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Three Years After Buying, Termites Are Gnawing Anew

SPECIAL TO THE TIMES

Question: We bought our house three years ago. We recently began remodeling and, in the process, discovered termites. We’ve had four companies inspect and give us quotes for tenting the house. All reported wood-destroying and subterranean termites.

But when we bought our house, the termite inspector reported only wood-destroying termites. However, there were prior termite reports showing both types and recommending tenting.

I called the company we hired three years ago. They said they did not see any subterranean termites. Can I go after this company so I don’t end up paying all this cost?

Answer: It’s possible that at the time you bought your home three years ago, there was no evidence of subterranean termites. The fact that they were discovered now and had been observed some time previously do not mean they were there three years ago. If you had observed the termites within a short time after the inspection, the termite inspection company would be liable for its error. To expect them to make good three years later, however, is a stretch. Of course, you can always go to Small Claims Court and let the judge decide.

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Ban the Buyer’s Agent? It Could Cost License

Q: As a Realtor, I sometimes wonder in what fairyland you are buying and selling real estate. You recently advised home buyers to insist on being there when their offer was presented to the seller, since they believed their agent wasn’t doing a good job.

In my area, it is customary for a buyer’s agent to write up a presentation cover letter, which gets faxed or delivered to the seller’s listing agent along with the offer. Neither the buyer nor the buyer’s agent is allowed to get near the seller.

Any buyer who put a directive in his offer insisting on being present for an offer presentation would quickly receive a written reply from a properly represented seller refusing even to consider the offer.

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A: The letter on which you comment was from a home buyer who was unhappy with her buyer’s agent. Normally there is no need for the buyer to accompany the agent to present a purchase offer. Most buyer’s agents do an excellent job.

But faxing an offer to the listing agent is a dereliction of the buyer’s agent’s duty to properly represent the buyer (unless the seller refuses to accept in-person offers). I find your refusal to allow a buyer’s agent to present the purchase offer in person to be outrageous, unless the seller has so specified in writing.

For a listing agent to refuse to allow a buyer’s agent to present a purchase offer to the seller in person, even if the offer specifies the buyer is to be present, would be a breach of fiduciary duty to the seller for which the listing agent could lose her license.

Advice to Mom: Give $30,000 Lot to Kids

Q: Recently you answered a question from a mother who deeded a lot, for which she paid $30,000, to her adult children for $1. As a CPA, I believe that was effectively a gift of $29,999, so the mother’s $30,000 basis should transfer to her children. When the lot was later sold for $32,000, minus various expenses, in my opinion there is a loss, not a taxable gain.

A: Thank you for your expert opinion, which I value highly. However, if the adult children are audited by the IRS on this lot sale, they will have to overcome the tax collector’s obvious argument that since they paid $1 for the lot, any net amount they received above $1 should be taxable capital gain. As we all see, it would have been better for the mother to give the lot to her children so they, as donees, clearly take over her $30,000 donor’s basis.

Insurer Should Resolve Dispute Behind Lien

Q: I bought a new home several months ago from a builder. But two months after moving in, I received a $5,865 mechanics’ lien against the house from the lumber company the builder used.

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I now find it necessary to sell the house and am having trouble getting a reputable realty company to handle my sale because of the lien.

The title insurance company says I should just have my buyers close with the same title insurer. But what if the buyer wants to get title insurance from another company? The builder tells me to stop worrying because this lien doesn’t affect anything. But why are realty agents shying away from my listing?

A: Be thankful you got an owner’s title insurance policy. Among its many protections for unexpected title risks is to insure you against loss from mechanics’ lien foreclosure. However, your title insurer is not doing its job well under the circumstances. The insurer should resolve the conflict between the builder and lumber supplier.

Although it rarely happens, the lumber supplier could foreclose on the mechanics’ lien. But this dispute shouldn’t stop you from selling your house. Ask the title insurer to write a “to whom it may concern” letter stating that the title insurer stands behind its policy and will insure title for the buyer. That should satisfy any realty agent.

In the remote chance the buyer insists on going to another title insurer, then your insurer must indemnify that insurer against loss.

Although mechanics’ liens can get messy and take time to settle, they are usually resolved. If necessary, hire an attorney and file a complaint with the state insurance commissioner against your title insurer.

Would-Be Tenants Lose Their Investment

Q: We signed a one-year lease, effective last Nov. 1. With the landlord’s permission, we cleaned the house and replaced the laundry room floor at our expense. We put new carpeting and padding in another room.

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But two days before we were to move in, the landlord and his wife changed the amount of our security deposit and the monthly rent, even though we had signed a lease. The police were called and we were ordered not to enter the property until Nov. 1. However, we decided not to move in. But now we are out our cleaning expense, labor and material cost. What should we do?

A: After you fixed up their house, the owners realized it should rent for more money. You obviously have a cause of action for breach of contract damages. If your damages were minimal, Small Claims Court is the place to sue the landlords and let the judge decide your damages.

If you were unable to obtain a comparable rental at a similar price and your damages are substantial, you might want to retain an attorney to sue for greater damages.

Reverse Mortgage Proceeds Go to Heirs

Q: I’ve been enjoying your recent explanations of reverse mortgages for we senior citizen homeowners. As I’m 75, I think I’m eligible. But what happens when a reverse mortgage homeowner dies?

A: After the reverse mortgage homeowner dies, the reverse mortgage lender (such as Fannie Mae or FHA) will make sure the residence is sold. From the sales proceeds, the lender must be paid its loan balance. The remaining proceeds will go to the heirs of the deceased homeowner.

In the rare situation where the homeowner lives to be 110, the loan balance will probably exceed the home’s market value. If that unusual circumstance occurs, the lender will suffer a loss, because the home is worth less than the loan balance.

But the deceased’s estate has no liability for the deficit and the lender eats the loss.

The new Robert Bruss special report, “How to Make Your Home Sell Fast for Top Dollar,” is available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010. Credit card orders are welcome at (800) 736-1736 and by fax at (650) 348-6916.


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