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Anti-Union SEPTA Protest on Sunday

Fri, 06 Nov 2009 11:50:00 PST

Hot off the press release:

Philadelphians are sick and tired of listening to TWU 234 whining over a perfectly good contract and keeping us from getting to work, school, and other commitments. We're planning to gather this Sunday at 1pm at SEPTA headquarters at 1234 Market Street to tell SEPTA not to back down! We support collective bargaining but will not stand for collective bullying! We would rather go without transit for however long it takes for SEPTA to either negotiate a fair contract with the union that won't raise fares or replace and retrain all of them.

Follow the protest plans on Twitter: @strikeprotest

No way around FHA's resale rule

Fri, 06 Nov 2009 09:55:53 PST

Home Sale Hindsight

Tara-Nicholle Nelson
Inman News

Q: Please explain why the Federal Housing Administration (FHA) will not allow a buyer to purchase a home that was previously sold within 90 days? We have asked this question numerous times and everyone just goes around it and says FHA will not allow this type of loan.

We have seen several properties that we really want, but we keep being rejected because we have to go FHA (we have only a 3.5 percent downpayment). Why is this a rule? Are there any ways to work around it?

A: The only thing you can do to work around this issue is to restrict your house hunt to homes near or past the 90-day time frame. You must close your purchase or escrow at least 90 days following the closing of the previous purchase -- and honestly, many sellers will simply prioritize offers from wannabe buyers using conventional (i.e., non-FHA) financing.

Let's get clear on what this rule is and why it exists. FHA doesn't actually offer loans; it simply insures loans made by mortgage lenders against the risk of default. That just means that if you default, FHA agrees to cover the lender's losses, so long as the lender ensures that you, your loan and your transaction meet a set of guidelines.

FHA's aim is to ensure that mortgage loans stay available to borrowers who otherwise wouldn't be able to qualify for a home loan.

Right now, the lowest "conventional loan" downpayment requirement is around 10 percent. By insuring loans with downpayments as low as 3.5 percent, FHA allows you and people in your situation to buy when they would be blocked from participating in the market otherwise.

But here's the deal: FHA's position is that a large number of homes that were walked away from and/or foreclosed on during this recent housing crisis were homes that had been flipped, or bought and resold very quickly at a dramatically higher price for profit.

From the FHA's perspective, the flipping phenomenon was partially to blame for the runaway appreciation in home prices and, when values dropped, the owners who had paid these inflated values were simply much more likely to abandon their homes or otherwise lose them through foreclosure.

My dad taught me as a child the following adage: "She who has the cash makes the rules." And so it is with FHA loans. FHA wants to discourage flipping, especially flips in which little or no work has been done to improve the condition of the property, so it refuses to insure loans that fund flip resales.

For this reason, in 2008 the FHA enacted the following anti-flipping rule, which is the very rule you seem to be running up against:

Resales occurring within 90 days of the acquisition will not be eligible for a mortgage to be insured by FHA. FHA's analysis disclosed that among the most egregious examples of predatory lending was on "flips" that occurred within a very brief time span, often within days. Thus, the "quick flips" will be eliminated.

Now, if you should find and get into contract to purchase a property that is past the 90-day threshold, you might be able to obtain an FHA-insured loan, but you will have to get a second appraisal -- at your expense -- and ideally the seller will be able to document that the seller made significant investments and improvements to the property since purchasing the property.

More from the FHA rule: Resales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a resale percentage threshold established by FHA.

This threshold would be relatively high so as to not adversely affect legitimate rehabilitation efforts but still deter unscrupulous sellers, lenders, and appraisers from attempting to flip properties and defraud homebuyers. Lenders may also prove that the increased value is the result of rehabilitation of the property.

But this is Home Sale Hindsight -- what went wrong in your house hunt? It was your advisers' failure to explain the rationale and details of this rule. Had they done so, you might have focused your efforts not on questioning the rule and looking for workarounds, but on finding that needle-in-the-haystack property that meets both your needs and FHA guidelines.

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." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.

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Community Leaders Rally Around A.C. Marathon

Fri, 06 Nov 2009 07:58:51 PST

Lace up those running shoes because the 51st Atlantic City Marathon is happening! The nation’s third oldest marathon will begin at 8:30am, Sunday, Nov. 15, in front of Boardwalk Hall on the world famous Atlantic City Boardwalk.

The race that almost wasn’t will once again fill the streets of Absecon Island with nearly 2,000 runners going the distance, thanks in large part to the leadership and commitment of the Katz Jewish Community Center (JCC), Harrah’s Entertainment and the Atlantic City Convention & Visitors Authority (ACCVA).

After 20 momentous years of stewardship under race director Barbara Altman, the A.C. Marathon was without an organizer this year.“As a community we should all be grateful for the true yeomen’s work Barbara and Ed Altman have done to ensure the Atlantic City Marathon not only survived but thrived over the past two decades,” says Jack Fox, executive director of the JCC, in a release to the media. “We feel a responsibility to keep a viable and exciting event like the marathon in our region and in Atlantic City. This is just the kind of event that will continue to build Atlantic City as a multifaceted destination, and benefits the community as a whole.”

In addition to holding the title as “America’s First Festival of Running,” the Atlantic City Marathon also serves as an official qualifying race for the 2010 Boston Marathon — a distinction that draws runners from all over the world to A.C. each year for the weekend-long event.

“We have a duty to ensure not only that Atlantic City’s greatest traditions are upheld, but now more than ever we need to direct our collective resources into events and attractions that expand our destination’s appeal well beyond our traditional markets,” says Don Marrandino, Eastern Divisional president for Harrah’s Entertainment, in the release. “The Atlantic City Marathon has done that for years, and we are proud to be a part of continuing this amazing event.”

“The Atlantic City Convention and Visitors Authority is proud to do its part to keep the Atlantic City Marathon running,” said Jeff Vasser, ACCVA president. “It’s events like the marathon, along with the A-10 Men’s basketball championship, ECAC hockey, and the NCAA golf championship, that help diversify Atlantic City’s sports offerings and keep it a world-class resort.”

Race day events and activities include a full marathon (26.2 miles); a half marathon (13.1 miles); a 10K run (6.2 miles); a 5K run (3.1 miles); a two-mile, non-competitive Health Walk; and a free Freda Spano Kids Fun Run. For information on the marathon’s course, entry fees and registration, click here or call the JCC at 822-1167 ext. 136.

Dogg House Of Blues

Fri, 06 Nov 2009 07:49:56 PST

Halloween was all treats for ticket holders for Snoop Dogg’s latest tour, Wonderland High, which stopped at Atlantic City’s House of Blues Oct. 31. By the time he left the stage after 1am (just before daylight savings kicked in) the superstar had transformed the popular concert venue into his personal “Dogg House of Blues.”

The treats however started more than an hour and a half before Snoop took the stage with veteran hip-hop artists Redman and Method Man. Both Red and Meth have enjoyed success as solo artists and as part of hip-hop super groups. Redman has been a key member of The Hit Squad and Method Man as part of the world famous Wu-Tang Clan.

Individually Method Man has made classic street music since his solo performance on the first Wu-Tang record (Enter The Wu-Tang 36 Chambers). Since then he’s also been a part of classic singles with his fellow Wu-Tang member Raekwon, as well as D’angelo and LL Cool J to name a few. Method Man has even shown that music from the streets includes love songs — doing several songs with Mary J. Blige.

Redman himself has built a great career as a solo artist since being featured on the track “Rampage,” and quickly following with the record Whut? Thee Album.

Halloween night, Redman and Method Man together, put on one of the best hip-hop performances ever to hit Atlantic City’s HOB. Red and Meth, as they are called by their fans, have been serving up a unique energy that comes from their performing together since their 1995 release How High?

Their performance was a treat indeed as they started off doing about 20 minutes of brand new music from their latest CD, The Black Out 2. All over the HOB venue you could see hands waving and people yelling in support of the two. Meth and Red kicked it up another four notches as they asked the crowd if they wanted to hear the classic material?

Red started the higher frenzy by going all the way back to his second single, which is a true hip-hop classic “Time 4 Sum Aksion.” Not to be ever out done, Method Man stepped up and gave the crowd pure, uncut 1993 hip-hop with his monster hit “METHOD MAN” (from Enter The Wu Tang). From there the two went back to back hit for hit.

Before leaving the stage, Redman and Method Man had paid tribute to the groups they came from, thanked their fans for more than a decade of true support (sold-out concerts and record sales), and gave a fitting tribute to the late rapper Ol’ Dirty Bastard.
They ended the night by telling the crowd to enjoy the moment and the people who make life special and by telling the crowd to make noise in remembrance of artists who have passed away like Michael Jackson, Lisa “Left Eye” Lopes and Aaliyah. Before leaving altogether Method jumped into the crowd for some body surfing.

Right after Meth and Red left the stage, a large movie screen came down.

On the screen were clips of movies such as Up in Smoke and The Blues Brothers, Blackula, and Being John Malkovich. In each case editing technology was used to place Snoop into the movie roles, with Snoop inserting his own dialogue and re-naming the movies after himself.

When the star of stage, screen and, of course, music took the stage in the flesh it was a “Dogg House of Blues” that was all treats and no tricks.

Snoop came out with his crew, which included Delvin the Dude and they performed about 20 minutes of brand new material. Armed with what could be called a pimped out microphone (think a pimp cup with bling as a microphone) Snoop yelled out repeatedly ever reference imaginable (and most likely a few I missed) about smoking marijuana.

What was a personal treat for me was when Snoop brought out his fellow West Coast rapper, The Lady of Rage. The two performed one of the best songs from his debut LP Doggy Style (though never released as a single) “G-Funk Intro.” Then we were treated to Rage’s hit single “Afro Puffs.” For the time Rage was on stage she brought and energy that was electric and was given back by a crowd excited to see an hear her.

Throughout the rest of the night Snoop performed the hits that have made him a music superstar from his early days with Dr. Dre to his singles with artists like Akon and Charlie Wilson. Snoop also lead the crowd in a 15-minute tribute to Tupac, which included Tupac’s song’s “Hail Mary” and “2 of America’s Most Wanted.”

The night was reminiscent of old-school hip-hop shows with great songs everybody knows, brand new songs and free styles, high energy and a few surprises that made the concert more than worth the money and the time.

Although very few people attended the Halloween show in costume, it was a sweet night for the musical art form known as hip-hop. n

Still Making 'Sounds'

Fri, 06 Nov 2009 07:49:06 PST

An Evening With Brian Wilson
Where: House of Blues at Showboat, A.C.
When: Saturday, Nov. 7, 8pm
How Much: $35, $45, $55 and $65

It should be a long joyful stroll down memory lane Saturday at the House of Blues, since the legendary Brian Wilson will perform his greatest hits throughout the evening.

The brilliant Beach Boy has written a plethora of tunes, which have scaled the pop charts. “Good Vibrations,” “California Girls,” “Surfer Girl,” “Help Me, Rhonda,” “Little Deuce Coupe” and many other songs, which are now regarded as pop classics, are among the cuts Wilson helped craft.

“I loved writing and recording those songs,” Wilson tells AC Weekly. “There’s a reason the songs are so popular and so well remembered. We did something very different back then. It was something special. Those big productions and vocals were just amazing. I knew it would be influential. It’s just great to be back doing these songs, doing what I love.”

Part of what inspired Wilson’s creative genius during his Beach Boys ’60s heyday was his group’s battle with the Beatles.

“Competition is a wonderful thing,” says Wilson. “We put out Pet Sounds and it prompted Paul McCartney to create Sgt. Pepper’s Lonely Hearts Club Band. He wanted to top Pet Sounds and he did it. And that made me want to top what they were doing. It was an amazing time back then and the great thing is that the songs are still there, so why not enjoy those songs?”

The Beach Boys tunes, which take listeners back to a time and a place, exude innocence, good times and a simpler way of life.
“Those days were so different than now,” Wilson says. “It feels like a million years ago but when you hear those songs you can go back to such a great time.”

Wilson, 67, loves to look back perhaps because he’s not too keen on contemporary pop-rock.

“I think it’s at an all-time low,” Wilson says. “It’s a shame that the Phil Spectors of the world aren’t doing anything anymore. I guess they ran out of ideas. It’s a shame when the innovators of my day aren’t working. But that’s not going to stop me.”

When reminded that Spector is unable to work since he’s doing time in prison, Wilson pauses for a moment. “I understand that he’s in prison,” he says. “But he was one of the great ones from my era.”

Well, if there were a Mount Rushmore of ’60s pop artists, Wilson’s familiar face would be carved into the edifice. Wilson wasn’t just the singer-songwriter of the Beach Boys. He was also their producer and arranger.

The Beatles had George Martin to handle the knobs. Wilson did everything but write the lyrics.
“It was challenging but it was well worth it when you look at the songs that were made,” Wilson says. “I can still do these songs. It was all worth it.”

Wilson’s crowning achievement remains Pets Sounds, one of the most critically acclaimed and seminal albums in the history of rock n’ roll. It was the Beach Boys’ most ambitious and well-produced album. However, the disc wasn’t embraced immediately by the public since it deviated from the group’s light-hearted formula of cars, girls and surfing. Wilson, who was responsible for most of Pet Sounds, created a masterpiece.

“We did something very different,” says Wilson. “We had that big production and the vocals were just amazing. I remember after listening to it that I knew it was something so special. I knew it was a classic album halfway through the production. I knew it would be influential and controversial too.”

Pet Sounds was hardly a commercial blockbuster. “I was sad about that,” Wilson says. “But I knew it would eventually catch up in sales.”

Wilson was right about that since Pet Sounds remains a steady selling album and its influence started just after it hit the bins.
However, members of the Beach Boys, particularly the enigmatic Mike Love, had expressed displeasure with the prototypical teen angst rock ‘n’ roll record.

“I never could understand why Mike Love didn’t like Pet Sounds,” Wilson says. “He didn’t appreciate the artistic value of the disc. I think he wanted something more commercial. He just went on about he didn’t like it. I kept saying to myself, ‘How the heck could he not love such a great album?’”

Now Love claims he has nothing but admiration for Pet Sounds and his cousin Brian.

“I love Brian,” Love says. “The man is a genius. I only want the best for him. We go back a long, long way.”
Love and his cousins sang together since they were children.

“What Brian and I had when we were young was really special,” Love says. “It was magical. We started singing together at an early age. We did the doo-wop thing. We did the Christmas singing. We did Gregorian chants. We came up with these ethereal harmonies. We’re a year apart. We were 11, 12 years old. We had a great relationship but it didn’t take long for things to get weird.”
Love is referring to Wilson’s well-documented mental illness.

But Wilson has been stable since the late ’90s. Wilson has been so together that he’s been touring for more than a decade. Wilson still hits his notes and often performs with an ear-to-ear grin.

“I’m happy doing what I’m doing,” Wilson says. “I don’t want to do anything else. I still get such great joy going up there on stage and playing these songs.”

Building regs: help or hindrance?

Fri, 06 Nov 2009 07:26:33 PST

Part 1: Living by the building code

Arrol Gellner
Inman News

Editor's note: This is Part 1 of a three-part series.

"When I built my addition, the building inspector made me tear out the bedroom window and put in a bigger one! Personally, I don't think it's any of his (deleted) business how big my bedroom window is!"

I hear these kinds of gripes from disgruntled do-it-yourselfers all the time. Not to rub salt in the wound, but in most such cases, a passing acquaintance with the building code -- and even more important, an understanding of its intent -- would have saved these folks an awful lot of frustration.

Though it may seem like it at times, building codes weren't formulated to harass do-it-yourselfers. In fact, they arose to protect public health and safety during the late 19th and early 20th centuries, a time when a population explosion in American cities was leading to ever more squalid and unsafe living conditions. This was an era in which tenement apartments variously lacked heating, natural light, access to fresh air, or a means of escape in case of fire.

On a larger scale, poor separation between closely packed buildings meant that a small fire in one structure could quickly spread to adjoining ones. Too often, the result was raging urban conflagrations such as the Great Baltimore Fire of 1904, which destroyed 1,500 buildings over an area of 140 acres.

Even nominally fireproof masonry buildings -- whose entire safety equipment might consist of a red-painted pail of water labeled FIRE placed on each floor -- were far from invulnerable. Such buildings commonly housed overcrowded sweatshops with inadequate means of escape in emergencies, and inevitably, there were a number of horrific fires.

The worst was New York City's Triangle Shirtwaist Fire of 1911, in which 146 garment workers, most of them immigrant girls and young women, either were overcome by the fire or leapt to their deaths from the building's ninth floor. The subsequent investigation determined that one exit on the ninth floor had been blocked by fire, and that the other had been locked from the outside. The building's exterior fire escape, the last possible means of egress, was flimsily built and poorly attached. It collapsed when the panicked workers swarmed over it.

Building codes arose in an effort to prevent such needless tragedies from recurring. In one way or another, every code provision -- including the one that raised that do-it-yourselfer's hackles -- trace back to this source.

Ensuring an escape route in case of emergency is a primary function of building code provisions, and in residential buildings this usually means providing more than one way out in case the primary egress is blocked by fire. In a bedroom, that emergency escape route is the window.

Once we understand the code's intent, requirements that may seem arcane or burdensome suddenly make sense. Most are meant to ensure that buildings will stand up safely, that habitable spaces have at least minimal access to natural light and fresh air, and that there's always a way out in case of emergency.

Next time, we'll look at a few basic building code requirements, and what they're meant to accomplish.

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Devil's in the home warranty details

Fri, 06 Nov 2009 07:17:46 PST

Don't be fooled by 'fine print'

Paul Bianchina
Inman News

Q: I'm currently in contract to buy a townhouse. The broker and my attorney are encouraging us to have the seller purchase a home warranty (through Coldwell Banker). What is your opinion of these programs? There seems to be many complaints about them online.

A: First, I need to give you a couple of disclaimers: I have only limited experience with home warranties, and I don't know anything about Coldwell Banker's specific program. So this is only my general and limited opinion.

From what I have seen and heard, home warranties suffer from a "fine print" problem. Homes and their systems are very complex, and there are so many variables that affect them, from the weather to do-it-yourself repairs. For that reason, there are a number of things that are either not covered or have only limited coverage under a lot of the warranties.

Also, there can be a number of factors that determine the inclusion or exclusion of a listed repair, such as age, condition, who's worked on it in the past, even its location in the house. Finally, depending on where you live, actually getting repair people out to your house in a timely manner may be an issue as well.

First of all, you need to carefully go over all the details and all the restrictions of the proposed policy. You obviously have an attorney involved, so he or she should be able to help you understand it. See what the deductibles are, and when they come into play. Find out what the exact procedures are for calling in a warranty claim, how long the processing takes, and how long it takes to get a service person out to the house.

If possible, ask for some local references of other buyers who have this service. Give a few of them a call, and see what their experiences have been.

Q: I recently bought a house built in 1927. It's a two-story with a finished attic (total of three floors of living space). It appears to have no insulation whatsoever. The third floor has access to the tops of the exterior walls, all of the roof rafters, and the tops of the second-floor ceilings. What would you recommend for insulation? Should I blow cellulose insulation down the exterior walls from the attic space?

A: Unfortunately, you're going to get a lot of conflicting opinions on whether blowing insulation into the exterior cavities of an older home is a good idea or not.

With a home as old as yours, you have the possibility that the weight and pressure of the blown insulation can damage wiring in the walls, crack plaster, and even possibly damage old water pipes. Also, older homes tend to leak a lot of air through the walls. That means that moisture is being drawn into the walls as well, which can dampen the cellulose and cause all sorts of additional moisture problems to the structure.

The best thing I can suggest is that you have two experienced, licensed insulation contractors come out and inspect the house and make specific suggestions as to what you can do to insulate it. Compare their suggestions and their cost estimates, and see if there is a consensus of opinion on how best to proceed.

Another option is to contact your local utility company and see if they have a weatherization consultant available that can come out and check the house. This should be a free service from the utility, and in addition to making specific suggestions about how to insulate and weatherize the house, they may have grant money or low-interest loans available to help you with the work.

Q: Is it possible to install a towel rack on glass block shower tile? Would it work by using epoxy with a regular towel rack, or would it not be strong enough to hold a wet bath towel?

A: It's difficult and even potentially dangerous to attach anything to glass block. I would be leery of even gluing something to the block, as the weight of a wet towel could eventually cause some structural problems if the blocks are not well installed. Above all, don't drill into the block for any reason.

My suggestion would be to look for alternative places to mount the towel bar. If there are no convenient walls to mount it on, you might want to consider a freestanding towel rack instead, or attach a hook to the back of the door.

Remodeling and repair questions? E-mail Paul at paulbianchina@inman.com.

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The Phillies Are Champs ... in Indonesia

Fri, 06 Nov 2009 07:15:16 PST

Back to back, baby:

Kids in the Lehigh Valley may not be wearing 2009 Phillies World Series Champions jerseys, but children thousands of miles away in Indonesia, which was devastated by a 7.3 magnitude earthquake in September, will be sporting 2009 Phillies World Series hats, shirts and jackets.

For the third year in a row, unsalable, postseason Major League-licensed apparel that list the wrong winning team, will be donated to children and families in need around the world through World Vision.

At least the Phillies still will look like winners to children who have lost their homes to an earthquake. If the MLB didn’t do this, the merchandise would be destroyed and that would be a waste.

3 Things: SEPTA Fail in Third Day

Fri, 06 Nov 2009 05:18:29 PST

Three things to know in Philly today:

SEPTA, UNION TALKING - BUT NOT WITH EACH OTHER: To break the impasse, the Daily News learned last night, the TWU was considering four scenarios for wages, none of which included the $1,250 signing bonus that was part of the contract offer the union rejected early Tuesday, according to a source close to negotiations. None of the proposals for the five-year contract includes a raise in the first year. For the remaining four years, the proposed raises were:

3 percent each year;
3 percent for three years and 2.5 percent the final year;
1.5 percent every six months;
1.5 percent every six months expect for the last six-month period, when it would be 1 percent.

Depending on the scenario, money could be freed up to solve other stumbling blocks, the source said. (Daily News)

TRANS WOMAN FILES SUIT AGAINST LIBRARY: Although trans woman Bobbie E. Burnett wants to leave her job at the Free Library of Philadelphia as soon as possible, she won’t leave yet. Burnett, describing her work environment as “hostile,” said she won’t leave until she receives legally enforceable assurances of adequate compensation for the discrimination she says she’s endured within the library system. Problems for Burnett began in 2001, when she notified supervisors of her intent to transition to the female gender. Since then, she’s been transferred to eight different library branches, denied the use of unisex staff restrooms, passed over for advancement and unfairly restricted in her interactions with patrons, the lawsuit alleges. Library officials failed to take corrective measures to alleviate the problematic work environment, according to the lawsuit. (Philadelphia Gay News)

PARENTS WORRIED ABOUT FLU VACCINE, AUTISM: Many parents in the region keep calling their pediatricians to see if the the H1N1 vaccine has arrived. But others don't want their kids to get the shot at all – even when it's available. Public Health officials in Delaware report low participation during the first week of school vaccinations – especially in one school that serves students with autism. Delaware's Division of Public Health reports that at the Brennen School in Newark, only 10 out of 320 students got the vaccine. This is a tough issue for parents of children with autism, says Theda Ellis, who directs Autism Delaware, a non-profit advocacy organization. She says worries about a connection between autism and vaccines still prevail. (WHYY_

Zen and the Art of Personal Maintenance

Fri, 06 Nov 2009 03:54:45 PST

When I was a teenager growing up in Philadelphia, South Street was still counterculture. Mohawked punks smashed store windows after midnight screenings of Quadrophenia; kids had knife fights while still dressed in Rocky Horror wear. There were no chain stores – just a lot of artists and weirdoes. It looked more like Sammy and Rosie Get Laid than the United States. Now Starbucks, Auntie Anne’s and their ilk have siphoned off the singularity in the service of lattes and sugary pretzels.

One of the best things about South Street back in those days was Garland of Letters, a store that’s rolled with the changes and remains today. After getting hopelessly stoned inside the movie theater on South Street, my friends and I would move in a dopey clutch from store to store, and Garland of Letters never disappointed: Between the foreign (to us) South Asian music and the heavy funk of sandalwood, it was like getting stoned all over again – and the books were suitably wacked out, all about alternate universes and spiritualities that had no truck with bar mitzvah dance parties or First Communions.

This was before yoga and Madonna’s Kabbalah and doggy massage. This was when it was really radical that my Jewish cousin went Buddhist. Garland of Letters? We could only assume it was owned by cultists.

Nowadays, the bookstore-cum-gemstore is a well-worn institution, and the books have a less radical sensibility – or perhaps it’s my own sensibility that’s changed. Recently, I picked up Clean Cures: The Humble Art of Zen-Curing Yourself by Michael Dejong. It’s part of the My Kind of Clean series that includes advice on natural housecleaning and natural hygiene. This latest in the series advises readers on interventions for everything from wasp stings to anxiety to flatulence, which the book calls “humm-errhoids.” The solution? Varying combinations of six ingredients, all of them easy to obtain: apple cider vinegar, baking soda, honey, lemon, olive oil and salt. Sure, they’re good on pasta or in a tart. But they’re even better for a cold sore.

It’s like this: Let’s say you’re me, at 13, and you’ve just been sitting in the movie theater on South Street, smoking a doobie, and now you’ve got dry mouth. As Dejong writes, “a dry mouth can affect both your enjoyment of food and the health of your teeth … Don’t live with ‘cotton’ mouth another cotton-picking minute.” (There is nothing this man likes better than a pun.) Four out of his six ingredients can actually help with this: baking soda with water cleans and refreshes; honey relieves dry mouth, says Dejong, “and it’s yummy!” Sucking on a lemon rind will do the trick or try a saltwater gargle.

See how simple? Unfortunately, the other “cures” in this book are not only simple, they’re simplistic. Everything is a variation on the above. Have a hangover? Drink some apple cider vinegar, or do the same baking soda-in-water thing or have a spoonful of honey or maybe some honey mixed with lemon juice. Wait! This one is a little different: “A shot glass of olive oil before a night of drinking prevents a nasty hangover.” I like it when he brings the olive oil in.

The problem with this very nicely designed little book -- which features what I can only call hipster black-and-white line drawings – is that you get the feeling it’s a bit of a gimmick. Dejong’s intro is bright and endearing, proving he’s a funny guy and a breezy writer. And since he’s not especially fond of doctors and pharmacies, he finds it comforting to have some natural remedies in the house, so he doesn’t have to go outside. I hear that. But the advice in this book is too vague: Having trouble with digestion? Well, “the acid in lemon juice may aid digestion.” But it may not? Um, thanks. I’ll suck a lemon and get back to you.

Some of the suggestions are novel: If I can’t sleep, perhaps I will massage olive oil into my toes and see what happens. But overall, the book seems like a good way for Dejong to keep the party going with this series. It’s supremely unessential reading, and the kind of thing – I’m sad to say –you might even find in Barnes and Noble.

Deadbeat tenants on the rise?

Fri, 06 Nov 2009 01:00:00 PST

Despite collections efforts, some landlords never see a dime

Robert Griswold
Inman News

Q: For the past 20 years I have been buying and managing rental homes and I have to say that these days tenants are worse than I have ever experienced. Not all tenants are bad, but lately I have seen a noticeable increase in tenants who do not pay their rent and then leave in the middle of the night after causing a lot of damage to the house. At one rental, I recently had to spend almost $6,000 to fix up the house for re-renting.

I certainly understand the economy is bad in our area and many parts of the country, but my management company is unable to collect any money after the tenant moves out. The manager simply gives the case to a collection agency, and I never collect any money from the agency. It has been a repeated problem. Can you please suggest what I should do? Can you suggest a reputable collection agency?

A: You are not alone, as many landlords are finding that tenants who stay and pay, and treat the rental property with respect, are far and few between. It is clearly a function of the economy, and once you see signs that a tenant is having trouble paying rent you may want to have some open and direct conversations with him or her about how quickly you can regain possession of the rental rather than taking legal action and dragging out the eviction process.

As you unfortunately found out, the amount of damage that can be done in a rental home makes the nonpayment of rent seem like a minor issue. Your first priority should be simply to get your property back in decent condition and start over with a new tenant. It is easier said than done, but the best way to avoid these problems is to very carefully screen and select your tenants when they apply.

Qualified tenants with a stable rental history and good, reliable income are in high demand and can actually find landlords competing for them. I have even seen some tenants who have a resume or reference list that they bring with them that demonstrates to the landlord that they are qualified.

In these situations, you may find that you need to be flexible with your rental rates or upgrade your rental homes so they are more desirable than other comparable properties in your area.

As for the collection of delinquent tenant balances, I cannot recommend a specific company but I can tell you what you should do. Contact your local apartment association or Institute of Real Estate Management (IREM) chapter and ask them for names of companies in your area. Then contact those companies, and then ask for and contact their references.

While the pricing of collection services will vary, they are often quoted on a percentage of the collected amount. For example, a firm that charges 50 percent would deduct half of the collected amounts as their compensation prior to remitting the balance to you. You also need to make sure that you understand whether the out-of-pocket costs are included in the percentage quoted or are extra amounts that are deducted or billed to you.

You are not looking for the company with the lowest percentage but the company that has the highest overall net return, and the only way you can determine that is to contact their satisfied customers to see their actual results. Also, be sure to contact rental housing customers only, as the collection account success rate for other businesses may not be indicative of what they can do for you.

The other key recommendation is that delinquent account balances become much harder to collect over time so the sooner you get the paperwork into the hands of your collection agent the better the results.

Another tip is to be sure to file a small claims suit and get a judgment for the money owed, which can be collected in the future as long as the tenant doesn't file bankruptcy and get your judgment set aside or discharged. This can be your best strategy because while your former tenant may be down on his luck today, I have had tenants call out of the blue asking to pay everything they owe because they are trying to borrow money for a major purchase and need to get the judgment removed from their credit report.

This may be five to 10 years from now, but most people bounce back from financial problems and they will need to pay you in full in order to get a loan to buy a car or a house. While you would prefer your money today, there is still some satisfaction, and the cash will come in handy regardless of when you ultimately collect.

This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and "Property Management Kit for Dummies" and co-author of "Real Estate Investing for Dummies."

E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com.

Questions should be brief and cannot be answered individually.

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Dire prediction for jumbos

Fri, 06 Nov 2009 01:00:00 PST

Without federal help, default rate set to soar

Steve Bergsman
Inman News

In springtime, when all things hopeful and botanical bloom, there was a widespread sprouting of press announcements, particularly from the major banks, about increased dollars allocated to the business of jumbo loans.

Alas, the soil for such pronouncements has proven poor. A dearth of jumbos persists and the market appears to be wilting.

As an executive at one mortgage research company told me, earlier this year there was a flurry of activity with Bank of America and other major banks announcing jumbo loan programs, "but I haven't heard anything since then. The market doesn't appear to have changed much. I think some of these announcements were made to generate good press. The banks were saying, 'Hey, we are open for business -- don't forget us,' but they weren't doing anything more than what they were doing before."

Jumbo loans are basically any mortgage where the principal amount exceeds the statutory purchase limit of Fannie Mae and Freddie Mac, which has been set at $417,000 (Congress raised the upper limit in some high-cost areas to $729,750). In other words, with a conventional mortgage, Fannie Mae and Freddie Mac will buy the loan from the lender in the secondary market.

The agencies won't purchase jumbos, which in the past were securitized and bought by private investors. That process completely closed down with the onset of the recession and the collapse of the credit markets.

If you're BofA, or even ING Direct, which is also offering jumbo loans, then the loans have to be held in the bank's portfolio. Hence, these lenders are being very circumspect about the loans they make since they can no longer shed the risk to other investors.

"Lenders that have stepped into this space are predominantly portfolio lenders, so they are a little more restrictive in the kinds of loans they are interested in writing," notes Keith Gumbinger, vice president of HSH Associates Financial Publishers in Pompton Plains, N.J. "Fewer outlets are interested in lending them and when you do find them, the terms and credit restrictions are definitely tougher than they have been."

Back in March, an Inman News story reported that BofA had cut interest rates on jumbo mortgage loans in the hopes of expanding its share of the market. Nevertheless, borrowers would still need strong credit (minimum 720 FICO score), at least a 20 percent downpayment, and assets sufficient to cover six months of payments.

In general, the big banks don't have attractive rates on jumbos and "are very strict in regard to underwriting and property valuations," says Dan Cutaia, president and chief operating officer of Fairway Independent Mortgage Corp. in Sun Prairie, Wis. "Unless you have a lot of equity and you are 'gold' to a lender, it will be difficult to find a jumbo loan, and if you do, you are going to pay a significant market premium."

Fairway Independent Mortgage has been writing jumbo loans, which it brokers to companies like ING, but the deal has to be "absolutely golden," with lots of equity and great credit. In short, the borrower has to be perfect.

Before the credit crisis, Fairway Independent did about 15 percent of its lending in the jumbo category; well into third-quarter 2009 the company wrote just over $2 billion in jumbos, which is less than 5 percent of its overall lending.

The good news is that prime-quality jumbo loans have a better history of defaults than conventional loans, which translates into a better risk profile on an individual loan basis. In a portfolio of loans, everything changes.

If $100 million of conventional loans came to market (which isn't happening, but let's fantasize), that could mean 1,000 loans of $100,000, or 100 loans at $1 million. Just a couple of loan failures in the jumbo portfolio could be more devastating than a higher number of failures in the conventional portfolio. In other words, actual losses could be higher with jumbos although the percentage of losses is lower.

The bad news with the jumbo-loan sector is that things could get worse before they get better.

"The big issue is that there are a trillion dollars of jumbo mortgages out there and these mortgage holders do not qualify for the federal government's modification plans. Many of these people are now having financial difficulty," says Steve Ozonian, executive chairman of Irvine, Calif.-based Sorrento Capital.

So far, the industry has not experienced a sizable destruction in jumbo-loan mortgage portfolios, as individuals who took these loans boasted good incomes at the time they signed their mortgage documents.

Since then, some of these good folk have lost their jobs.

Fortunately, when the now unemployed got their jumbo loans back in the mortgage heyday years between 2002-07, they were able to also get from the lender significant lines of credit, in some cases upward of $1 million. Ozonian believes a lot of the unemployed jumbo borrowers are using their lines of credit to continue to make mortgage payments.

The higher-end home market could experience a higher proportion of defaults and REOs at the end of this year and through 2010, says Ozonian. "The amount of jumbo-loan defaults will accelerate if we don't allow people to modify, refi, or get out from under these homes."

If Ozonian's prediction comes to bear, the already narrow jumbo loan market will squeeze down even further.

Steve Bergsman is a freelance writer in Arizona and author of several books, including "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade."

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Little Jazz Man

Thu, 05 Nov 2009 14:14:02 PST

Nazir Ebo has a tough act to follow. His older brother, 18 year-old drummer Justin Faulkner, already has a list of credentials long and impressive enough to make musicians twice his age green with jealousy. Last year Justin finished his senior year of high school on the road while he toured with Branford Marsalis. Luckily, it seems that 9-year-old Nazir isn’t fazed by his brother’s glory, only inspired.

“When I was about five I would listen to songs Justin played in his band, and then try to remember all of them and play them,” Nazir recalls. When he had gotten enough practice on Justin’s drums—seizing any moment Justin rested as a drumming opportunity—the boys’ mother bought Nazir his own set.

Now Nazir has taken over end of the Faulkner’s living room as his own domain, and he supplies the neighborhood around 51st and Walton Avenue with the breathtaking sounds of his drumbeats. After he’s finished his homework.

Kevin Smith Breaks His Silence

Thu, 05 Nov 2009 10:37:35 PST

For two hours, Kevin Smith kept me waiting for his phone call. Two hours of his assistant checking in, letting me know he's on a very important conference call, telling me that ol' Silent Bob hasn't forgotten about me. By the time the man himself finally gets on the line, he is refreshingly apologetic about his tardiness. "I'm sorry, Smith says. "Unfortunately, I have corporate masters now."

So, what exactly was he and his "masters" talking about for so long?

Why, they were talking about dicks.

More specifically, A Couple of Dicks, the new movie Smith has directed that's coming out in February. The night before the interview, Smith screened the movie, a buddy cop comedy starring Bruce Willis and Tracy Morgan, for an audience, to make sure it's as funny as Smith and his masters believe it to be -- and it was a smashing success. The audience, which included family, friends and contributors to Smith's View Askew Productions Web site, ate it up.

Smith is happy. The studio is happy. Now, there's only one problem:

The title.

Clever and, of course, dirty as Dicks sound, if they go ahead with keeping the title, TV networks may only play ads for the movie after 9 p.m. So, they've been thinking of alternative titles. But none of them are as good as the original. "Nobody can let go of DIcks," he says, before adding, "which sounds very erotic."

After working with longtime idol Willis (anyone who has seen Smith's last Q & A DVD, Sold Out: A Threevening with Kevin Smith, knows how much Smith wanted to work with the fellow New Jerseyan again after appearing together in Live Free or Die Hard) and the unpredictable Morgan for three months, Smith is quite ready to give up the title if it means getting this sucker out into theaters.

Smith went through a similar battle a year ago with his last movie, Zack and Miri Make a Porno. Both networks and newspapers refused to give out the full title in ads, just cutting it off at Zack and Miri.

But, for Smith, that was actually the least of his problems regarding that movie's reception.

While the movie, which had Seth Rogen and Elizabeth Banks as down-and-out buddies who make their own skin flick as a get-rich-quick scheme, did get some love from critics (hey, even our own Sean Burns liked it!) and managed to gross a reasonable $31 million, Smith had higher expectations for it.When those expectations weren't met, Smith kind of got in a funk.

"Long story short though," he explains, "was I depressed? No. Was I disappointed? Absolutely. But it wasn't so much about the gross of Zack and Miri, as it was realizing that I couldn't continue being the same Kevin Smith that I've been my whole life, in terms of being a writer. Because I was so disconnected from the source, you know, at this point in my life."

So, there it was: Kevin Smith realizing he wasn't that young up-and-comer from Red Bank who sold off most of his comic-book collection to make his first film, Clerks, fifteen years ago. The man lives in L.A. now. He'll be 40 next year. He's been married to the same woman for a decade. They both have a 10-year-old daughter. Other people pay his bills, for Chrissakes!

He couldn't go on returning to the same format on-screen, of stoners and slackers "sitting around in front of the camera, talking about pussy and Star Wars and shit like that." Especially when Judd Apatow and his crew of ad-libbing man-children have been taking that same formula and spinning comic gold at the box office. (You could say that Zack and Miri was Smith reminding audiences that Smith was Judd Apatow long before Apatow showed up.)

"These dudes do what I used to do and they do it way better than I've ever done it," he admits. "Or, at least, they reach more people doing it. And that's the name of this game. People don't care about who did it first. They care about who does it most profitably."

Thanks to consuming "tons of weed" during this time, Smith came to terms with what he had to do. He knew he had to stop making "blogs as movies," as he calls it. Besides, he has other venues where he could riff on pussy, Star Wars and other Smith concerns: Twitter, his stand-up Q & A gigs (which he'll be doing on Thursday night at Merriam Theater), the "SModcast" he does with longtime producer Scott Mosier on his Web site. (Transcripts of said podcast's most uninhibited moments can be found in Smith's new, aptly titled book, Shooting the Sh*t with Kevin Smith: The Best of SModcast. )

It was time for Smith to get out of his self-pitying, marijuana smoke-filled haze and become a genuine, straight-up, goddamn filmmaker!

Luckily, someone threw Dicks in his lap. An exec over at Warner Bros. thought Dicks would be an ideal project for Smith since the script (which he didn't write; a first for a Smith film) has a "Clerks as cops" vibe. But Smith says he also jumped on it because it's the kind of traditional movie his dad would've appreciated. "If I made this movie," he says, "my father would've been like, 'Oh, you do make movies for a living.'"

While it may seem like longtime indie boy Smith has officially sold out by working with a major studio, he actually has nothing but praise for Warners. "Like, they're the ones taking chances now," he says.

"They're kind of what Miramax was back in the mid-'90s. These are the crazy cats who are like, 'Yeah, let's make Watchmen. Yeah, let's make Where the Wild Things Are. Yeah, let's put fucking Guy Ritchie on Sherlock Holmes. Yeah, let's put Kevin Smith on, like, a buddy cop movie from the '80s.' Didja see Observe and Report? What fucking studio makes that movie? I was like, "Wow, it's insane that a studio would get behind a comedy that out-there."

So, there may be a very chance that Dicks or whatever the hell it may be called come February may be the breakthrough, box office smash Smith has been looking for lately. I just hope he doesn't blow up to the point where he doesn't apologize for being late for phone interviews.

People like Smith when he's making movies about dicks -- not being one.

Kevin Smith 8pm, $39-$66. Merriam Theater.

5 things to never tell a buyer

Thu, 05 Nov 2009 09:39:14 PST

Watch what you say about crime, defects, religion

Bernice Ross
Inman News

A buyer is looking at your home and asks a question. Be careful what you say, as it can cost you much more than you realize.

As a seller, you may find yourself at home when a buyer is looking at your home. In most cases, it's smart to leave during the showing. If you are at home and the buyer or his/her agent asks a question, tread carefully. Here are five things to never tell a buyer.

1. Where is the property line?
It's easy to point to the fence and say that's where the property line is. The correct answer to this question is, "I don't know where the exact property line is. If you want the exact location, you will need a survey."

I remember selling a property where my client's brick fence was encroaching on a 2-inch-by-2-inch part of the property next door. My buyers didn't learn of the issue until they decided to add a room to the house. They hired a surveyor who discovered the problem. It cost almost $2,000 and a considerable amount of hassle to obtain an easement (i.e., permission to use) this tiny piece of land. Part of the expense was due to having to re-record the deeds for both parties as well as obtaining a written approval from each of the lenders.

In a different case, the sellers represented that the property line was located at the fence. The fence was actually encroaching on the neighbor's property by 1 foot. The property line on that side was 220 feet long. Due to the prime location of the property, the value of the land as awarded by the court was more than $200,000.

2. Do any ______ live in this neighborhood?
If a buyer asks you a question that references race, ethnicity or religion, it is a violation of the fair-housing laws to answer the question. A better response would be to say either "I don't know" or "federal law prohibits me from discussing race, ethnicity or the religion of my neighbors. If you would like to know more about the general characteristics of this area, you can check the U.S. Census data."

3. Is this a safe neighborhood?
While you might be tempted to say, "We have never had any problems," that's not a good idea. You may not have had any problems, but what about the neighbor on the next block who had her car stolen or who was burglarized? You may not be aware of the problems, but your representation of the safety of the neighborhood could come back to haunt you.

A better response is to say, "If you are concerned, please check the crime statistics for this area either online or at the local police department." Some resources include NeighborhoodScout or SpotCrime.

One particularly important point to note is the issue of sexual predators. CrimeReports.com allows you to enter your address to locate crime statistics plus identify whether registered sexual predators are living nearby. Please note that unless your local policing authority is reporting crimes to these online sources, there may not be accurate or complete data.

4. Is there anything wrong with the roof (or any other major system in this house)?
Your roof may have been watertight all last winter, but it may have developed a leak over the summer. There is no way to know the exact condition of the roof, even if you climb up and look at it. In fact, when roofers climb on your roof to make repairs, it can be extremely difficult to pinpoint where a leak originates. About the only way to tell for sure is to be on the roof when it is raining. Even then, the roof may leak when the wind is out of the south and not leak when it is blowing from other directions.

Most states will require you to disclose in writing the conditions about which you are aware. To protect yourself, it's smart to have your own inspector go through the property and to note where he or she found problems. You can give prospective buyers a copy of the report. There's one important caveat: Be sure to note on the report that the buyers should obtain their own inspections to verify the condition of the property at the time of sale.

5. Why are these floors so uneven?
Buyers often ask about the condition of the property. It could be a stain on the ceiling or a crack in the wall. It's important that you avoid diagnosing what the problem is. Settling could cause the uneven floors, but there could also be a foundation problem. The stain on the ceiling could be a roof leak, but it could also be honey from a beehive in the attic. Again, advise the buyers to obtain their own inspections to determine the exact condition of the property.

To minimize your exposure, avoid being at home during showings. If you must be at home, avoid volunteering verbal information to the buyer. Instead, obtain your own inspection report prior to listing the property and make that available to any buyers who view your home.

Second, fill out any required disclosure statements as completely as possible. Third, encourage the buyers to seek their own inspections regarding any concerns that they may have. Finally, place a home warranty policy on your home that covers the major systems on your property during the listing period as well as for the first year the new buyer owns the home.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.

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A foreclosure protection strategy?

Thu, 05 Nov 2009 08:03:26 PST

Rent it Right

Janet Portman
Inman News

Q: My landlord, who's been a great guy, told me that he thinks he's probably going to lose the property to foreclosure. My lease runs out in a couple of months, and I was hoping to stay here for at least another year. The landlord offered to renew the lease now, for as long as I want, because he says there's a new law that makes foreclosing banks honor existing leases. If we do this, will it work? --Paul L.

A: Your landlord is correct about the new law. Signed by President Obama in May 2009, the Protecting Tenants at Foreclosure Act of 2009 requires foreclosing banks who become the owner upon foreclosure to honor existing leases.

If someone buys the home at a foreclosure sale intending to occupy it, however, the new owner can terminate the lease with 90 days' notice. (Incidentally, for month-to-month tenants, both the bank and any new occupying buyer have the right to terminate the rental agreement, but must give tenants 90 days' notice.)

Your landlord's idea would give you the long-term protection you need as long as the bank buys the property rather than a buyer who plans to live there. Even if the bank turns around and sells to someone else, that new buyer will have to honor the lease.

However, even if the bank becomes your landlord upon foreclosure, you might face some problems if the bank learns of your last-minute lease-signing. Reasoning that an empty home will be easier to sell than an occupied one, and realizing that any subsequent buyer will be shackled with you as a tenant for the length of your new lease, the bank may decide to challenge the validity of your last-minute lease.

Undoubtedly, the bank would start by offering you some money to move fast and quietly (known as "cash for keys"). If you don't go for it, they'd proceed by terminating your tenancy. If you refused to move, the bank would file an eviction lawsuit.

You could argue that the bank must honor your new lease, but the bank would likely contend that the lease was an effort to defraud the bank and shouldn't be enforced. Ultimately, the judge would be asked to decide whether the new lease is valid.

Your landlord's plan is clever, but that doesn't necessarily mean that it's legal. You and the landlord are taking advantage of a legal right (signing a new lease) knowing that it will tie the hands of the bank later. Is this fraud?

Lots of maneuvers that businesspeople engage in do just this -- cleverly use the law to their own advantage, and perhaps at the expense of others down the road. These ploys become illegal when, for example, the actors owe some duty of care or loyalty to the person who ends up disadvantaged by their act.

But does the landlord's relationship with his lender make him duty-bound to make life easier for the bank when the landlord defaults on his loan? Perhaps. When two people are parties to a contract, they owe each other a duty of "fair dealing," which generally means that they must not act in a way that will harm the interests of the other.

Your landlord and his lender were under contract -- but does extending your lease and making the property less salable constitute active harm? If the landlord were dealing with the neighborhood bank, maybe ... but these days, the lender could be one of many subsequent owners of this mortgage, which might have been chopped and bundled and sold repeatedly to unknown buyers.

The new federal legislation you're relying on may itself supply the answer. Section 702(b) specifies that the new duty to honor your lease applies only when you're a "bona fide" tenant.

According to the law, tenants must not be the spouse, parent or child of the owner; tenants are paying rent that's not "substantially less" than fair market rent; and the lease transaction must have been conducted at "arm's length." This last requirement probably doesn't describe the plan hatched by you and your landlord, which might doom your chances of staying.

Q: Like many properties in town, my apartment complex is not fully occupied, and I'm having trouble filling vacancies. My wife suggests that we take advantage of the lull to renovate. I'm hesitant, given these hard times. What do you think? --Matt S.

A: I think your wife has a very valid point, and it's one that hasn't been lost on your commercial landlord counterparts. There are several good reasons to renovate now, rather than waiting until full occupancy returns and the economy recovers:

1. Renovating now positions you nicely once the economy improves. Things are bound to improve (that's why real estate cycles are called "cycles"). If you've upgraded your property, you'll be ready to attract the best tenants and charge them an increased rent for your spiffed-up units. But if you wait, you'll either have to rent for less or keep apartments off the market while you do the work, losing you even more rental income.

2. Renovating now helps keep current tenants. As you've noted, vacancies are up, which means that your remaining tenants have plenty of choices about where to live. If they see that you're actively improving the property, they're less likely to jump ship, even if they could rent for less.

3. Renovating now is convenient. You already have some vacant units -- you may as well take advantage of that to do the work. If you wait, you'll have to either take them off the market when you could be renting them or try to do the work with tenants in place. Even if that's feasible, most tenants will expect some compensation (relocation or diminished rent) in exchange for the disruption.

4. Renovating now may allow you to take advantage of discounted goods and services. Take a look at the price of appliances at big box stores -- there are bargains galore. You may also find contractors willing to work for less than they'd charge in a booming economy, when there's a higher demand for their services.

If you decide to go ahead, start by figuring out which improvements will set you apart from the competition. Learn what your market -- tenants who earn enough to afford your rent -- really want in a rental. Is it granite countertops? An on-site gym? How about "green" improvements? Talk to other landlords and brokers to find out -- the last thing you want is to spend money on remodels that don't appeal to your target market.

Finally, be sure that after you do all this work and spend the money, you choose qualified and creditworthy tenants. Your entire strategy is based on spending money now so you can collect more money (in the form of higher rent) later. That plan depends on finding solid tenants who pay on time and don't have to be evicted.

Having to evict means more expense, and rent-less months while you look for a replacement -- all of which will cut into your income stream.

Wives have such excellent ideas, don't you agree?

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.

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Purchase power: Know your true max

Thu, 05 Nov 2009 07:28:42 PST

REThink Real Estate

Tara-Nicholle Nelson
Inman News

Q: My wife and I were approved to buy a home up to $400,000, but we knew that we couldn't actually afford the monthly payment on that much. So, we started out looking at homes in the $200,000 range. Over the months, we realized that we would have to offer quite a bit more than the asking price to get in.

And so many of the properties we were seeing were in really bad shape -- so bad that we couldn't afford to fix them up if we did get them. So we decided to look in the $250,000 range, but even after offering $30,000-$40,000 over asking, we still weren't getting anything.

Now we're looking up in the low $300,000s -- we're starting to see fewer offers on the properties and better places, but I'm concerned by this trend and I fear that we're in danger of overextending ourselves. How should we proceed?

A: When I was a kid, there was a series of animated commercials for Crest toothpaste in which the city of Toothopolis was attacked by these massive, muscular invaders whose sole mission was to drill cavities into teeth. The name of this tribe? The Cavity Creeps. I believe that you might be running into their cousin: the "Price Creep."

Mindset Management

Unlike The Cavity Creeps, Price Creep has some redeeming qualities. Many times, buyers start the house-hunting process with unrealistic expectations, especially given the hit home values have taken recently. Many first-time buyers or folks who have been out of the market for any significant period of time read the headlines that prices were down and assumed they could get a mansion for a song.

For those who were laboring under this misconception, Price Creep can be useful, even necessary. You need to have some mental flexibility and, ideally, room in the budget to creep your mental maximum price upwards to the point where you're at least operating within the same reality as the rest of the players in the market, or you'll make lowball offers, continually experience rejection, and burn yourself and your agent out -- all without getting a home.

Educated, reality-based Price Creep is the opposite of fantasy-land, ignorant rigidity, and that might be why you were willing to move your price range upward initially.

However, Price Creep Gone Wild is a potentially dangerous animal. I've seen it time and time again -- buyers trying to beat out all the other offers, creeping up by $5,000 or $10,000 every 15 minutes because, well, it adds only $50 or $75 to their monthly payment. And that's true, but those reasonable and incremental Price Creeps, multiplied by four or five, can hike up your monthly mortgage payment from a place where you have to give up a night out a month to a place where you have to give up food altogether -- and that's not a good look, as the kids say.

Need-to-Knows

So the name of the game is getting clear and concrete: on your personal finances and what they can bear, on your priorities, and on your vision for your life in your new home -- and what lifestyle or property must-haves, compromises and sacrifices you're willing to make to keep Price Creep under control.

I want you to move from where you are now (nervous that you'll overextend yourselves) to a place of confidence about what your absolute max is. I want you to be so confident that even if you saw your quintessential dream house, you would have no regrets if you made your best offer and failed to get it, because you know exactly what your best offer is.

To get there, you need to get crystal clear on your personal finances. If you haven't already, write out a list of your current income and expenses. Talk with your accountant or tax preparer to get an estimate of how much your monthly net income will increase when you change the taxes withheld from your paycheck to account for your mortgage interest deduction.

Then, tweak your list to exclude your current rent, and to include all of the miscellaneous costs of ownership (outside of your mortgage payment), like maintenance and utilities that you're not paying now.

This is a truth-telling exercise. You'll have to be honest with yourself about how much you're currently spending on discretionary expenses like dining out, leisure shopping and traveling -- put it all on the list. Ideally, work from your last month's bank statements to get the most accurate picture.

Then, prioritize and make some value judgments as to which discretionary expenses you can reduce once you buy your home, based on what you two feel is worth giving up in exchange for homeownership. Be honest here, too. Some folks will tell you not to buy lattes or to downscale your international travel habit to road trips in the tri-state area.

My suggestion is that you stay true to what you know about yourself and what level of spending-habit change is actually feasible. And remember that your life is supposed to get an upgrade from buying a home.

So while almost every homeowner needs to scale back from the unfettered spending of their days as a renter, do not assume that you're going to go from mimosa brunches every Sunday to total self-imposed poverty the day after you sign your closing papers. Avoid setting yourself up for failure.

After you reduce those expenses on this spending plan you're creating, you should have a much clearer picture of how much you can afford -- max -- to spend on your home.

Go back to your mortgage professional and ask them to work backward from that monthly dollar amount, keeping in mind how much cash you have to put toward downpayment and closing costs, and tell you what purchase price corresponds with your monthly max.

Make sure he or she includes principal, interest, property taxes, homeowners insurance, mortgage insurance, and homeowners association dues, if applicable.

Follow these action steps, and you should be so clear on your max that you'll be much more likely to stick with it -- period. You've gotten all the benefit possible out of the Price Creep, now put the creep back in its place!

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IRS tax credit safeguards fall short

Thu, 05 Nov 2009 01:00:00 PST

Key controls missing from first-time buyer program

Tom Kelly
Inman News

A 4-year-old …? How does a 4-year-old get approved for an $8,000 first-time homebuyer tax credit?

While Realtors, lenders, appraisers, home inspectors, escrow officers and every other professional service connected to home sales and financing are lobbying for an extension of the first-time homebuyer housing credit, a recent audit revealed thousands of fraudulent claims and a need for more safeguards to support the popular program.

It's disheartening that problems would surface in the one plan that is housing's primary driver, but I guess the fraud disclosure should not come as a surprise. Mortgage scams have been in the news. And, we are just now getting an indication of how many consumers are willing to participate -- especially if they think there is a chance the Internal Revenue Service will not discover their creative maneuvers.

The American Recovery and Reinvestment Act of 2009 revised and extended the first-time homebuyer credit provided for in the Housing and Economic Recovery Act of 2008 to Nov. 30, 2009. Taxpayers qualifying for the program may claim the $8,000 credit on either their tax year 2008 or 2009 individual income tax returns. As of July 17, 2009, more than 1.1 million tax returns claiming more than $8 billion had been processed.

The goal of the recent audit conducted by the Treasury Inspector General for Tax Administration (TIGTA) was to determine whether the IRS had controls in place that effectively identified erroneous claims for the tax credit.

It developed computer programs to identify 73,799 first-time homebuyer credits attached to an original U.S. Individual Income Tax Return (Form 1040), totaling almost $504 million, that were claimed by taxpayers who had indications of prior homeownership within the last three years.

According to the audit, the 73,799 taxpayers had entered information on their individual income tax returns for one of the prior three years indicating they may have owned a home. These entries included deductions for home mortgage interest, real estate taxes, deductible points, and qualified mortgage insurance premiums.

While the IRS adopted controls to identify many questionable claims for the credit, some key controls were missing, according to the TIGTA. Missing from the suggested safeguards was information provided on the First-Time Homebuyer Credit (Form 5405) to verify eligibility requirements. In addition, taxpayers were not required to provide documentation that they actually purchased a home.

The law defines a "first-time homebuyer" as any individual (and spouse, if married) who had no ownership interest in a principal residence during the three-year period prior to the purchase of the home to which the credit applies.

According to the audit summary, TIGTA identified 19,351 tax year 2008 electronically filed tax returns on which taxpayers claimed credits totaling more than $139 million for homes that had not yet been purchased.

If that revelation wasn't absolutely mind-boggling, then the discovery of 4-year-old claimants (apparently more than one) really takes the cake. In the words of the audit writers: "Through July 25, 2009, we identified 582 taxpayers under 18 years of age who claimed almost $4 million in first-time homebuyer credits. The youngest taxpayers receiving the credit were 4 years old.

"Contract law generally exempts children under the age of 18 from being bound by the terms of a contract. Therefore, it is unlikely that these taxpayers would have entered into an arm's-length transaction for the purchase of a home."

Approximately 28 percent of the 582 taxpayers under age 18 that were identified claiming the credit did not meet the IRS' Adjusted Gross Income screening criteria. In 64 of these cases, other IRS filters flagged the claim for further scrutiny. However, 101 of the claims (totaling $626,779) made by children under the age of 18 did not meet any of the IRS screening criteria.

As of May 17, 2009, the IRS implemented examination filters to identify potentially erroneous claims for the credit. The age of the taxpayer receiving the credit was not one of the specific filters implemented by the IRS to screen the original claims. According to the audit, the IRS believed that its filter identifying taxpayers claiming the credit who had adjusted gross incomes below certain levels would catch the questionable claims.

Also falling through the cracks were 12,023 taxpayers claiming to be first-time homebuyers who had taken a residential energy tax credit within the past three years.

"This increases the likelihood that the taxpayers owned a principal residence and do not qualify for the First-Time Homebuyer Credit since this credit is generally only available for qualified expenditures made on a taxpayer's principal residence …"

While many taxpayers will be identified by recently implemented IRS filters and are subject to pre-refund audits, the TIGTA identified 70,005 taxpayers whose tax returns were processed prior to the implementation of the filters.

Clearly, the IRS underestimated the need for basic first-time homebuyer safeguards in the credit program -- and probably the popularity of the program itself.

But a 4-year-old?

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 Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com.

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Bankruptcy fails as foreclosure rescue

Wed, 04 Nov 2009 12:20:01 PST

Law of the Land

Tara-Nicholle Nelson
Inman News

In this case, homeowner David Coletta secured a note for $60,000 with mortgages on two properties in favor of mortgage holder Nicholas Mattera. After the homeowner defaulted on payments on the note, Mattera filed a foreclosure action in the county court.

The homeowner's response failed to conform to the court's rules, and he was given an extension of time to respond appropriately. Instead of responding, the homeowner filed a Chapter 11 bankruptcy action, which automatically stayed the foreclosure proceedings. His attorney was unable to provide evidence that he notified Mattera of this bankruptcy filing. The homeowner failed to follow through with the bankruptcy case, and it was dismissed.

When the homeowner failed to file a conforming response, the county court entered a default judgment in favor of Mattera, who attempted to collect by scheduling the properties for foreclosure sale. The day prior to the scheduled sale, the homeowner filed a Chapter 13 bankruptcy action, again automatically staying the foreclosure.

Mattera requested that the bankruptcy court lift the stay and expressed that this was his first notice of either bankruptcy proceeding. The bankruptcy court lifted the stay and allowed Mattera to foreclose on the properties. Mattera then purchased both properties at the foreclosure sale. The homeowner again failed to follow through with this bankruptcy case, and it was dismissed.

After the sale, the homeowner returned to the county court and requested that the default judgment and foreclosure sale be set aside, because they violated the automatic stay of the initial Chapter 11 bankruptcy filing.

Mortgage holder Mattera argued that the automatic stay of the foreclosure on these two properties from the homeowner's initial bankruptcy filing should be retroactively annulled. The bankruptcy court ordered the automatic stays retroactively annulled; on appeal, the district court upheld the annulment.

On this second level of appeals, the Court of Appeals upheld the lower court's ruling to retroactively annul the automatic stays. The court found that the bankruptcy court did not abused its discretion in finding that Mattera likely was unaware of the initial bankruptcy filing. The factors that should be considered, explained the Court of Appeals, for retroactively annulling an automatic stay are "whether a creditor violated the automatic stay inadvertently and in ignorance of a pending bankruptcy and whether the debtor acted in bad faith."

The bankruptcy court in this matter analyzed the proper factors and found that it was more likely that the homeowner's attorney failed to notify Mattera of the Chapter 11 bankruptcy filing than it was that Mattera's attorney ignored the bankruptcy filing, especially given that the homeowner's attorney could not produce a fax cover sheet or copy of a letter notifying the mortgage holder, according to court records.

Accordingly, the bankruptcy court did not abuse its discretion in finding that mortgage holder's violation of the stay was "innocent," the court found. Further, as the bankruptcy court pointed out, the homeowner was "chargeable with inequitable conduct because he allowed an inordinate amount of time (eight months) to elapse before he raised the violation of the automatic stay."

Given the weight of the evidence showing the innocence of Mattera's violation of the automatic stay, and the wide latitude of authority possessed by the bankruptcy court to order an automatic stay retroactively annulled, the Court of Appeals ruled that the lower court did not abuse its discretion and upheld the retroactive annulment of the stays with respect to the foreclosure actions on the two properties at issue.

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Taking a stand on floor insulation

Wed, 04 Nov 2009 08:31:47 PST

Best plan: Match to climate zone

Bill and Kevin Burnett
Inman News

Q: Our Mill Valley, Calif., home was built in 1957 and was not insulated. Every time a wall is opened up, we add insulation. Some say it would be a good idea to insulate the floor of our house. There is a crawl space under the house where we could reach the bottom of the floor. As the house is built on a slope, the crawl space varies from 2 to 8 feet tall.

Others say insulating the floor may not be a good idea. In the summer, the house gets hot, and the coolness of the crawl space will help keep the house from getting hotter.

What do you guys think?

A: Without a doubt you should insulate the floor that separates the living areas from the crawl space. And rest assured you're doing absolutely the right thing by insulating the walls as you open them. You don't mention the attic space. We assume you have some insulation there. Check to make sure it is enough.

Insulation is measured in R-value, which is a measurement used to quantify the resistance of a material to the transfer of heat. Some materials, such as most metals, are good heat conductors; others, such as fiberglass, conduct heat poorly.

Interior air is always trying to seek a balance with outside air. Left to its own devices, 70-degree indoor air wants to transform itself into 40-degree exterior winter air. Insulation inhibits that transformation. The same is true for cooler interior air in the summer. Insulation, caulking, thermal windows and other energy-saving strategies seek to maintain the temperature of conditioned interior air within the living space.

The U.S. Department of Energy provides a chart and map of recommended insulation levels for homes in various climate zones. According to this map, your Mill Valley house is in zone 3. Assuming your heating system is natural gas, the recommended insulation level for a crawl space is R-13, walls are R-13 and attic space is R-38.

The Department of Energy also includes an insulation calculator on its Web site. You can plug in the first three numbers of your ZIP code and answer a few questions, and recommended R-values will be calculated for you.

In our view, these recommendations are minimums. As we mention from time to time, Kevin lives in Eagle, Idaho. That's in climate zone 5. The recommended floor insulation level is R-25. Unfortunately, he installed only R-11 insulation in his floors. The 9 1/2-inch-deep bays between his floor joists would easily have taken R-30 fiberglass batts, which would have made his home more comfortable and saved on heating and cooling costs.

As it is, even with substandard insulation, he is able to walk barefoot comfortably on his wood floors year round.

Your 1957 home probably has 2-inch-by-8-inch floor joists that measure 7 1/2 inches deep. It will easily accommodate R-19 fiberglass batts. If the joist bays are deeper, use a thicker batt. The bottom line is to separate the crawl space from the living area with as much insulation as you can.

Remember, when installing insulation batts, the craft face or foil face vapor retarder should be installed toward the conditioned area. In this case, that's the floor.

But remember, you'll get the most bang for your buck by properly insulating the attic space. Attics get hot in the summer from the sun. Hot attic air will try to radiate into the living area. A proper level of insulation inhibits that.

The same is true for the crawl space air. Foundation vents are designed to allow exterior air to circulate under the house. As crawl space air reaches the ambient exterior temperature, it also radiates into the living area, making it hotter in the summer. Insulating the floor provides resistance to this heat transfer, enhancing the comfort of the interior temperature.

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