Something to think about this Halloween...

Ghoul Disclosure: Must Home Sellers Disclose Paranormal Activity?
Susan Funaro
Published on Legal Zoom Newsletter 10/25/07

As home seller, you dutifully check off the "to do" list your realtor suggests for a quick sale—curb appeal, leaky faucets fixed, termite reports, and oh, what about the other occupants? Do I have to mention them? This question brings new meaning to the saying, "Buyer Beware!" If the thought of buying a house isn't scary enough, does the buyer need to worry about checking for poltergeists along with old plumbing?

Although the wording may vary state to state, most real estate laws require sellers to disclose known problems with the house. This includes certain "material facts" such as structural concerns, the age of the roof and shingles, leaks in the foundation and walls, existing mold and mildew, and total square footage. Material facts can also include other items that affect the house's value such as the amount of property taxes, details about individuals who claim to have an interest in the house, or overlaps on adjacent properties.

Items not considered material facts include personal information about a seller, such as pending foreclosure or divorce, illnesses of the seller, or the seller's reasons for moving (uh oh!) What if the seller's reason for moving involves the paranormal? Remember the unhappy inhabitants in Poltergeist, The Amityville Horror, and The Others? Must a seller disclose whether their property is haunted? Or what if a heinous crime, murder, or suicide occurred on the property?

Death on a property may be material. In California, the Association of Realtors addressed the issue of death disclosure requirements. Civil Code §1710.2 states death on a property need not be disclosed if it occurred more than three years prior to the sale. The statute does require disclosure of a death more than three years old if the buyer asks. It does not state whether a death within three years must be disclosed, but many brokerage firms have Supplemental Disclosure Forms that specifically inquire about death. To avoid liability, it is recommended the seller disclose if a death occurred within the last three years, and let the buyer decide.[1] Some states have even gone further requiring home sellers to disclose "stigmas" attached to a property, which can include proximities to homeless shelters or whether it was scene to a violent crime.

In New York, a buyer sued the seller and the seller's realtor for failure to disclose the house's ghostly reputation. The seller even wrote about her bumps in the night with spirits for the local paper and Readers' Digest. However, many neighbors doubted the claims of the seller's spectral encounters, since the house was built in the 19th century and one of her spooks was anachronistically dressed in a Revolutionary War uniform. Although the court did not rule nondisclosure of the house's reputation as fraudulent, it did allow the buyer out of his contract and the return of his down payment. The house did eventually sell for $630,000 and several years later for $900,000.

According to a study by two business professors at Wright University, the supernatural stigma associated with houses where murder or suicide have occurred can take 50% longer to sell, and at an average of 2.4 percent less than comparable homes. Yet, a California appraiser, who specializes in diminution in value issues, says that a well publicized murder generally lowers selling price 15 to 35 percent.

Some homebuyers are not hindered by the macabre, especially if the gruesome past involves celebrities or legends. Indeed, ghosts can even be a selling point for some towns that rely on their dead inhabitants for tourist appeal. Cities like St. Augustine, New Orleans, and Hollywood all provide ghost tours of popular sighting sites. In St. Augustine, a legendary haunted house turned restaurant lures in diners with the prospect of seeing the house's former owner—a woman dressed in white who purportedly appears in mirrors and walks the second floor. Even homes that have witnessed notoriously grisly events have managed to sell. O. J. Simpson's home sold to an investment banker for about $4.7 million, and the Miami estate where Gianni Versace was murdered was auctioned for about $20 million.

Sellers should disclose grisly facts about the house, so they will not be "haunted" later. Even if not required by state law, in order to soothe the spirits of prospective buyers and avoid lawsuits, the seller should be upfront about their home's paranormal guests or ghoulish histories. In a sellers' market, ghosts tend to fade and may even disappear.

How Wall Street Stoked The Mortgage Meltdown

By Michael Hudson
From The Wall Street Journal Online

Email your comments to rjeditor@dowjones.com.
-- June 28, 2007

Twelve years ago, Lehman Brothers Holdings Inc. sent a vice president to California to check out First Alliance Mortgage Co. Lehman was thinking about tapping into First Alliance's lucrative business of making "subprime" home loans to consumers with sketchy credit.

The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial "sweat shop" specializing in "high pressure sales for people who are in a weak state." At First Alliance, he said, employees leave their "ethics at the door."

The big Wall Street investment bank decided First Alliance wasn't breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers' loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.

Today, Lehman is a prime example of how Wall Street's money and expertise have helped transform subprime lending into a major force in the U.S. financial markets. Lehman says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home, and proud of the controls it has brought to a sometimes-unruly business.

Now, however, that business is in deep trouble, and some consumer advocates and policy makers are pointing the finger at Wall Street.

Read whole article here.

'Subprime' Aftermath: Losing the Family Home

By Mark Whitehouse
From The Wall Street Journal Online

Email your comments to rjeditor@dowjones.com. -- May 31, 2007

For decades, the 5100 block of West Outer Drive in Detroit has been a model of middle-class home ownership, part of an urban enclave of well-kept Colonial residences and manicured lawns. But on a recent spring day, locals saw something disturbing: dandelions growing wild on several properties.

"When I see dandelions, I worry," says Sylvia Hollifield, an instructor at Michigan State University who has lived on the block for more than 20 years.

Ms. Hollifield's concern is well-founded. Her neighbors are losing interest in their lawns because they're losing their homes -- a result of the recent boom in "subprime" mortgage lending. Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit.

Some used the money to buy their houses. But most already owned their homes and used the proceeds to pay off credit cards, do renovations and maintain an appearance of middle-class fortitude amid a declining local economy. Three now face eviction because they couldn't meet rising monthly payments. Two more are showing signs of distress.

Read whole article here.

Midyear real-estate report says gains in home values abound

By HUBBLE SMITH

Sep. 04, 2007
Las Vegas Review-Journal

To hear people whine about the Las Vegas housing market, you'd think they were cats taking a bath.

Sure, home prices have receded from their all-time peak, which was just a year ago and followed a period of blistering appreciation. Las Vegas led the nation with quarterly appreciation of 40 percent and 50 percent in 2004.

Increased housing demand from mid-2003 through 2005 resulted in record numbers in both the new and resale home market, Coldwell Banker Premier Realty President Bob Hamrick said.

The market has backed off, but the gains remain, he said.

Nine ZIP codes in Las Vegas Valley with depreciating home values in 2006 show net gains of anywhere from 9 percent to 81 percent since 2003, according to a midyear report from Coldwell Banker Premier Realty.

One sample neighborhood gained 16 percent in 2003, 45 percent in 2004 and 13 percent in 2005, appreciating more in three years than it would have in 20 years by historical standards.

Before 1999, Las Vegas was among the slower U.S. housing markets with annual appreciation of 1 percent to 4 percent. That's what made it one of the best housing values in the nation. Homes in master-planned Summerlin were selling for $66 a square foot at a time when a comparable home in Phoenix was selling for $115 to $120 a square foot.

Giving back 1 percent last year is a drop in the bucket, Hamrick said.

"Few of us would pass on a stock market investment with a three-year return on investment of 73 percent," he said. "With the onslaught of negative press, many of us have forgotten about these record-breaking gains."

Read Full Article

Las Vegas Named #4 Top Renters Market by Forbes

Forbes Magazine named Las Vegas number 4 in Top Renters Market last month.

# 4 Las Vegas
The same issues of oversupply putting a burden on the Las Vegas housing market are plaguing the rental market. In the last year, according to NAR, rental vacancies have increased from 2.9% to 4.9%--transforming the market from one of the nation's tightest to one of the most overstocked. Rents in Class B and Class C housing grew slightly faster than did Class A units. Strong job creation figures suggest the supply gap will be gobbled up quickly, meaning now may be the best time to get in as a renter.

Read Full Article

Are Stated Income Loans Illegal in Nevada?

NO!A Letter From Our Mortgage Lending Division Commissioner
by Aaron Gordon

I have gotten a lot of calls in the last few weeks from very nervous real estate agents who have asked me if stated income loans will become illegal in Nevada as of October 1, 2007 when the new Nevada Lending Law goes into effect.

Others have told them that they will be illegal and they are panicked.

These agents are wondering if they need to start looking for other careers as stated income loans are so prevalent in our city due to the number of "tipped" employees we have.

The answer in "NO!" Stated income loans are not illegal and will not become illegal when Assembly Bill 440 (Nevada Lending Law) goes into effect on October 1, 2007.

In a letter dated, Thursday September 13, 2007 to all Mortgage Banker and Broker Licensees from Joseph L. Waltuch, Commissioner of the Mortgage Lending Division in Nevada, he confirmed this.

Here are some parts of his letter.

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EXCERPTS FROM THE LETTER FROM COMMISSIONER WALTUCH:

The Mortgage Lending Division (the "Division") has become aware that there exists some confusion amongst licensees regarding certain amendatory language to the new Nevada Lending Law.

Effective October 1, 2007 it will be an unfair lending practice for a lender to:

"(b) Knowingly or intentionally make a home loan, other than a reverse mortgage, to a borrower, including, without limitation, a low-document home loan, no-document home loan or stated-document home loan, without determining, using any commercially reasonable means or mechanism, that the borrower has the ability to repay the home loan."

Many licensees have expressed concern as to the meaning of "commercially reasonable means or mechanism" in the context of determining that the borrower has the ability to repay the home loan.

This does not prohibit specific mortgage products or types of documentation that may be utilized in the making or underwriting of home loans.

Read Full Article

New Steps to Help Homeowners Avoid Foreclosure

President Bush Announces Steps to Help American Families Keep Their Homes and Reform The Mortgage Finance System

THE WHITE HOUSE
Office of the Press Secretary

August 31, 2007
Content updated September 4, 2007

The Following Steps To Help American Families Keep Their Homes


1. The President Calls On Congress To Pass Federal Housing
Administration (FHA) Modernization Legislation.

The President's FHA modernization proposal would lower downpayment requirements, allow FHA to insure bigger loans, and give FHA more pricing flexibility. These reforms would empower FHA to reach more families that need help – first-time homebuyers, minorities, and those with low-to-moderate incomes – and offer more options to homeowners looking to refinance their existing mortgage.

The Administration Will Also Launch A New FHA Initiative Called "FHASecure." The President has asked Secretary Jackson to pursue important administrative changes to give FHA the flexibility to help more families stay in their homes during this time of transition in the mortgage market. The FHASecure program will help people who have good credit but who have not made all of their payments on time because of rising mortgage payments. For the first time, FHA will be able to offer many of these homeowners an option to refinance their existing mortgage so they can make their payments and keep their homes. FHA will also charge mortgage insurance premiums based on the individual risk of each loan, using traditional underwriting standards, so it can expand access and help even more families.

Since 1934, FHA Has Helped Close To 35 Million People Buy A Home And Stay In Their Home. FHA is a government agency that provides mortgage insurance to borrowers through a network of private sector lenders. It also offers options to homeowners looking to refinance their existing loan. The President's FHA modernization bill was first sent to the Hill in April 2006, and it passed the House last Congress with over 400 votes. The President has once again asked Congress to send him a clean FHA modernization bill as soon as possible so he can sign it into law.

2. The President Calls On Congress To Change A Key Housing Provision Of The Federal Tax Code So It Does Not Punish Families Who Are Forced To Sell Their Homes For Less Than Their Mortgage Is Worth.

Current tax law counts cancelled mortgage debt on primary residences as taxable income. For example, if the value of a home declines and $20,000 of the homeowner's loan is forgiven, the tax code treats that $20,000 as taxable income. The President proposes temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income.

The President Is Working With Congress In A Bipartisan Fashion To Make This Important Change. Senator Debbie Stabenow (D-MI), along with Senator George Voinovich (R-OH) and others, has introduced a bipartisan bill that would protect homeowners from having to pay taxes on cancelled mortgage debt. In the House, Representatives Rob Andrews (D-NJ) and Ron Lewis (R-KY), along with several of their colleagues, have introduced similar legislation. The President looks forward to working with Congress to reach agreement on a bill, so we can deliver this vital tax relief to American homeowners.

3. The President Announced That The Administration Will Launch A New Foreclosure Avoidance Initiative To Help Struggling Homeowners Find A Way To Refinance.

Housing and Urban Development Secretary Alphonso Jackson and Treasury Secretary Henry Paulson will reach out to a wide variety of groups that offer foreclosure counseling and refinancing for American homeowners. These groups include community organizations like NeighborWorks, mortgage lenders and loan servicers, FHA, and Government-Sponsored Enterprises like Fannie Mae and Freddie Mac. The goal of this initiative is to expand mortgage financing options, identify homeowners before they face hardships, help them understand their financing options, and allow them to find a mortgage product that works for them.

The President Supports Actions To Protect Homeowners And Prevent These Problems From Happening Again

Read more here.