndyMac bank, which FDIC Chairman Sheila Bair reportedly plans to propose going nationwide as part of the federal government's $700 billion markets bailout plan.

At IndyMac, at-risk borrowers got letters with proposals to cut their payments to no more than 38 percent of their incomes, with modifications such as reduced interest rates or longer loan terms. All they had to do was provide verification of their incomes.