Q: Every now and then I hear about a house that has a "history." For example, a murder occurred in the house or the house is "haunted" in some way. How would a buyer know about this? Is it possible the house could be less valuable based upon its "history"? Does the real estate broker have a responsibility to investigate the "history" of the house and if there are negative events disclose them to potential Buyers. I know this question sounds weird but what is the story?
C.M., Boston, MA
A: The question is a bit unusual and not one I am asked on a regular basis. Nonetheless, it is interesting particularly in light of the remake of Alfred Hitchcock's "Psycho." Who would want to purchase the Bates Motel. Of course, a Buyer has some general responsibility to perform his own due diligence. I generally recommend to a Buyer that he go to Town Hall and review the building and assessing files for the property. These files can reveal some information. Also, often people in Town Hall are familiar with particular houses, and will answer questions if asked. Real estate brokers, however, are not obligated to disclose to Buyer or tenant that a property is or was "psychologically impacted." Massachusetts General Laws, Chapter 93, Section 108 approved in August, 1998 indicates that no cause of action shall arise or be maintained against a Seller or Lessor of real property or a real estate broker or sales person for failure to disclose that a property was the site of a felony, suicide or homicide or that the real property has been the site if an alleged parapsychological or supernatural phenomenon. Further, no disclosure is required that prior occupants may have been infected with a disease which is unlikely to be transmitted through the occupancy of a dwelling. So the burden is on the Buyer to investigate the house and reliance cannot be placed on the real estate broker.
Michael W. Merrill
Q: I recently lost my job for a period of time while I was sick. Now I am back on my feet and earn a reasonable paycheck but I have three creditors who are chasing me, two of which are credit card companies. Also, several years ago I entered into a payment plan with the IRS to pay off a federal tax lien over a period of years. This a lien on my property. I want to pay these creditors through a refinance of my two-family house, which I occupy. There is enough equity in the house to pay off the existing loan and consolidate all of my debts. The loan is within FNMA limits. The ratio would be 80% loan to value. A few lenders I called said I will have a problem refinancing because of my credit history. One lender said it would consider a ten and one-half percent interest rate and three points to do the refinance and there would be a prepayment penalty. What do you think? Would you agree to these terms?
L.T., Waltham, MA
A: It is difficult to step into your shoes and make a decision in part because I am not sure of the urgency of the situation or if you are giving me the complete story. However, in this competitive lending marketplace with interest rates for residential owner-occupies loans in the mid to high 6% range, the terms you are being offered are extremely onerous. I would not accept them. I recommend you contact other lenders. Look for lenders who advertise in the newspaper and ask local xRealtors about lenders they recommend. Ask your lawyer. I understand that your loan is not an easy loan for underwriting purposes and some lenders only want the safest and most secure loans. Nonetheless, you should call as many lenders as possible and see if they are interested. You might also contact a local bank which prides itself in community lending. Often these banks will portfolio their loans in order to meet the needs of a customer. I am sure there is a way you can put this together with reasonable loan terms. Good luck.
Michael W. Merrill