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Ask Our Broker

After an inspection, I found

tons problems with my home.
What can I do now?
Q: I bought a home and got an
inspection. After the inspection, I
found that a heavy metal sliding
door did not slide. The owner said he
would fix it with some oil.
Later, after I moved in, I could not
open the back door and asked a door
specialist to look at it. He said the door needed
replacing, and because that size was no longer
made a larger hole would have to be cut in the
wall, and a new installed would cost more than
$3,000. Also, the back door from the garage was
nailed shut, and pipes from the air conditioning
leaked, completely ruining the carpeting and floor
boards. The water softener didn’t work and the
bathroom walls were full of mold and the tiles
were coming loose – entire walls had to be
replaced. So many things were wrong that should
have been found in the inspection. The repairs to The never-ending hallway:The trend in real estate is moving toward homes with just the right amount of space to work and live – a shift from super-sized homes
make the house livable totaled more than $10,000. that offer more square footage but also cost more to maintain.
The inspector said “if a door is blocked by boxes
or something, they don’t check it” and similar
lame excuses. He said I could have looked things
over before closing, and I should have asked them
to come back for an additional charge to check
Too Big ... Too Little ... Just Right
things out. But how would I know what to look for More and more houses are
and why should I pay them twice? It’s not my job BY PATRICIA V. RIVERA afforded him. It gave him places to put his
CTW Features home computer, store his books, install a
to be an expert in such things. They won’t even coming with more and more home gym and entertain overnight guests.
return my inspection fee, and when I contacted
rooms, but that doesn’t always
G
regory Johnson’s decision to move out A divorce, however, left him staring at the
the Better Business Bureau they could not find the of his 2,000-square-foot home to one four walls of an efficiency apartment, the
company. What can I do? mean they’re practical.The that is less than one-tenth that size did- idea of living small slowly started to appeal
n’t happen overnight. to him.
A: The inspector is right that he cannot examine areas right-sized home utilizes the Like most people, Johnson didn’t just While Johnson’s decision to move into a
that are blocked by furniture, carpets and boxes.That wake up one morning and decide to move tiny cabin may seem extreme to most peo-
said, did no one – including you and your broker – not right amount of space for your into a 142-square-foot cabin. In fact, the Iowa ple, it reflects a gradual shift away from
City, Iowa, resident really liked the extra
notice the mold and the tiles? Did no one try the back lifestyle space his 2,000-square foot home once See RIGHT SIZE Page 2
door to the garage? Were the carpets stained from the
mold? If yes, did they smell? As to the door repairs, did
you get only one estimate or did you shop around for a
better deal?
Home price is one thing, annual assessments are another. Don’t let the
Did you have a pre-settlement walk-through with your
broker? Were all furniture and boxes removed? If yes, Pondering Property Tax hidden costs in home ownership surprise you each year
were not the problems you mention somehow hidden?
Thirty-one states now license home inspectors. If your BY CHARLES SCUTT chase. first-time purchasers – often are residence they are thinking about
CTW Features Often misunderstood, taxes unprepared for the big chunk that purchasing because the taxes
state has a licensing program, contact state regulators
assessed on property valuations property taxes comprise in closing could be the factor that make the
and ask that they examine the inspection report and the SHOPPING FOR A HOME CAN be a tax- can vary widely throughout the costs and the tax ramifications that difference between being able to
home.Also, check the Internet to see if there’s an avail- ing process – especially for those country, depending on municipali- will continue throughout a home- afford the house and the house
who don’t probe deeply enough ty, size and condition of the home owner’s life. being beyond the buyer’s means,”
to learn how much they’ll owe in and other factors. Experts say that “It’s important that buyers
See ASK OUR BROKER, Page 2 property taxes once they pur- many homebuyers – particularly learn about property taxes on the See PROPERTY TAX Page 2

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 RIGHT SIZE
The trend says less is more
CONTINUED FROM PAGE 1
mega-houses that are so expen-
sive to maintain and so pricey.
The National Association of
Home Builders reported in 2006,
for example, that even though
the average size of new homes
expanded by 50 percent in the
last three decades, experts don’t
expect the trend to continue.
Square footages are expected to
drop slightly from the current
average of around 2,450.
Another industry pulse taker,
the American Institute of
Architects, revealed in its most
recent annual survey that more
residential architects are being
asked to design smaller resi-
dences.
AIA spokesman Scott Frank
says homeowners seem to be
placing less attention on the
amount of space in their homes
and are, instead, focusing more
on how the space they have will
be used.
“We’re seeing better use of
PROPERTY TAXES
They come with the territory
CONTINUED FROM PAGE 1
says Linda M.Toga, an attorney in
East Setauket, N.Y.
For example, at closing the
buyer often is required to reim-
burse the seller for prepaid prop-
erty taxes and to give the lender a
portion of the taxes that will come
due after the closing, she says.
“It’s not at all unusual for the
buyer to pay thousands of dollars
in property taxes at the closing,”
says Toga.“And the portion of the
annual tax bill that is often includ-
ed as part of the monthly payment
demanded by the lender may put a
house beyond a buyer’s reach.”
According to Ted Lanzaro, man-
aging partner at Lanzaro CPA,
Shelton, Conn., property taxes are
commonly assessed based on
three factors: the assessed value of
the home as determined by the
local government tax appraiser;
the budget of the local govern-
ment; and a mill rate – a dollar
amount assessed in tax for every
$1,000 of assessed value, which is
determined by dividing the total
budget amount over the total
assessed value amount of a town.
For instance, a mill rate of $20 on a
existing space in homes, which
reduces the need for more
square footage,” he says.
Sarah Susanka, a North
Carolina architect and author of
“The Not So Big House:A
Blueprint for the Way We Really
Live” (Taunton Press, 1998) has
long advocated for sensibly sized
homes that won’t bankrupt a
buyer at closing or drive a new
homeowner into the red when it
comes to paying heating and
cooling bills.
Her book drew enough atten-
tion to warrant the more detailed
books that followed. Over the
last two years more people seem
committed to downsizing.
“People have bought houses
that are bigger and bigger. Now
they’re realizing that size doesn’t
create a home with warmth and
personality,” she says.
She suggests that buyers ask
themselves just how much space
they really need.
“If a formal living room isn’t
getting used what is the point of
having it?” she asks.
Instead of a room that may get
used twice or three times a year,
she suggests buying or building
home with a $250,000 assessed
value would equal $5,000, says
Lanzaro.
“Property taxes are assessed
every year based upon the budget
of the local government,” he says.
“Depending on the growth of
value in the housing market of an
area, the assessed value of a home
may be reassessed every year or
every few years in slower growth
areas.”
Toga says that some municipali-
ties assess properties based on a
number of factors, including but
not limited to the location of the
property, the size of the lot, how
the property is zoned and whether
or not it is improved.
“It’s not unusual for a home-
owner’s taxes to increase follow-
ing the renovation of a kitchen or
the addition of a bathroom,” says
Toga.
Toga says it’s important to real-
ize that homeowners in towns
with large shopping centers, sever-
al industrial parks or other tax-gen-
erating business sources generally
have lower real estate taxes than
owners with comparable proper-
ties in primarily residential areas.
Likewise, owners residing in a
municipality that needs expanded
services and facilities, such as a
new high school, may have higher
taxes than a neighboring town
homes with rooms that can do
double duty with a few pieces of
adaptable furniture.
The key: Focus less on ego-sat-
isfying (but bank-account-drain-
ing) square footage and more on
actual needs.
“Look to create a sense of
comfort, which comes from tai-
loring a home to the way you
live.Then fill it with personal
details,” Susanka says.
Johnson, meanwhile, found
more support than he expected
to when he formed the Small
House Society, an organization
that actively promotes tiny resi-
dences.The homes of members
range from less than 100 square
feet to 5,000 square feet.What
they share, despite the disparity
in their sizes, is the interest of
owners in finding ways to reduce
environmental footprints.
Johnson has found that today’s
relatively low-cost technology
makes his choice of residences
all the more easy to live in. His
former library, filled with books
and CDs, now fits into an iPod
and a laptop.The main floor of
his cabin works as his office, liv-
ing room or kitchen. He climbs a
that had a high school built 10
years ago, Lanzaro says.
If you’re considering the pur-
chase of a new-construction
home, be prepared for other com-
plications that may arise a year or
two after the purchase, says Ron
Cahalan, a Gilbert,Ariz.-based
mortgage lending analyst
“In most counties, the property
taxes for a new home are still
being assessed at the preconstruc-
tion value of the lot, so the proper-
ty taxes are still very low,” says
Cahalan, who adds that it can take
a county up to four years to
reassess a newly built property.
“That’s when the homeowner is
blindsided by a tax assessment and
tax bill that may be five or 10
times the amount it was when
only the lot was assessed.”
While many homeowners gripe
about the steep financial responsi-
bilities of paying for property
taxes, keep in mind that these
funds are essential to the healthy
functioning of local governments,
Lanzaro says.
“Money collected from proper-
ty taxes goes to pay for the servic-
es provided such as schools, police
and fire departments, sanitation,
recreation and other services,” says
Lanzaro.
Any large increase in assessed
value of your home should serve
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ladder to a loft for sleep.
It helps that he lives in a com-
munity that provides him with
services to replace the space he
surrendered when he moved out
of his 2,000-square-foot home.
For example, he now goes to a
local gym instead of going to his
private workout room.When he
has guests that are staying in
town overnight, he directs them
to a quaint B&B since he no
longer has a guest room.
“What’s important is under-
standing what you really need for
your daily life and not so much
what may come in handy one
weekend a year,” he says.
Clearly drawbacks exist, but
another benefit to downsizing
that Johnson appreciates is the
extra money in his pocket.That
is an obvious benefit at a time
when homeowners are experi-
encing double-digit increases in
their energy bills.
For Johnson, life can feel relax-
ing, like when you rent a tiny
cabin in a wooded state park and
feel carefree.
© CTW Features
as a red flag to prompt you to chal-
lenge the assessment, Lanzaro says.
In this case,“research what compa-
rable homes in your area were
assessed at to see if a marked dif-
ference was apparent,” he says.
If you have not made major
improvements to your property
and there has not been a town-
wide reassessment, you may want
to dispute it,Toga says. Owners
who believe their assessment is
incorrect generally have a limited
time each year during which they
can dispute the figures.
Lanzaro says that some states
and local areas have laws that cap
the amount that a property can be
reassessed for. Case in point:
Florida has a homestead law that
caps reassessment of the value of
primary residences to 3 percent a
year.
Property taxes and assessments
will continue to be big topics with
all the ups and downs of the real
estate market in the coming years,
Cahalan says, especially in volatile
markets like Arizona, Las Vegas,
California and Florida.
“We could see an even greater
drop in values as the inventory of
homes on the market rises and
demand lessens,” he says.“It will be
interesting to watch.”
© CTW Features
Ask Our Broker
CONTINUED FROM PAGE 1
able replacement door that would not require cutting
a new hole in the wall.
Q: Seven years ago we purchased a home for
our kids. We made only the down payment, and
since then they have made all of the mortgage
and tax payments. They have now paid the
down payment and we want to transfer the
home to them, taking our names off the title.
We have in the last four years been transferring
certain ownership percentages to them, and at
present the property is owned 60 percent by us
and 40 percent by them. The value of the house
has gone up about $500,000 since first pur-
chased. Should we just continue giving them
gifts of certain percentages each year until they
get the last percentage and completely own the
home?
A: You have given your children a substantial head
start through real estate, but you need to consider
your next step.The fact that the property has appreci-
ated by $500,000 is great news – enough to fund col-
lege educations or to start a business – but it also
means that transfers are more complex.
First, since the property has a mortgage, you need to
be careful before transferring title. Special rules may
apply that would allow you to transfer title to your
children while preventing the lender from immediate-
ly calling the loan. Check with an attorney for
specifics.
Second, by changing the title there may be signifi-
cant state and local transfer taxes, perhaps thousands
of dollars.
Third, there can be substantial tax consequences
associated with big gifts. In general terms, you and
your spouse can each give $12,000 a year to someone
without a gift tax.This means the two of you can give
a total of $24,000 to one child, $24,000 to another,
etc.You could thus transfer ownership to the children
on a gradual basis without paying a gift tax. It’s also
possible to give larger sums, but this gets you into the
wonderful world of probate and estates.
Lastly, be sure that both you and your children each
have wills and living wills.Without such paperwork,
you and your heirs potentially can face daunting costs
and squabbles.
For details, please speak with a qualified attorney
and a tax professional before going further.
© CTW Features
Need real estate advice? Peter G. Miller, author of “The
Common-Sense Mortgage,” would love to hear from you.
Send your questions to peter@ctwfeatures.com. Due to the
volume received, not all letters may be answered.