Today's Top Real Estate News

Finding fix for septic smell

DEAR BARRY: We sold our previous home about eight years ago but have continued to live just a few doors away. A few years ago, a trash truck got stuck in the mud at the edge of that property and damaged the leach lines in the septic system. The broken pipes were sticking out of the ground, so the owner pulled them up and threw them away.

Since then, smelly water from the septic tank drains onto the street. The house has been sold since then, and the new owners refuse to fix the problem. They say the county has determined that the water is from a broken sprinkler pipe, not the septic. But that can't be true because the smell on our street is awful. Is there anything we can do? --Lisa

DEAR LISA: The county has an obligation to investigate your complaint rather than dismissing it out of hand as a broken sprinkler pipe. If county officials are not awakened by your reasonable concerns, a letter from an attorney might arouse their interest.

You should consult an attorney who specializes in administrative law. You might even get your neighbors to pitch in on the legal expense.

Another thought: The editor of your city newspaper might be interested to know that the local government is not interested in exposed sewage at a residential neighborhood. That's the sort of news that makes interesting front-page reading in a community paper.

The objective in these efforts is to have the septic system professionally inspected by a licensed septic contractor. That should be your demand to the property owners and the municipality. A full report of the system's condition should be provided to determine what corrective procedures, if any, are needed.

DEAR BARRY: A few years ago, we had a flood in our home, caused by a bad plumbing leak. The insurance company paid for major repairs, including new carpets, new drywall, new wood flooring, and more.

But ever since that time, our daughters have had severe allergies and seasonal asthma. We are afraid that the repair work could have disturbed lead paint or asbestos and that this could be affecting our daughters' health. How can we find out if this is the cause of our problem? --Kimberly

DEAR KIMBERLY: A possible cause of their health problems is that the flooding incident produced a mold infection somewhere in your home. To determine whether this is the case, you should hire a professional mold inspector to take air samples from your home and have them analyzed by an environmental lab.

If a strong presence of mold spores is detected, you'll need to hire a mold remediation specialist. If the mold count turns out to be low, your daughters' health problems may be unrelated to the flooding that occurred in your home. At that point, it will be the task of your family physician to provide a diagnosis and solution.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.

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Shopping tips for homeowners insurance

On all those reality TV shows that follow the ups and downs of first-time homebuyers, most of the financial discussion revolves around the price of the house itself. Occasionally, they'll throw property taxes into the calculation. The words "homeowners insurance" don't seem to come up.

But homebuyers need to factor it into their budgets. The National Association of Insurance Commissioners said the average homeowners insurance policy, covering the building, personal property and liability, cost $822 in 2007.

However, some states can be significantly pricier: Florida and New York, for example, each had an average cost of more than $1,000 that year. Then, there are the potential add-ons and extra coverage for flooding, wind damage or earthquakes.

On the flip side, the diligent and savvy consumer can score some discounts, but he or she might have to ask for them specifically.

Five things for homebuyers to keep in mind about homeowners insurance:

1. How much insurance should you have?

"Homeowners insurance pays what it's going to cost to rebuild a house and replace your personal possessions in it," said Jeanne Salvatore, a spokesman for the Insurance Information Institute, a trade group.

The institute suggests homebuyers can ballpark the cost of basic insurance by multiplying the square footage of the home by local building costs per square foot. The group says such local figures may be available through real estate agents, local homebuilders' associations or insurance agents.

2. The condition and location of the house could make a difference in the annual premium, Salvatore said.

For instance, a home closer to the local fire department and to professional, full-time firefighters usually costs less to insure. In addition, poorly maintained or unsafe plumbing or electrical systems could add to the annual premium.

"Some companies will send out someone to look at the house (and its mechanical systems), others will not," Salvatore said.

"They might ask follow-up questions. The reality is that if it's known that you have an older house with older electrical or plumbing systems, this is something that could cause losses, and you would be charged more (for coverage)," she said.

3. Then there are special circumstances. Depending on the region, some homeowners will need to acquire coverage for flooding, wind damage, earthquakes or other natural hazards, Salvatore said.

Flood insurance isn't covered under standard policies, though it's available from the National Flood Insurance Program, which is serviced by private carriers and some specialty insurers.

Wind damage may be covered by private insurance or through state-run programs. Earthquake coverage requires an endorsement to a homeowners insurance policy or separate insurance. Some homes in Hawaii might need tsunami insurance.

4. There are ways to whittle the annual tab down, such as raising the deductible amount. If you have a good credit history, some insurers may offer you a discount.

Other potential discounts: multi-policy, for having homeowners, car or other policies with the company; having smoke detectors, fire sprinklers or fire extinguishers; being over 55 and/or a longtime policy holder; security alarms that connect to an outside service; wind-resistant-shutters, and others.

5. Consumers can check a home's insurance "rap sheet" to see whether certain undisclosed problems may have befallen the place in years past by asking the seller to provide a loss-history report.

The loss-history report is a record from the insurance industry that shows what, if any, claims have been made for the property in the past five years. The reports might reveal claims related to flooding or electrical fires, for example.

CLUE (Comprehensive Loss Underwriting Exchange) reports are available for homeowners through ChoicePoint (ChoiceTrust.com); ISO, which compiles insurance-industry data and issues A-PLUS reports (ISO.com). To protect homeowner privacy, only homeowners and others with certain permissible business purposes can obtain the reports, so interested homebuyers should ask the seller to provide them.

Mary Umberger is a freelance writer in Chicago.

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Buyers can't rescind disputed purchase contracts

In 2007, Borden East River Realty LLC sponsored the Hunters Point Condominium Development in Long Island City, N.Y.

Borden East filed a New York State Offering Plan with the New York State Attorney for the 132 residential condos, 26 roof terrace units, and 25 parking space units comprising the development, then began selling the unfinished units.

Hunters Point was promoted under a common promotional plan with a neighboring development, Hunters View, that was sponsored by a different developer.

Later in 2007, eight prospective buyers entered into contracts to purchase residential condo units at Hunters Point, and each placed a 10 percent earnest money deposit on the respective units, prior to which each was given a copy of the offering plan, according to court records in Romero V. Borden East River Realty LLC.

Between January and April 2009, the prospective buyers all notified Borden East of their intention to cancel their purchase contracts and demanded the return of their deposit funds.

Each prospective buyer reportedly wrote to Borden East, claiming that Borden East failed to comply with the requirements of the Interstate Land Sales Full Disclosure Act and that Borden East's violation of the act entitled them to both rescind their contracts and recover their deposits.

Borden East acknowledged that it was not aware of the act.

In March 2009, Temporary Certificates of Occupancy (TCOs) were reportedly issued for both Hunters Point and Hunters View.

Based on the number of units that were unsold at the time the TCOs were issued, the developers of the combined Hunters Point/Hunters View project researched the matter and believed the projects to be exempt from the requirements of ILSA under several exemptions provided in the Act, court documents state.

The developers also reportedly requested that the federal Department of Housing and Urban Development issue an advisory opinion on the matter of whether the projects were required to comply with the Interstate Land Sales Full Disclosure Act.

HUD reportedly issued two separate opinions, two days apart.

The buyers all filed suit, and all parties (the buyers and Borden East) moved for summary judgment, requesting that the court issue an opinion as to whether Borden East was required to comply with ILSA.

Under ILSA, the developer of a "subdivision" may not "sell or lease any lot unless a statement of record with respect to such lot is in effect ... (and) a printed property report . has been furnished to the purchaser or lessee in advance of the signing of any contract or agreement by such purchaser or lessee."

Under the act, if the developer does not provide an ILSA-compliant property report prior to the buyer's execution of a purchase contract, the buyer has the right to rescind the contract for up to two years, and the right to the return of his or her deposit monies.

The U.S. District Court for the Eastern District of New York agreed with Borden East's argument that Hunters Point was exempt from complying with ILSA's statement registration and report disclosure requirements.

ILSA's "Improved Lot Exemption" exempts from ILSA's disclosure and registration requirements "the sale or lease of any improved land on which there is a residential, commercial, condominium, or industrial building, or the sale or lease of land under a contract obligating the seller or lessor to erect such a building thereon within a period of two years."

Borden East argued -- and the court agreed -- that all lots sold following the issuance of the TCOs were sold as completed construction and, thus, fell under that exemption. Another unit was exempted under a section of the act relating to lots sold for the purpose of resale.

After subtracting out units exempted by the act, the remaining units -- including the units of the prospective buyers who filed the complaint -- were found exempt under a "Hundred Lot Exemption," which provides that ILSA's registration and disclosure requirements "shall not apply to the sale or lease of lots in a subdivision containing fewer than 100 lots which are not exempt under" Section 1702(a) of the act.

The court rejected the prospective buyers' argument that the exemptions could not be combined, explaining that both the plain reading of the statute and HUD guidelines for interpreting ILSA supported Borden East's ability to piggyback the exemptions.

Additionally, the court explained, the development's parking lots and rooftop terraces could not be conveyed by the developers separately from a residential unit and, thus, did not count as separate lots, so as to push the development out of the Hundred Lot Exemption.

As a result, the development was found exempt from the registration and disclosure requirements of ILSA, and the prospective buyers were deemed unable to rescind their purchase contracts and recover their deposits.

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." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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Homeowners association vs. individual insurance

DEAR BENNY: My condominium association has a very comprehensive insurance policy. Our board is recommending that each owner get his or her own insurance coverage. Why do I need to pay for insurance when it's already paid for by the association? --Harry

DEAR HARRY: Every condominium association must have a master insurance policy. The declaration will spell out the minimum required insurance coverage, and many state condominium statutes also require a minimum amount of coverage. The master policy will cover problems and issues relating to the common elements and the limited common elements.

For example, if there is a common-element water pipe that bursts, causing flooding and water damage to the common halls, elevators and individual units, the master policy will pay the damage claims, less the insurance deductible specified by the policy.

However, the master policy does not provide all-inclusive coverage. What if the water flooded into your apartment, damaged your walls, ruined your carpet and destroyed your expensive 50-inch plasma TV?

The master policy will pick up the cost to repair your walls, but you are on your own regarding any personal belongings. Additionally, most master policies exclude improvements, or what are known as "betterments." If you have the original floors in your unit, coverage will probably be available should they get damaged as a result of the flooding.

But if you (or your predecessor) installed parquet flooring, the "betterment" will not be covered under the master policy. I firmly believe that every condo owner should get the HO-6 coverage; the cost is minimal and the risk without it is great.

DEAR BENNY: My daughter and I own a condominium unit in a senior (over 55) complex. I paid for it, but my daughter's name is on the deed as "joint tenant with right of survivorship." I am 65 and she's 37, but married to a man who is 60. Thus, they qualify to live in this community. I live with my husband in another community.

Things are not going well in my daughter's marriage, and the word divorce keeps showing up. If they were to divorce, would she be forced to leave that condo, or is there any such thing as "grandfathering"? She's lived there for almost two years, and met with the condo for approval before moving in. --Karen

DEAR KAREN: Part of the answer can be found in the legal documents of your condominium association, and part of the answer can be determined by reviewing any local zoning restrictions enacted by your local government.

The Department of Housing and Urban Development (HUD) generally regulates these senior projects. HUD does allow 55-and-older communities to bar children; however, they encourage "some flexibility where the exemption would not be destroyed by that flexibility."

But a HUD policy statement also recognizes that "there is no direct legal authority under the statute" to require communities to bend their rules, leaving developers, homeowner associations, and municipalities free to adopt stricter age and occupancy requirements than HUD mandates.

Developers who are planning senior housing projects with HUD's 55-and-older rules need to be aware that many cities and towns have adopted far more restrictive zoning bylaws. Some eliminate the 20 percent "open" occupancy that the HUD rules allow, requiring that 100 percent of the units be occupied by age-eligible residents; others establish a maximum two-person occupancy limit and require that both occupants, not just one, meet the age requirement.

However, a case decided back in 2002 in Arizona held that the refusal of a community association to waive the minimum age requirement so that a disabled person under the required age could reside with his parents violated the Federal Fair Housing Act.

You should talk with your attorney, as well as the lawyer for your condominium association, to get specific answers.

DEAR BENNY: I am a full-time, licensed, practicing real estate professional. I have been with the same company for more than 12 years now and have been licensed since 1986. I have a bachelor's degree in business administration.

I often take issue with your answers in the Mailbag column. I don't believe you are at all realistic. You also give the most absurd answers to many of the questions.

Your answers do not reflect that you have any real experience in the business. It could not be possible that you have actually represented the buyers and sellers in actual real estate negotiations of an offer, secured an acceptance, mediated a home inspection, arranged and accompanied buyers on showings, negotiated a listing contract, and more.

Perhaps you have only reviewed the contract language and been at the closings? And now you write this column as a hobby? --Rose

DEAR ROSE: Thank you for writing; I always appreciate and often enjoy hearing from readers. Most of the readers who e-mail me are appreciative of the consumer information I try to provide; however, many real estate agents write me with similar comments such as yours.

You can find my background on my law firm's website at kmklawyers.com. I think you will see that (1) I have been licensed as an attorney for longer than you have been licensed, and -- more importantly -- (2) I have considerable experience with all aspects of real estate, both residential and commercial.

I do not write as a hobby. I have a full-time practice of law, and often have trouble meeting my column deadlines. But I write to provide assistance and consumer information to my readers. I am sorry that you do not like my answers; I respect your opinions and hope you will respect mine.

By the way, since at least the early 1980s I have conducted probably thousands of real estate closings -- as well as represented buyers, sellers and yes: even many real estate agents.

DEAR BENNY: We bought our home in June 2008, from the second builder involved in developing this community. Our home is not included in the original property owners association (Phase 1), as we are in Phase 2 of this community.

We do our own landscaping and have voluntarily paid toward the maintenance of the common area. A bill came showing an increase in "dues" and I questioned the need for an increase because there were considerable funds in the treasury a year ago.

When I asked to see where monies had been spent in 2009, I was told that because we don't belong to the association, we are not entitled to view financial information.

I was subsequently asked to be treasurer of this association. After looking over the books, I concluded that there had been carelessness in recordkeeping and misappropriation of funds. I, therefore, returned everything along with a list of concerns and comments. Although the president was very upset with me, the board has since hired an accountant to do the job.

Am I obligated to continue contributing to the maintenance of the common area? --Marlene

DEAR MARLENE: That's a great question, but let me ask you a question in return: Why did you voluntarily pay homeowners association dues when you knew you were not part of that association?

The simple answer: Your home is not part of the recorded association and you do not have to make any payments to that association. However, the association attorney may take the position that because you voluntary made payments for a number of years, by your conduct you remain obligated to continue those payments.

The theory of law that this attorney will use is waiver and estoppel. In other words, by your actions of the years you waived any defenses that you may have.

I believe you will prevail, but if the association ever needs money, I am sure it will try to go after you.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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Pricing to sell in today's market

Putting yourself in the right mindset to sell is essential. It's the most difficult aspect of selling for most sellers. Your home is worth what a buyer is willing to pay, which may not be what you think it is worth.

Detaching yourself emotionally from your home is difficult. Clearing out years of clutter, depersonalizing your home by removing personal memorabilia, and staging your home for sale can help you step back and view the home as a commodity that needs to be sold rather than as your personal sanctuary.

Putting your home on the market at a price that reflects what you want and not what the market will bear can cost you time and money as it sits on the market unsold.

The home-sale market is a localized phenomenon. The only way to get a clear picture of what your home is likely to sell for is to find out which listings are selling in your neighborhood and for how much.

The most recent sales -- those that closed within the last three months -- will be the most informative. Be sure to take a hard look at the list prices of homes that are new on the market.

If the list prices are lower than they were two or three months ago, this indicates that prices are declining. This needs to be taken into account when you select a list price.

HOUSE HUNTING TIP: Pay close attention to your competition. Don't fall into the trap of pricing your home higher than your neighbor's home because yours is better. If your neighbor's price is too high for the market, neither of your homes will sell.

Ask your listing agent to call the listing agents of properties similar to yours to find out what kind of showing activity they are receiving. Have they had offers? If so, why weren't they accepted? Was the price too low? If so, you should set your sights lower.

Some listing agents recommend that you list considerably under market value in order to stimulate multiple offers. In some cases, this can be an effective strategy.

For example, in the low-end foreclosure market, this was common practice at the end of last year. Some listings priced way below market value received more than a dozen offers.

However, it can be risky to price significantly lower than market value on a more expensive property for which the demand is lower. You could end up with more than one offer, but you could also receive under-market price offers.

Your home needs to be perceived as a good value to a buyer to sell in this market. However, you could shortchange yourself by discounting the price too much.

Your home is most marketable when it is new on the market. Buyers wait anxiously for the new crop of listings. Listings that don't sell relatively quickly often languish on the market.

Price reductions often follow as the sellers try to find market value. A listing that has been on the market for months is likely to receive a low offer -- if a buyer makes any offer.

A listing that receives a lot of showing activity when it first hits the market but gets no offers is probably overpriced for the market. In this case, it's best to lower the price to market value as soon as possible while the listing is still fresh in agents' and buyers' minds, even if this is within two to four weeks of the listing date.

THE CLOSING: Listings in neighborhoods where sales activity is slim require a longer marketing period. Even so, pricing right for the market is imperative.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."

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Learn financial fluency in 'kidspeak'

Book Review
Title: "PiggyBanking: Preparing Your Financial Life for Kids and Your Kids for a Financial Life"
Author: Jeff Opdyke
Publisher: HarperCollins; 240 pages; $15.99

I had my kids early -- many moons ago. What with that and the fact that so many of my professional women compatriots are having kids later than women of earlier generations, many of my close friends are either gearing up to have their first or second baby, or are raising very young "kidlets" as we speak.

Many of my pals fall into the horrid-sounding, but not nearly so bad in real life, "Alpha Mom" psychographic segment: super-smart women who treat the matter of planning for and raising their children with the same level of skill, strategy, intention and intelligence as they have honed in the workplace -- but to the 10th power, because these are their kids, after all, not a work project -- whom they love almost ferociously.

As both a close friend and a real estate adviser to a number of the Alpha Moms in my life, I've seen firsthand the vast variations in the level of planning and preparation that different families put into pre-baby, preschool and pre-college financial planning.

I've also seen very few families put any conscious strategy in action around teaching money lessons to their children, except lessons about the importance of a good education and simply teaching by (very good, sometimes) example. As the mother of 17- and 18-year-olds myself, the importance of the kids' financial education and life preparedness has become critical in my own world.

Given this context, I was delighted to lay eyes on Wall Street Journal columnist Jeff D. Opdyke's latest book, "PiggyBanking: Preparing Your Financial Life for Kids and Your Kids for a Financial Life." And I was even more delighted at what I found inside -- and I mean immediately, inside the front cover!

Opdyke starts off with a bang, listing off his 15 rules, which are really guidelines, for teaching your kids about money and cultivating in them a healthy relationship with money and sound financial habits from a very young age, ranging from allowance guidelines ("should not be so meager that your child is a pauper among peers, nor so generous that your child can easily afford all wants with little financial planning") to more profound, relational money matters ("One of the greatest gifts you can give your child is your own financial self-sufficiency when you're old.").

Each line item rule foreshadows Opdyke's deep dive into it later in the book, down to the page number, but for parents with a pressing question or concern it's a great navigational shortcut to the area in the book which they are likely to find the most useful.

Opdyke then takes a step back, walking through preparing and planning for having children, including estimating the costs of furnishing and caring for a baby -- both one-time and ongoing expenses -- and covering such important matters as insurance, the decision-making process of whether a couple can afford for one parent to stay at home with the baby, and creating emergency lifelines and even extra income streams.

Paying short shrift, in my opinion, to the longer-term planning of what a family's expenses will be over the longer term, Opdyke zooms straight to his meaty and useful rules for teaching kids about money.

And these rules are wide-ranging: Opdyke very thoroughly and insightfully covers the topic of teaching children about earning (through allowances, then businesses and jobs) and spending priorities.

It may sound like a helicopter parent's fantasy, this fixation on allowances, but as Opdyke accurately declares: "Allowances are one of the single best tools parents have when it comes to teaching kids about money."

And he shows you how to wisely wield this weapon against financial ignorance.

The book's ultimate selling point? Its usability. The book is less than 250 pages -- you could read it cover to cover, if you choose, in a couple of hours. But for every rule and guideline Opdyke suggests you pass onto your kids, he provides a very doable action plan for executing this education.

For instance, on investing, not only does Opdyke break down the basic traded-asset types -- stocks, bonds and mutual funds -- into a single paragraph of plain English for parents who aren't clear, he also provides a definition of each asset type "in kid terms," which a parent could literally read from to teach their tykes what a mutual fund is, using examples including "hot dog stands" and "Slip 'n Slides" for illustration.

Opdyke moves on to drill down into how to teach children responsible spending and budgeting, saving, investing, giving and learning. He repeatedly reminds parents of the ultimate aim, which is to teach sound financial lessons and practices, not to flip your kid's Christmas money into a billion-dollar profit, or otherwise to create a mini-mogul.

The lessons for parents in "PiggyBanking" are simple and actionable, yet cover a surprisingly complete gamut of money matters.

Thus they, and "PiggyBanking" as a whole, succeed at Opdyke's aim of empowering parents to take steps to provide their children with a sound financial education by avoiding the overwhelm that is often inherent in "how-to" books on child-rearing.

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." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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The season of real estate glitches

To quote the Scripture -- and The Byrds: "for everything there is a season." And it seems that we might now be living in the season of the glitch, especially when it comes to the world of real estate and mortgage.

Last week, the Obama administration released some numbers reflecting the outcomes for homeowners who have sought loan modifications under the Making Home Affordable set of programs.

According to the Treasury Department, about 340,000 homeowners have been granted loan modifications under the program and are paying their modified mortgage payments on time. Sounds great, huh?

Well, yes, until you hear that 155,000 borrowers dropped out of the program -- just in the last month! That makes a cumulative total of 436,000 borrowers who have dropped out of the program since its inception in March 2009.

Long story short -- that means more people have left the program than those who have managed to receive permanent, successful modifications under it.

The banks often argue that the problem is missing income documentation, etc., but anyone who has ever attempted to submit one of these applications for themselves or for a client knows that many, many times, complete packages are submitted and resubmitted ad nauseum because the bank claims never to have received such and such piece of paper.

There is virtually no system of accountability set up under which a borrower can document what was submitted, and often the buck stops with no one -- there's no one person or there is an endlessly changing lineup of people on the bank's end who are responsible for a given file.

Other borrowers say they did actually make on-time payments under their initial trial modifications, and the bank lost the payment!

Glitches.

But this is just the beginning of the big-time glitches that are throwing massive monkey wrenches into Americans' best efforts to manage their weightiest financial and physical asset these days.

Last week, the National Association of Realtors also had a data release, announcing that despite the tax-credit driven influx of buyers into the market in April, closed deals were actually down 2.2 percent in May, compared to April! What's to blame? Glitches, of course.

Super-long short sales, clunky REO (bank-owned property) sales with hard-to-corral asset managers (who must sign on the dotted line for the deal to close) and even "regular" deals with glitchful appraisals are stretching the escrow period out from the traditional 30 days to 45, 60 or sometimes many more moons.

These lender-side glitches are having such a massive impact that, even though Congress provided for a 60-day transaction length between the April 30 contract deadline for the tax credit and the June 30 closing deadline, according to NAR, 180,000 transactions that met the contract deadline will fail to close in time to qualify for the credit.

There has been a congressional effort to extend the closing deadline, though the outcome is uncertain.

But wait -- there's more! Rumor has it that many a transaction to buy a home along the Gulf Coast has fallen out of escrow due to the oil spill.

On top of that, the National Flood Insurance Program is about $19 billion in debt -- largely from the effects of having to repeatedly rebuild homes destroyed or damaged by floods in a short period of time.

About 1 percent of properties insured by the program account for 38 percent of all claims! (Not surprisingly, these properties are also concentrated along the Gulf Coast, in areas hit by the double-whammy of hurricanes Katrina and Rita.)

So, Congress has let the program lapse twice this year. Given that real estate sales in the floodplain cannot close without this insurance, glitches in the program (currently alive under a short-term extension to Sept. 30, 2010) equal glitches in the transactions, full stop.

Well, it's not always a full stop. Sometimes these glitches just create a comma -- a breath-holding pause in the transaction while the buyers and sellers anxiously await news from the completely nebulous and untouchable powers that be (Congress in some cases, "the bank," in others) about when and whether they can restart their transaction, moving plans and their lives.

Other times, these glitches kill the deal, underline the cancellation, and shred the papers, metaphorically speaking -- especially for sellers on the verge of losing their home if they don't secure that modification or close that short sale quick-like.

It might not sound like the fanciest of economical prose or technical legalese, but glitch reduction is certainly a worthy, even necessary, aim of our collective efforts to heal the real estate industry.

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." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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New lead rules affect pre-1978 homes

Many houses, apartments and other buildings that were built prior to 1978 may have paint in them that contains lead. Lead-based paint can pose serious health hazards if not taken care of properly, especially for children and pregnant women. If you live in a home that was built prior to 1978, or if you're thinking of buying or renovating one, this is certainly an issue that you need to be aware of.

On April 22, 2010, the Environmental Protection Agency (EPA) put a new rule into effect that's designed to help focus the efforts of consumers and contractors to protect against the potential health hazards of lead-based paint. Called the Lead Paint Renovation, Repair and Painting Rule (RRP), the new rule affects contractors and subcontractors who work on older homes.

Under the RRP rule, all renovation and repair contractors working in pre-1978 homes, schools, and day care centers who disrupt more than 6 square feet of lead paint are required to become EPA-certified in lead-safe work practices. Contractors are required to take a one-day training course, and firms must send in an application to the EPA. If not, they could face tens of thousands of dollars in fines in the future.

According to the EPA, many contractors think the issue of lead-paint poisoning went away years ago. But lead-paint poisoning isn't just about eating paint chips, and even contractors who think they're doing a good job may not be working in a lead-safe manner.

In fact, new research shows that contractors such as plumbers, electricians, painters and window replacement experts can inadvertently expose children to harmful levels of lead from invisible dust disturbed during jobs they perform every day.

Of particular concern to the EPA is the safety of young children who are living in the home during renovation work. The EPA quotes one study where it was found that children were 30 percent more likely to have unsafe levels of lead in their blood than those in homes where renovations were not occurring.

Contractors who work on pre-1978 homes, apartments, schools, day care centers and other places where children spend time -- from large and small contractors to building services professionals -- will have to take the necessary steps to become lead-safe certified. EPA certification is good for five years.

Where is lead a hazard?

Typically, the older your home is, the more potential there is that lead paint will be present. It may be buried under several other layers of non-lead-based paint, and as long as those upper layers are not disturbed the health hazard remains relatively low.

But as soon as the paint begins to chip or peel, or if any sanding, cutting, or other renovation or repair work is done, the lead-based paint can be released.

Here are some of the potential hazard areas, based on suggestions from the EPA:

• Lead from paint chips, which you can see, and lead dust, which you can't always see, can be serious hazards.
• Peeling, chipping, chalking, or cracking lead-based paint is a hazard and needs immediate attention.
• Lead-based paint may also be a hazard when found on surfaces that children can chew or that get a lot of wear and tear. These areas include windows and window sills; doors and door frames; stairs, railings, and banisters; and porches and fences.
• Lead dust can form when lead-based paint is dry scraped, dry sanded or heated. Dust also forms when painted surfaces bump or rub together. Lead chips and dust can get on surfaces and objects that people touch. Settled lead dust can re-enter the air when people vacuum, sweep or walk through it.
• Lead in soil can be a hazard when children play in bare soil or when people bring soil into the house on their shoes.

To find out more about lead-paint hazards, lead-paint testing, and the new lead-safe certification program for contractors, visit the EPA's website at www.epa.gov/lead, or contact the National Lead Information Center (NLIC) at 1-800-424-LEAD (5323).

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

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Don't expect real estate deal to close on time

Q: Is there any clause that can force the seller to pay damages if he fails to close on the agreed date without any prior notification? My closing was supposed to be on a particular date. But when I requested confirmation, the seller didn't respond. I was waiting for any reply. The seller's attorney didn't even pick up the phone calls from my lender or title agency.

After seven days, my attorney sent documents to the seller. The seller did respond seven days after that when I said that I was going to close the deal if he didn't respond by the next day.

After 14 days of stress and mental harassment, the seller agreed to close on a date 14 days after the closing date in the contract! He didn't respond to any of the mail I sent him through the entire transaction, including a letter explaining the damages he was causing me. Is there anything I can do against him? --Harassed buyer, New Jersey

A: I don't know what the New Jersey state real estate contract form says, but it's highly unlikely that it contains a clause under which you could hold the seller liable for closing two weeks late. The reality is that a close of escrow date that is specified in a real estate contract is generally thought of as an approximate date, despite the fact that most real estate sales contracts specify that "time is of the essence."

As long as both parties still want to close escrow at the time both are ready, willing and able to do so, and so long as the transaction does actually close escrow, it's doubtful that there's anything in the contract that would award damages to the buyer for a two-week-late close.

Now to the inevitable exceptions. If you and the seller agreed -- even now -- that he would pay a late fee for closing beyond the revised close of escrow (COE) date, that would be different.

And, in fact, on most sales of foreclosed homes, or REO properties (bank-owned, also known as "real estate-owned"), the bank/seller actually puts a clause in the sale contract up front that mandates that the buyer will be liable for a per diem (per day) late fee in the range of $100 for every day the buyer is late closing.

The clause is not reciprocal, and does not apply to the bank/seller in the event the transaction does not close on time.

(Of course, in the vast majority of real estate sales, a late close is due to a buyer's delays, not delays on the seller's end.) Even in REO transactions, the bank doesn't generally enforce the late-fee clause for a tardy close of a few days or less -- it's often enforced only after a long delay in closing.

If time truly, truly was of the essence to the point that you would experience significant damages from a two-week delay in closing, the time to negotiate a damages clause for a late close of escrow would have been when you negotiated the original purchase contract.

That would both have secured your rights to some sort of penalty/compensation for a delay and, even better, would have given a major boost to the chances that the seller would have put much more effort into an on-time close.

Of course, the seller might not have been willing to agree to such a term. In any event, the 100 percent surefire way to protect your interests up front would have been to ask your agent or attorney how precise the contract closing date was, and build as much flexibility into your moving plans as possible to avoid experiencing any damages from a late close of escrow.

I have advised many a homebuyer to delay giving their landlord a 30-day notice as long as possible, because close of escrow dates are slippery on today's market, more than ever.

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." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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Financial reform under fire

A much-noted feature of the recent financial crisis is that none of the federal regulatory agencies saw it coming. They could respond to minimize the damage only after it happened -- at enormous cost.

One reason for the lack of prescience is that the many of the large firms that overexposed themselves and had to be rescued because they were "too big to fail" (let's refer to them here as "TBTF") were not regulated by the agencies, and therefore were not on any early-warning radar screens. The agencies focused on firms under their legal jurisdiction; what happened outside their box was for someone else to worry about.

This is one problem addressed by the Senate's Financial Stability Act of 2010, which Congress finalized on Friday. The major purposes of the legislation are to end TBTF, to end taxpayer-financed bailouts, and to protect consumers from abusive financial practices.

There are an enormous number of potential means to these ends, and the bill includes enough of them to comprise a mammoth piece of legislation, weighing in at 1,336 pages.

One important provision of the bill, which is the subject of this article, is a mechanism for identifying and fixing emerging systemic problems before they result in a crisis. It creates a Financial Stability Oversight Council that would be responsible for identifying TBTF firms that posed potential systemic risks, and imposing or augmenting regulatory restraints on such firms.

The council consists of the heads of eight federal agencies plus an outsider with expertise in insurance -- there is no federal regulator of insurance.

As the Wall Street Journal notes, "In extreme cases, it would have the power to break up financial firms."

While all eight members can vote, the Secretary of the Treasury and the chairman of the Federal Reserve Board will have special powers. A new Office of Financial Research, designed as the intelligence arm of the council, is placed in the Treasury Department.

The Fed is the designated regulator, which includes the power to examine any nonbank firm (including foreign firms) that the council deems to be a potential systemic risk, and to impose prudential standards such as capital requirements on such a firm.

The council is not designed as a mechanism for dealing with an ongoing financial crisis. Recent experience showed very clearly that to turn back a crisis that is under way, critically important decisions have to be made within a few days, and sometime within a few hours, which is possible only if there are very few decision-makers who have to agree.

On this topic, I strongly recommend David Wessel's book "In Fed We Trust," which is a behind-the-scenes look at how decisions were made during the crisis.

In contrast, the proposed council is a deliberative body that will not have the capacity to move fast. Any actions taken by the council must be passed by a two-thirds vote, including an affirmative vote by the chairman, who is the Secretary of the Treasury.

The process of identifying firms that are potential systemic risks and placing them under regulation is subject to time-consuming procedural rules, including the right of the designated firm to appeal. These rules are designed to protect the firms against arbitrary or hasty actions to place them under regulation, but this means that the process can take several months or more.

The upshot is that the council, to do its job, must identify emerging systemic risks and take effective regulatory actions early enough to prevent systemic damage. There is nothing in the history of regulation that instills confidence that it will be successful.

Bank regulators often fail to identify and fix serious problems in banks under their legal jurisdiction, operating in an industry they are completely familiar with, and in possession of an array of regulatory tools.

There is no reason we should expect that a committee of regulators will identify and fix serious problems in a firm that is in an industry it may not understand, and where it may have to justify imposing regulatory constraints in court.

I think the process would have a much greater chance of success if authority were centralized in the Federal Reserve. The committee approach is designed to avoid undue concentration of power in the Fed, following the substantial enlargement of its powers during the crisis.

But the powers exercised by the Fed during the crisis were thrust on it by the urgent need for support that only the Fed could provide. The cost in bad PR was high, and the Fed's independence from political meddling, which is highly prized, was jeopardized.

The Fed does not want to have to do that again, and that is the best possible motivation to identify and sterilize systemic threats before they can develop into crises. A committee of regulators has no such motivation and may well get in the way.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

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Read fine print before buying into community

Here's the underlying problem when people move for the first time into a condominium, cooperative or even a homeowners association community: They never read the fine print. Heck, they never read any of the paperwork!

And they often end up confused and angry about what is expected of them and what limits are applied to the lifestyle.

It's not that folks are lazy, but there is so much paperwork, why bother? When you enter into what is collectively called a shared ownership community, or SOC, you are given all sorts of documents, including declarations, covenants, conditions, restrictions, articles and bylaws.

You move into your dream condominium by the sea and expect a continuation of the American Dream.

This is your castle and you can do what you want -- until you discover that your flat-screen TV with surround-sound is 10 decibels louder than your neighbor can tolerate, the smell of your cigar bothers the people living above you, the floor that you just had installed has to be ripped up because it didn't meet architectural restrictions, and a special assessment is going to cost you thousands. You're pissed off, and you are not going to take it anymore ...

Well, you usually do put up with it unless you want to move away, which could mean bumping into a whole lot more condo rules that you weren't aware of.

For all of you who've become disgruntled, perplexed, threatened or disappointed in your shared ownership community lifestyle, Gary Poliakoff and his son, Ryan Poliakoff, wrote a book for you: "New Neighborhoods: The Consumer's Guide to Condominium, Co-op, and HOA Living."

A slight nod to son Ryan, who according to the book jacket is president of a condominium property in South Florida, but this book is really the handiwork of father Gary, an attorney, who after almost four decades in the SOC legal trenches has become one of the foremost authorities on community association law.

"When I entered the field, there were no statutory laws, very few appellate decisions and no real guidance in regard to the rules and regulations that would apply to SOCs," he tells me from his home in South Florida.

Now, the law books are so thick with rulings that one could write a book just on the subject of condominiums. Oh yeah, that book has already been written by Gary, and it's called "The Law of Condominium Operations."

Going back 45 years, just about the time when Gary was still an undergraduate at the University of South Carolina, there were only about 1,000 SOCs in the U.S. Now, there are 300,000 SOC associations.

That's nearly four times the number of municipal governments, and they are responsible for maintaining and operating homes that are occupied by 24 million families and 60 million individuals, and have a collective value of $4 trillion.

These 300,000 associations garner $41 billion in assessments, and if a poll of homeowners were taken today I'd bet not one of those dollars would be deemed wisely spent.

Today, SOC residents are often dismayed and disgruntled, which is why Gary and Ryan wrote "New Neighborhoods" -- common folk who own SOC properties need some common-folk guidance.

"We wrote this book because there was no comparable book like it anywhere in the nation," Gary explains. "The few books that were out there, including my own, were really desktop legal manuals or legal books written for lawyers."

New Neighborhoods is different in that it is written for a lay audience, in conversational language.

"When we wrote it, we wanted to create a book that would be to shared ownership communities as 'Robert's Rules of Order' is to parliamentary procedure," Gary exclaims.

"This would be something a volunteer on a board or a person buying into a shared ownership community could use. This is for someone who wants to understand exactly what their rights and responsibilities are without falling asleep reading legalese."

Here are some paragraphs addressing some of the more prevalent hot buttons that drive SOC owners slightly batty:

• Architectural review. "In many communities, any modifications made to limited common elements and sometimes even individual units must be presented to the association. It is quite legal for your (association) to require approval of these projects. However, there is a cardinal rule of law when assessing an architectural review committee's scope of authority: the exercise of power by the ARC must be governed by the applicable covenants and guidelines and must be reasonably exercised, must be made in good faith and must not be arbitrary and capricious."
• Selling. "No association in any state can entirely prevent you from selling your unit. That said, associations can apply a few restrictions that may reduce your ability to alienate your property. Perhaps the most common is the right of first refusal."
• Outside management. "From the perspective of the board of directors, there are a lot of reasons why it might be in the best interest of the association to contract with a management company. A single harassment or discrimination lawsuit could quickly wipe out any savings that the association may have realized by going solo."
• Maintenance. "While all state laws provide some version of this rule, the Uniform Common Interest Ownership Act explicitly states that 'the association is responsible for maintenance, repair, and replacement of the common elements.' If damage is inflicted on the common element, the association, if it is responsible, is liable for the prompt repair thereof."

Gary's primary residence is inland from the Florida Coast in a ranch-type community. However, he does own a beach condominium in South Florida's coastal community of Bal Harbour, where he has no beef with current management or maintenance.

I ask Gary, considering all the upheaval in the condominium markets -- especially South Florida: What's the best way to approach an SOC purchase?

"The only safe bet today is to buy into a community that is built out," he says. "Even then you might still be buying into the potential pitfalls of bad debt, but the amenities are built and you can see what the community is. I would be very hesitant to buy into the promises of future development."

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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Getting house ready for the Big One

Q: I am strengthening my house in the crawl space by putting oriented strand board (OSB) shear panels on the cripple wall from the mudsill to the floor joists. I am wondering if the same application would work horizontally, by nailing or screwing panels to the bottoms of the floor joists. I would do this at the corners of the house, and "sprinkle" them throughout the field of floor joists.

I think the floor joist spacing may be too wide, so I thought maybe I could do that shear scheme.

My reasoning is that in a severe quake, that a "right-angled" structure might become a parallelogram. It seems it would help stiffen the joists and corners against flexing against and away from each other and thus guard the understructure against folding and crumpling.

Is there a good reason not to try this?

A: First off, kudos to you for installing shear panels on the cripple walls, the short wall between the concrete foundation and the floor structure. Make sure to connect the mudsill, studs and top plates so the panel forms a monolith and resists being racked in a quake.

Also remember to drill ventilation holes in the panels at the top and bottom of each stud bay. As far as nailing panels to the bottom of your floor joists, we can't think of a good reason not to do it -- other than it's a lot of work and will take a fair amount of time. But we also wonder how effective such a project would be.

Assuming you have a plywood or OSB subfloor, there already is shear protection for the floor joists. If you live in a relatively newer house (around 1990 forward), your subfloor is probably affixed with construction adhesive and nails. This process creates a monolith that is highly resistant to racking -- or as you say, "folding and crumbling."

If you live in an older home, the subfloor may be constructed of boards. The boards are most likely placed diagonally across the floor joists. Diagonal placement provides protection against racking and allows the finished flooring to be run in any direction. This is important if the finished flooring is hardwood.

Joist spacing depends on the width of the floor joists combined with the thickness of the subfloor and the distance to be spanned. Floor joists are usually set either 16 or 24 inches on center. But 36 inches on center is OK with a subfloor of 1 1/2-inch tongue-and-groove boards. If the floor joists are conventional lumber, they should have blocking or bridging every 8 feet or so to prevent the joist from rolling.

Blocking is a solid piece of lumber nailed perpendicular to the run of the floor joists. Bridging consists of two pieces of wood, usually 1-by-4s, nailed diagonally between two floor joists. One end of the first piece is nailed to the top of the joist where it intersects with the subfloor. The other end of that piece is nailed to the bottom of the adjacent floor joist. The second piece is nailed to the joists in reverse order. When viewed from the side it forms a cross. The purpose of blocking and bridging is to prevent the joists from warping.

This being said, we can't see a compelling reason not to do as you suggest. You'll do no harm, but we can't say that this will do much good either. If the floor framing system is like we described, it won't turn into a parallelogram in the next quake. Seems to us if the quake were that strong, shifting of the floor would be a minor problem, considering that the entire house might collapse.

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Vacation-home site hones in on buyer trends

Nearly 30 years ago, our family purchased a small cabin on a mountain lake. The intent was to give our kids a few carefree memories in the sun, similar to the experiences I had every year on our family vacations as a youngster.

I realized early in my adult life that the fondest memories of my youth were of those summer days at a variety of rental cabins that surrounded a mile-high, lakeside village. While the life and times in the primary residence my parents owned for 46 years were memorable, they were not all as comfortably vivid as those times together at the lake.

As people came to visit for lazy days of swimming, sailing and water skiing, we often heard from the guests: "We should have bought something like this years ago ... let us know if you ever think about selling."

I thought about that the other day when I read that HomeAway.com had introduced a new site for buying and selling vacation homes -- with a focus on the possibility of renting the home out to others.

If a potential buyer knew a property's realistic rental income, in addition to the benefits of experiencing quality family time, wouldn't that data influence a purchase decision? HomeAway already focused on consumers looking to rent a vacation home, so why not show them properties for sale in the same category?

"We felt it simply completed the cycle of what we do," said David Petty, general manager of HomeAwayRealEstate.com. "Some renters look to buy, some owners look to sell, then those new owners would also seek renters. We were also very aware that the world didn't need just another real estate website."

The highlight of the new site is a tool to gauge the property's rental income potential. It also provides homebuyers, sellers and real estate agents with local amenities and vacation-specific characteristics.

HomeAway does not employ real estate salespersons who earn commissions or referral fees. The company's business model is to charge owners and real estate professionals to list homes on the site (approximately $395, depending on number), betting that second-home traffic to the company's variety of sites will prove to be a cost-effective marketing method for consumers and professionals.

HomeAway, based in Austin, Texas, operates several online owner-rental sites, including HomeAway.com, VRBO.com, VacationRentals.com, Holiday-Rentals.co.uk, OwnersDirect.co.uk, FeWo-direkt.de, Abritel.fr and Homelidays.com. Homeaway.com is the company's flagship site and hosts a global inventory of about 480,000 properties.

The company purchased VRBO.com, a pioneer in the online advertising of for-rent-by-owner properties, in November 2006 and continues to run the site as an independent brand. Approximately 85 percent of the site's 125,000 properties are based in the U.S. Earlier this year, HomeAway purchased BedandBreakfast.com.

The launch of the new site appears to be well-timed. Not only are more families heading out on vacation this year than in 2009, more vacation homes are selling. According to the National Association of Realtors (NAR) Investment and Vacation Home Buyers Survey released in late March, vacation-home sales are up nearly 8 percent, with prices up 13 percent following three years of declines.

The NAR report also found nearly a third (32 percent) of vacation-home buyers are first looking online for properties for sale, up from 22 percent in 2008, and one out of four (26 percent) vacation-home buyers found their home on the Internet, up from 21 percent in 2008.

Brian Sharples, HomeAway's CEO, said that about 300 million travelers visit the company's website each year, and "HomeAway Real Estate members ... benefit from our users, who understand the value of vacation homes."

We still own that mountain cabin. Our four kids are grown, and three of them have moved away, but all of them would disown us if we sold the place. They say their dearest memories are there, and I am extremely grateful that at least one thing I wanted for them has gone according to plan. Of course, they expect the sun to be on the dock when they return, gas in the boat and food in the fridge.

Now, if they wouldn't mind pounding a few nails and diving into the crawl space to repair the plumbing.

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

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Weighing religious freedom vs. rental alterations

Q: My tenants have asked for permission to place a large, conventional religious symbol on their front door. They'd need to screw it into the wood. My leases prohibit alterations without my consent, and I don't want the door disfigured like this. But they say I have to agree because saying "no" will interfere with their right to practice their religion. What do you think? --Maureen B.

A: Your question highlights the tension between a landlord's legal right to prevent physical modifications or alterations to her property and a tenant's desire to exercise her religious beliefs, which may include placing symbols on the landlord's property.

Landlords everywhere have the right to prevent even the slightest physical change to their property, including painting and even nail holes for artwork. Few are so unreasonable to prohibit picture-hanging, but they are within their rights to charge the tenant at the end of the rental term for the cost to cover and paint the holes.

This is just a fact of rental life: Unless a tenant's request to alter the physical structure involves a modification needed by a person with disabilities, the tenant needs to get the landlord's permission. Without it, the landlord has grounds to evict, especially if the alteration is significant.

But does the situation change if the alteration has religious significance to the tenant? Landlords may not adopt policies that are aimed at specific religions, either encouraging or discouraging their practice.

For example, an owner who forbade the wearing of religious symbols or clothing would be a prime candidate for a discrimination complaint (as would a landlord who required such garb); and one who did not allow gatherings of reasonable numbers for prayers would also risk a lawsuit.

But your policy of preventing unauthorized alterations is not aimed at any particular religion, or even at religious practices in general. It's "neutral," in that it applies as much to the tenant who wants to affix a cross or mezuzah as one who wants to hang a self-portrait or a "No Solicitors" sign.

Because the policy is not aimed at religious practices, and assuming you haven't enforced it only when tenants want to install religious items, you are within your rights to apply it evenly to deny every request to alter the physical premises.

This is theory -- now let's get real. You might think about treating this request as you would any that involves alterations. Does the tenant understand that she runs the risk of a deduction from her security deposit if she doesn't repair the door to your satisfaction when she leaves? If the door is high-end and it will be impossible to repair the damage adequately, is she prepared to replace the door?

You might have this conversation and put your understandings in writing. That way, if you need to use the deposit for a new door, the tenant will have very little to argue about.

Q: My husband and I have lived in our apartment for 20 years. When he became disabled, we applied for Section 8 assistance. After two years' wait, we were accepted and got a voucher. But our landlord doesn't want to participate in the Section 8 program. We can't afford the rent without help. Is there any way to force the landlord to accept Section 8 money? --Marissa and Bill

A: Your options will depend on which state you live in. But first, a little background on the Section 8 federal rent subsidy program: When a family becomes eligible for Section 8 assistance, the local public housing authority (PHA) issues them a voucher, which is simply a document describing the program and the steps the housing authority will take to approve a rental selected by the family.

When the family selects a rental, with an owner willing to lease under the program, the family asks the PHA to approve the tenancy. If the rental passes a physical inspection, and the landlord attaches the "Section 8 Addendum" to the lease, the tenancy is created. Tenants pay 30 percent of their income toward the rent; the federal government, through the local housing authority, pays the rest directly to the landlord.

The federal law that established Section 8 does not require landlords to participate in the program. But some states do. In Connecticut, Maryland and Massachusetts, for example, landlords may not refuse to rent to current or new tenants who become or are eligible for Section 8 help.

And in New Jersey, when an existing tenant becomes eligible for Section 8 help, the landlord may not refuse to accept Section 8 money. If you live in one of these states, your landlord's refusal is against the law.

Alas, you may not live in one of these four states. Tenants in positions like yours have used creative arguments to support their theory that the landlord must participate in the program. One such argument is based on the state's ban (if there is one) on discrimination on the basis of "source of income."

Normally, this prohibition prevents a landlord from refusing to rent to someone who receives Supplemental Security Income (SSI) payments, alimony or money from any other legitimate source. Would-be Section 8 tenants can attempt to extend that ban to subsidies to the landlord from the government under Section 8.

An argument of just this kind was recently settled by an appellate court in California, which has a ban on source-of-income discrimination. The court pointed out that the subsidy paid to the landlord was not "income" to the tenant -- it was money that went from the federal government to the local housing authority, and then to the landlord. Simply put, it was the landlord's income, not the tenant's.

The court also looked at the text of the source-of-income law and considered the effect of its language that a landlord was not to be considered a "representative" of the tenant. The Legislature, reasoned the court, was making it crystal clear that a subsidy to the landlord was different than, say, money paid to a tenant's conservator.

In the latter circumstance, a landlord could not legally refuse to rent to a conservatee whose support was channeled through a conservator. But, said the lawmakers, a landlord is no such representative.

One hears lots these days about "activist judges," usually from quarters that disparage tenant rights, but in the California case, the judges were simply doing their job -- applying the clear law that the Legislature wrote. If California's notoriously rancorous state Legislature wants to require participation in Section 8, it can do what other states have done and say so directly.

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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Working with foreclosed owners who won't go

Q: Can someone who has been foreclosed on buy the same home back? I bought a home at the county courthouse foreclosure auction. When I went to visit the home afterward, I found the previous owners still living in it! I spoke to them and they don't want to leave. They mention wanting to buy the house back. Can they? What are my options? I do want to flip the house. --Raul, Dade County, Fla.

A: While many people think about these sorts of hidden complications and significant "surprises" when they envision buying a foreclosure, the reality is that most foreclosed homes are bought as REOs (bank-owned properties) -- after the county courthouse foreclosure auction is held, with no takers, and ownership of the property reverts to the former owner's bank.

By the time these REOs make it to the market, the bank has gotten the former owners and, in most cases, tenants out, and has emptied the place of their belongings. With a bank-owned property, the bank/owner also handles any other loans and liens, back property taxes and homeowners association dues, and various and sundry other weirdness like outstanding city garbage bills -- so the new owner doesn't have to.

But when you buy a home on the steps of the county courthouse, you take the home subject to all these things -- meaning they become your responsibility. (This high, high risk goes hand in hand with the low, low prices at which homes can sell during county auctions.)

So, what's a new, would-be flipper to do? You have several options. First, you could evict them. You own it and they are not even tenants (who might have certain federal and local protections) in a foreclosed property. In virtually every city in America, you have the right to put out foreclosed former owners.

However, unless you can use your powers of verbal persuasion to get them to leave, it is likely to cost you a little chunk of change to get them out. You can offer them some cash to move out, or you can go to court and get an eviction order, which the county sheriff will enforce. Both of these options will cost you, but neither should be prohibitively expensive when you compare them with the proceeds you are looking to realize by reselling the house.

Second, there's certainly no law against the former owners purchasing the home back from you. However, the logistics involved make this option a bit tricky. If they just had this foreclosure on their credit report, the chances are between slim and none that they'll be able to turn around and obtain a new mortgage loan to buy it back from you.

However, I can certainly envision more creative circumstances under which this repurchase scenario might work, if you're inclined to go that way. Perhaps not every adult in the house was on the foreclosed mortgage, and someone might actually be able to qualify for a new mortgage to buy the home from you.

Perhaps they know someone -- a relative or friend -- who is interested in taking the mortgage to buy the home for them to live in, for whatever reason (stranger things have certainly happened).

Finally, and this may sound bizarre, they might have the cash to buy the place from you. In areas where housing values are really low, it is not unheard of for a homeowner to stop making payments because they owe so much more than the home is worth.

That means they may have some cash stockpiled, and if the value of the home you hoped to sell it for is within the same range as their savings account, it's possible they could just buy it from you outright.

Would this be unethical on their part, having stopped payments with this level of strategy in mind? Yes. But would it be unethical for you, who just met these people and didn't participate in the strategic default this scenario assumes, to resell it to them? No.

So, there are some scenarios under which the former owners buying the home back from you make sense, but they are fairly creative scenarios with some relatively unlikely prerequisites. And there's no reason you shouldn't sell it to them -- it would save you from having to evict, repair and re-market the property.

As such, if you are interested in selling it to them, you should move forward to ascertain whether there's any chance whatsoever of them being able to buy it, and you should take these steps immediately. You should decide what you want to sell it for, recognizing that if someone will be financing the purchase with a mortgage, the home will have to appraise at that price.

Then, if you're inclined to do so, you should give them a very short time frame in which they must provide you with a purchase offer and either a mortgage preapproval (not prequalification) letter from a reputable lender or proof that they have the cash to close the deal. If they can't move forward on repurchasing the place immediately, you need to evict them or take another course of action.

In terms of the other courses of action available to you, you do have two other options. You can rent the place to them, which doesn't sound up your alley, given that you had planned to flip the home.

Or you can rent the place to them on a lease-option agreement, whereby they will have the right to buy the home back over a period of time -- anywhere from one to three years or longer, depending on what you negotiate.

If you think you might want to go this latter route for whatever reason, talk with a real estate broker and a real estate attorney in your area to ensure that you have a robust agreement and protections of your rights and your property in place.

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." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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