HUD Fines Real Estate Manager

The Department of Housing and Urban Development slapped a whopping $170,000 penalty on an apartment complex manager in St. Louis. The money is being split $83,000 to the residents allegedly being discriminated against, $15,000 for a trust fund for possible other claimants, and $72,000 to set up an on-site daycare center.

The violation: Requiring the parents to supervise their minor children if they were outside of the apartment.

No, there is no sense in the ways these laws are sometimes enforced. Perhaps the apartment manager should have taken a different tack and reported the parents to the local child endangerment authorities instead of attempting to impose parenting onto the parents.

Determing Your Downpayment

This article gives you some excellent hints and tips for how to approach how much your down payment should be. Succinctly - Do not go for the "no money down" lending schemes that led to the real estate bubble and avalanche of foreclosures.

Landlords - Screen Your Potential Tenants

Screening tenants is an art, not a science. However, in order to make good decisions, you need to gather information about the prospective tenant in a manner both legal and ethical, and which will maintain the dignity of the person.

One of the biggest mistakes a new landlord makes is not screening potential tenants. Yes, John’s check for the security deposit cleared the bank – but what will happen next month? The screening process has one purpose, and one purpose only – to help you make a prediction of the prospective tenant’s future behavior based on their prior behavior.

It is essential that any prospect fill out a thorough rental application, with information on their employment, income, address history, as well as previous landlords’ names and contact information. You should also obtain an emergency contact on the application for several reasons.

Be sure the application requires a signature, and contains a release so you can legally check the information they have given you. If you start snooping around in someone’s background without that signature and release, you could be in violation of state and federal laws, and face an expensive and time-consuming lawsuit.

The first people to contact, and the information source worth the most weight, are the current and previous landlords. They are your best source for determining what sort of tenant the applicant may be in your case.

Key information to obtain from other landlords includes: a) Were they late with the rent, and if so, how many times?; b) How long were they a tenant?; c) Did they damage the apartment?; d) Was any eviction action started during the tenancy?; e) Did the tenant leave owing a balance?

In many cases, landlords will only respond to written inquiries about previous tenants, with a copy of the release signed by the person. It is good practice to maintain written records of inquiries you have received, and to have on file a record of what information you provided. It is also good practice to have a written record of what was said about the previous tenant, if you deny them a lease.

Do not rely solely on the current landlord’s information. In some cases, that landlord has a ‘problem’ on their hands who they would all-too-happily pass off to you.

It occasionally pays to go to the next step, and subscribe to a credit reporting service. If the rents are high enough, the $150 annual fee most services will charge a small business are more than warranted.

However, do not fall into the trap of making one of the biggest mistakes a rookie landlord makes, by relying too heavily on credit reporting services. The reports do not tell you who will be a good or bad tenant. Analyze the patterns. Look at the dates involved. It is possible that your prospective tenant had a financial setback due to illness, injury, or divorce, and they will be an excellent tenant.

If the credit report comes back shaky, ask the person to meet with you for an explanation. Do not be shy about asking pointed questions. If the person is serious about living in your property, they will be direct and forthcoming about the causes.

Make sure you have an emergency contact, preferably a family member, listed on the application.

There are two primary reasons for requiring this information. 1) If something happens to your tenant, such as major illness, injury, or death, you may be the first person to know. 2) If the tenant disappears, this family member may be able to help you locate them.

Following these general tenant screening tips will help you have a successful career as a landlord, as well as keep you out of hot water with invasion of privacy suits, and discrimination claims.

Remember, you became a landlord for the revenue and wealth-building, and it pays to remain blind to everything else.

Buy, or Rent?

Should you rent or buy a home? That is a question people all over the free world ask themselves every day.

There are numerous factors to consider on whether your temperament is suitable for home ownership, or continuing to rent. Deciding whether to rent or buy a home is as much an emotional decision as a financial one. Let the financial aspect rule the final decision, but do not ignore your heart!

Are you ready to settle down and make roots in a specific location? If so, then plan your financial strategy, factoring in all of the expenses of home ownership, and make the investment. If not, rent at an affordable level, at a price less than the cost of ownership, and sock away the cash for a down payment if/when you are ready to buy.

Home ownership is a long-term investment and creates a sense of permanence. It can also become an anchor in the community that you cannot easily shed. Real estate is an illiquid asset and not easily ‘cashed out,’ and cannot be picked up and moved with you if you take a job that requires relocation. You can’t use it for food or medication, if you have a medical emergency that cuts off your income. If the neighborhood suddenly changes, you cannot pick up and move without consequence.

What type of home should you buy?

You have decided it is time to buy a home, but that does not necessarily mean a house. Condominiums might be the right answer for you, once you have considered the next question. Or perhaps the answer to the next question is an enthusiastic YES, and you should consider buying a duplex or four flat building in which you can live, and receive all of the same favorable financing and tax consequences as a single family home.

Are you ready to tackle all of the small maintenance and repairs yourself? Have you factored in the costs of the tools you will need and those repairs into your financial decision-making process?

With ownership comes certain responsibilities beyond financial ones. Owning a home may require a certain set of maintenance skills, or the finances to hire skilled craftsman and tradesman to handle maintenance issues. Do you have these skills, or, are you willing to acquire them? There is a reason a plumber makes $75 to $100 an hour – their tools and skills have been acquired through training, experience and investment, no less extensive or exhaustive as getting that MBA.

Are the tax benefits of ownership all they are cracked up to be? The answer is “sometimes.”

Sometimes the tax expenses of owning a house will exceed the tax benefits in a very short time. Discuss the income tax benefits of owning a home with a qualified tax professional prior to purchasing, and compare that projected benefit to the projected costs of local property taxes. Once you have projected the property tax increases against the income tax savings, determine if the convergence of the benefits are being exceeded by the expense in the near-term. If this convergence occurs too closely in the future, then consider remaining a renter and investing the cash in a different long-term vehicle such as municipal bonds that also receive highly favorable tax consequences, as well as being a much more liquid asset in the case of an emergency.

Is the timing right?

Real estate values are a localized phenomenon, even though they are somewhat impacted by national factors such as mortgage rates. You need to find out if the values in your location are rising, if they are flat, or have they been declining?

If home values are in the decline, then now is not the right time to buy. Be patient, and wait a few months. Now is the time to watch the neighborhood you want to live in for a crop of FOR SALE signs sitting on lawns month after month. Once those signs start saying SOLD, it is time to buy. Your odds will be significantly improved that the asking prices are more reasonable than they once were, and you should be able to afford to purchase more home than you originally thought.

Foreclosure "Rescue" Scam Hammered

As if the looming avalanche of foreclosures in the United States isn’t bad enough, the Federal Bureau of Investigations (FBI) announced on Wednesday that they have filed charges against an Ohio man, alleging that he was involved in a scheme that defrauded unsuspecting homeowners of hundreds of thousands of dollars with a false promise of saving them from foreclosure.

James A. Warsing of Ashtabula, Ohio, was indicted on eight counts of Mail Fraud. The indictment claims Warsing, operating as WJW Enterprises, bilked $500,000 from people using a promise to use the money to settle their foreclosure cases, but instead converted the money to his personal use. The indictment claims these activities took place between 2001 and 2005.

This is not Warsing’s first brush with the law. In October 2004, Ohio Attorney General Jim Petro charged Warsing with violations of Ohio’s Consumer Protection laws. Warsing was convicted of those charges in June 2006, and was ordered to make restitution to 18 people, as well as to pay fines totally $300,000.

"Homeowners deserve to be protected from unscrupulous business practices," Petro said. "It was unconscionable for Mr. Warsing to take advantage of people already down on their luck, and we're pleased he has been brought to account for it."

Petro said Warsing was running a “Foreclosure Rescue” scam, in which Warsing through his company would offer to settle or stop a foreclosure action, for a fee, but instead pocket the fees that ran from $3,000 to $5,000 and do nothing.

Such “foreclosure rescue” scams have become more commonplace in the past decade according to a report from the National Consumer Law Center, a consumer advocacy agency based in Boston. “This is a uniquely bad collision of the financial stresses on homeowners with a boatload of bad ways for them to be conned into losing their homes or the equity in them,” says NCLC’s Steve Tripoli, principal author of the report.

New Home Furnace and Boiler Standards Released

After a delay of nearly thirty years, a program passed in 1978 during the Carter administration is finally being implemented by the Department of Energy (DOE). The DOE released on Friday guidelines for improving energy efficiency in hot water heaters, furnaces, and boilers, but the new standards will not take effect until 2015 and take 24 years to put in place.

The “fast tracking” of the new standards was started in February 2007, when the Department requested that Congress approve a streamlining process for residential and commercial appliances, shortening what the DOE described at the time as a three year review process into one that would only take 10 months to implement the changes.

The long range goal of the program is to update the standards of a wide variety of household appliances, including everything from dishwashers to heat pumps. Under the plan, the DOE has already amended standards for dishwashers and hot water heaters.

The DOE in a press release claims the new standards will lower carbon dioxide emissions by 7.8 million tons a year, or the equivalent of 2.6 million passenger vehicles.

“As a nation, we must find better and more ways to both conserve energy and use it more efficiently and productively. These amended standards will not only cut down on greenhouse gas emissions, but they also allow consumers to make smarter energy choices that will save energy and money,” DOE Assistant Secretary of Energy for Energy Efficiency and Renewable Energy Andy Karsner said.

The DOE said the new regulations would be online at the Federal Register on November 19, but a search of their database only pulled up the February request to Congress.

The thirty-year logjam in carrying out this process was broken in January 2006, according to the DOE. Since that time the DOE claims that the implementation of rules governing the four appliance groups is at “…a pace unprecedented in DOE’s history.” However, the Manhattan Project, carried out by the predecessor agency to the DOE managed to take from theory to reality the atomic bomb in a mere six years.

More appliance groups are under study for revised standards, and they include everything refrigerators, central air conditioners, furnaces, water heaters, clothes washers and dishwashers; as well as smaller, home equipment including ceiling fans, torchiers, dehumidifiers, and fluorescent and incandescent lights. Also covered, would be plumbing equipment, including showerheads, faucets and toilets.

“Improving appliance standards is a top priority of the Department of Energy,” Karsner said.