Article 1 (What Is A Buy Down?) Article 2 (What is Considered "Like-Kind" Property?) Article 3 (Which Is Harder - Buying or Selling a Home?) Article 4 (Skipping A Home Inspection May Turn "The House Of Your Dreams" Into "The House Of Horrors!") Article 5 (Q&A with Michael Merrill) Article 6 (Who Should Be Your Real Estate Agent: Your Best Friend or The Best Qualified Professional?) Article 7 (Will It Pay to Remodel?) Article 8 (Hiring A Home Inspector)

What Is A Buy Down? By Eric Erickson, partner in Viking Mortgage Company. He has been helping homeowners and real estate investors close their mortgage transactions for the past 8 years. He can be reached at 1-888-738-3350. In today's volatile interest rate environment, any edge you can get on a lower monthly payment makes sense. One idea is a mortgage program that allows you to buy down the loan's interest rate for the first two years. How does a buy down work and what are the benefits? First, how does a buy down work? A buy down applies to a 30-year fixed rate mortgage. The current interest rate market determines the "Note" interest rate. The "Note Rate" is the interest rate charged to you for as long as you hold this mortgage. This "Note Rate" is bought down for the first two years - essentially some of the mortgage interest is paid up front (prepaid). In the first year 2% of the interest is prepaid and 1% is prepaid in the second year. The mortgage industry calls this a 2/1 buy down. This is accomplished by setting up a separate escrow account in name of the borrower at the time of loan closing. The prepaid interest money is deposited into this escrow account and the account is debited every month to pay part of the mortgage payment. What are the benefits of prepaying or buying down your interest on a mortgage loan? Let's pretend you have found the home of your dreams with a purchase price of $200,000. You only have 5% for a down payment and you have applied for a loan of $190,000. You have called your local mortgage broker and they are quoting a 30-year fixed interest rate of 8.50% with no points. Your proposed payment is $1,406.94 plus real estate taxes ($200), insurance ($50) and PMI ($123.50) giving you a total payment of $1,780.44. This payment is a little higher than you want to spend right now and the mortgage broker is having difficulty qualifying you for the loan because you make $50,000 a year. If you buy down or prepay your interest then you may be able to qualify for the loan. The two major agencies Lenders sell their loans to allow the borrower to qualify at the effective first year interest rate. In this case the effective interest rate would be bought down to 6.5%. The payment at 6.5% is $1,200.95 and when taxes, insurance and PMI are added the total payment would be $1,574.45. The major benefit of a buy down is that you can qualify for a larger loan. Where does the money come from to buy down or prepay the mortgage interest? It can come from your savings, a gift, the seller, or the Lender. Be aware that if the Lender is providing the buy down funds your Note Rate will be higher than market interest rate. Even if a Lender funded buy down is your only way to get the loan do not despair. In two years you will probably be able to refinance to another mortgage product offering a low interest rate. The mortgage industry is always working on loan products that will make sense for you to purchase or refinance your home.

What is Considered "Like-Kind" Property? By Robert HB Buckner, New England Division Manager for Asset Preservation, Inc., a subsidiary of Steward Title Company. Questions regarding exchanges can be directed to him at 877-845-1031 or hbbuckner@earthlink.net. IRC Section 1031 does not limit "like-kind" property to certain types of real estate. The term refers to the nature or character of the property, rather than its grade or quality. Real property must be exchanged for like-kind real property. Real property is not considered like-kind to personal property. WHAT IS EXCLUDED? An Exchanger's primary residence and property held "primarily for resale" (dealer property) are excluded from tax deferral under IRC Section 1031. [Note: Primary residences qualify for tax exclusion, with certain restrictions, under IRC Section 121. QUALIFYING REAL PROPERTY The types of real estate which can be exchanged are extremely broad. Any real estate held for productive use in a trade or business or for investment - whether improved or unimproved - is considered "like-kind." Improvements to real estate refer to the grade or quality, not the nature or character of the real property. Like-kind examples: -Unimproved for improved property -Fee for a leasehold with 30+ years to run -Commercial building for vacant land -Duplex for commercial property -Single family rental houses for an apartment building OWNER-OCCUPIED MULTI-FAMILY HOUSES People who owner-occupy multi-family houses are often misinformed about the tax consequences of selling these homes. Under Internal Revenue Code Section 121, a couple can sell their home and exclude up to $500,000 in gain. However that rule only applies to the portion of the house that is the owner?s residence. The percentage of the property that is rented, would be subject to capital gain taxes, since that portion of the property is used as a business, for income. The rental portion of an owner-occupied property could be exchanged for other investment property, including a vacation rental condo or even a tenant in common interest in a large shopping center. QUALIFYING PERSONAL PROPERTY Personal property that qualifies for a 1031 exchange must be "held for productive use in a trade or business or for investment." In general, qualifying properties must both be in the same General Asset Class or within the same Product Class. The Standard Industrial Classification Manual provides categories for General Asset Classes of depreciable tangible personal property. It is critical to review any personal property transactions with tax advisors because the rules are far more restrictive than for real property. Examples of qualifying personal property exchanges include: -Mexican gold coins for Austrian gold coins -Aircraft for aircraft -Restaurant equipment for restaurant equipment -Computers for computers Nobody likes paying taxes. If you're considering selling investment property, make sure you understand the options and flexibility of Internal Revenue Code Section 1031.

Which Is Harder - Buying or Selling a Home? By Jay McHugh, RE/MAX Affiliates, 2077 Centre Street, West Roxbury, MA. Questions should be directed to Jay at 617-323-5050 or faxed to 617-323-4040. E-mail JAYMCLB@aol.com or visit www.jaymchugh.com. Both sides of the real estate transaction present a number of challenges whether you are going through it for the first time or have bought and sold several homes. The dynamics of the market, the real estate professionals involved, and your own reasons for buying or selling change dramatically with every transaction. Your experiences, good, bad or indifferent, add up to a unique personal perspective. What makes buying or selling real estate so stressful? Is it having to buy or sell under pressure? The conditions of the market? The people with whom you must deal? Buyers have a number of concerns based primarily on intangibles and unknowns. Their first questions are: will they get the loan and how much will the lender allow them? Then they must come up with ways to make the down payment, or if they are the more daring types, to swing a bigger loan. As they pass this first hurdle, they must evaluate the true cost of the home. How much extra will be needed to remodel, repair and decorate the home to my satisfaction? Does the home meet the family's needs in terms of space, storage and flow? What about schools, services, and shopping? How easy is it to get from home to work and other destinations? What are the neighbors like? What are the amenities of the neighborhood? Is this home the best deal out there for me and my family? Most buyers operate under a tremendous temporary financial strain as they balance living, moving, and remodeling and/or decorating costs. All of these questions produce a special stress, even when you are buying the home of your dreams. Sellers, on the other hand, are more interested in leaving the table with as much money as possible. The sales transaction is usually a means to an end, and the first step to a secondary goal - a different home or a different lifestyle. Unless they have a driving economic reason to sell, sellers are interested in the short term and long term costs and rewards of the transaction. What will it take to prepare the home for sale? How much can be made after paying commissions and closing costs? Sellers are also concerned with the long term effects of the sale, including tax consequences and the ability to purchase another home. Unfortunately, many owners find that they have not built enough equity in their homes to leave the table with much money and some find they must pay some amount in order to close the transaction. In addition to these pressures, the seller's life becomes an open book the moment their home is being marketed. Sellers experience substantial loss of privacy for months on end, and the home has to be kept in "show" condition, a strain for even the most avid housekeeper. The best way to cope, no matter what side of the transaction you are on, is to keep your eye on the goal. Buyers, get prequalified so you know where you stand financially. Sellers, get the house in tip top shape so you aren't surprised by a devaluation in the market. Both sides, be prepared with paperwork and time. Listen to your Realtor's advice. Remember that tempers may flare, but ultimately buyers and sellers want the same thing, for the home to close. And it may be no small advantage to you to know what your opponent is going through on the other side of the table.

Skipping A Home Inspection May Turn "The House Of Your Dreams" Into "The House Of Horrors!" By Joseph Rizzo, Chief Executive Officer at Tiger Home Inspection, one of the largest inspection companies in the Northeast, conducting more than 18,000 inspections last year. The firm maintains central offices at 969 Washington Street, Braintree, MA 02184. For additional information on Tiger Home Inspection, please call 1-800-628-4437. In today's real estate market, demand for homes is high and constant, reflecting a strong economy. Homeowners are having little trouble selling their homes, sometimes within weeks of the original listing date. In fact, some homes and towns are so popular that a virtual bidding war ensues over a property, between several different potential buyers. The seller usually doesn't have to worry much; all they must do is accept the highest offer given for their home. But what happens when a buyer is determined to have a particular home or property? How far will they go? Homebuyers placing an offer on a home may go as far as meeting, or in some cases, exceeding the list price, sometimes by as much as $8,000. But, what if this isn't enough? The only other option is to guarantee the seller a "fast sell." This means doing whatever is necessary to make the offer and sign the purchase and sale agreement in an extremely small amount of time. Hence, skipping any extra steps, such as a home inspection. The Repercussions of Waiving a Home Inspection Skipping a home inspection may not be the end of the world, but it has the possibility of putting a serious dent in your wallet, if there are problems with a property. One case in particular involved two buyers in the throes of a bidding war over an antique home on two acres of land. Both had reached the limit on the selling price. The first buyer had been waiting years for the property to be listed, thinking it was their dream home. As you may have guessed, they were determined to have that property, no matter what. They waived a home inspection, won the bidding, and shortly after, signed the purchase and sale agreement. Well, the new home turned out to be a "dream" of the less pleasant kind. The antique house was almost a century old and needed upgrading in some of the major areas in the home. The buyers thought the electrical system was fine when they bought the home. All the lights worked, and everything seemed to be in relatively good shape, until, they installed their air conditioner and shorted out the system. When they brought in an electrician, he informed them that they would need new wiring and a new electrical fuse box with circuit breakers to support the amount of electricity within the house. A home inspection would have revealed any electrical problems, as well as acknowledged to the seller that the entire system would need to be upgraded. Unfortunately, the buyers discovered that upgrading the electrical system in their home would cost an estimated $2,000. The Snowball Effect At this point, the new homeowners began to wonder about other potential problems in their home. Since they had overextended themselves financially when they bought the home, paying more than the actual list price during the bidding war, they weren?t sure how they were going to afford repairs. The homeowners decided to have a home inspection conducted. They wanted to know exactly what problems or repairs would be needed in the future. They planned to take out at small home improvement loan to renovate the electrical system, and they wanted to be sure that nothing else needed to be renovated. A professional home inspector, trained to notice and point out existing or potential problems, was hired to grant the homeowners an objective diagnostic report of the home. The home inspection took approximately three hours, and gave the new homeowners a complete detailed report on the condition of their home, as well as the life expectancy of the major aspects within the home. For an affordable cost, the owners were given details on all parts of their home: the complete exterior and the complete interior including plumbing, heating, electrical and mechanicals. The ventilation and insulation was also checked, as well as evidence of water penetration and wood boring infestation. The home inspection informed the owners of several other areas that would pose future problems, including the patched, rusty oil tank and rotting floorboards in the bathroom underneath the leaky tub, all of which needed replacement. Had they known the condition and life expectancy of these areas within home prior to the sale, they would have been able to request repairs and restoration of the areas from the seller, or withdraw their offer. The homeowners were able to obtain financing to make the necessary repairs, but they were not pleased about having an overextended budget. It would take years to get back into good financial shape. By that time, according to the home inspector?s report, a few other restorations would be needed, such as the replacement of the roof and gutters. Buying a house is an expensive investment, and a home inspection can provide an accurate, realistic assessment of that property?s condition so that a homebuyer can make an informed decision. The insight provided by a home inspection may save thousands of dollars, plus, spare any unnecessary aggravation. This way, a buyer's "dream" home, remains pleasantly so.

Q&A With Michael Merrill By Michael Merrill, of Merrill & McGeary, a real estate attorney. Questions should be mailed to his attention at Six Beacon Street, Boston, MA 02102 or call 617-523-1760. Q: I am a Condominium Trustee. Last week an owner's pet dog bit another owner in the hallway. The injury was just a scratch and the owner's pants were ripped. The unit owner who was bitten has complained to the Trustees and requested the Trustees prohibit the dog from the Condominium. Do we have that authority? What would you recommend? What if the dog bites someone else? M.R., Boston, MA A: The Condominium Documents, including the Master Deed, Declaration of Trust, and Rules and Regulations, will provide the parameters of the Trustees? authority relating to pets. Generally, most Condominiums that allow unit owners to keep pets in units also give the Trustees the authority to prohibit pets from the Condominium if the Trustees deem the pet to be a nuisance and/or danger to the other residents. However you should read your documents carefully and follow the requirements of the documents prior to taking any action in responding to the complaining unit owner and/or to the pet owner. I also recommend the incident be investigated and the parties be invited to meet with the Trustees or management prior to any formal action being taken. Perhaps the owners can work out the issue between themselves. If not, the Board of Trustees should take into account all the information they have and decide whether or not the pet should be banned from the Condominium. This can be an emotional issue for all parties, particularly the pet owner. I recommend you consult with the Condominium's attorney in determining the best strategy to deal with the issue. Michael W. Merrill Q: I just accepted a new job with a somewhat higher salary than my previous job. As a result, I have additional income which I would like to invest. I am relatively young and I thought I might purchase a two or three family house and move into one apartment rather than continuing to rent. I am somewhat concerned about real estate values. Would you say the market is at its top? What factors should I consider in determining whether or not this is a good idea? Could I join with someone else if I need additional cash to make the deal happen? How would that work? I know this is a mouthful. Do your best. A.C., Cambridge, MA A: Of course, I am biased. I recommend real estate as a good investment and home ownership as the way to go long term. I agree the real estate market is at an all-time high. However, the market constantly fluctuates over a period of years. The last down cycle was in the late 1980?s through 1992 or 1993, and then the market began to turn more favorably toward owners and Sellers. As an owner, you will have to ride out turbulent periods. If your investment horizon is short, real estate probably is not the best investment strategy. Nonetheless, you need housing and with a purchase you are building equity. Each real estate investment stands on its own merits. The quality of the property and building, location, price, rental values, and financing terms are all factors to be considered. I recommend a thorough analysis of the entire deal before signing a purchase and sale agreement. If you need additional cash, you can take on an investor either as an equity partner or merely as a lender. This relationship could affect your financing options. If you join with someone else, I recommend a written agreement be signed by the parties to clearly define the rights and obligations of the parties. The agreement does not have to be complicated, but it should touch all of the bases including capital contributions, management, distribution of profits, termination of the partnership, compensation of the partners, and the like. Good luck. Michael W. Merrill

Who Should Be Your Real Estate Agent: Your Best Friend or The Best Qualified Professional? By Selma Newburgh, MBA, Architect, Realtor - Coldwell Banker-Hunneman, 1375 Beacon Street, Brookline, MA 02446. She can be reached at (617) 731-2447 or via e-mail at san@world.std.com. Visit her web site at www.selmasellshouses.com. Buying or selling a home is probably one of the most significant financial decisions anyone might make. Yet, all too often, selecting a real estate sales agent for this important transaction gets less consideration than choosing a hair stylist! (No offense meant to hair stylists.) Who should it be? A fellow member of the PTA? A member of the country club? Your next door neighbor?s best friend? Or should it be a real estate professional selected after interviewing several and checking his or her references? I believe the latter. The real estate industry is complex and far-reaching. It encompasses urban economics, land planning, politics, architecture, construction, consumer protection and fair housing laws, finance, and a good measure of psychology. To truly be a real estate professional providing superior service, a real estate agent today must be well-versed in as many of these disciplines as possible. Buying or selling a home is time consuming and often frustrating. A superior real estate professional has the skills to ease the entire process and help buyers and sellers achieve their goals. Working with a seller, such an agent is able not only to identify the realistic price range for the property, but also to explain why! Such an agent is able to assist the seller identify options for improving the property prior to marketing and to evaluate trade-offs between cost and value. An effective marketing plan incorporates pricing, product presentation and promotion programs that will keep the product in "the eye of the market" and place it in a market niche that will make it more attractive than the competition. A well-qualified real estate professional will carefully follow changing market conditions and update the strategy to bring the process to a successful close. Working with a buyer, such a real estate agent must translate buyers' needs and dreams into tangible three-dimensional properties. The task begins with analyzing market trends and financing alternatives to assist in establishing a realistic, affordable price range. The next step is locating properties that fit into these parameters. In today's fast-moving marketplace, with low supply and high demand, superior service to buyers requires the zealous pursuit of new entrants into the market to ensure that the buyer gets to see them as soon as the offering is made public! Once willing and able buyers and sellers are brought together, a professional real estate agent will ensure the timely progress of the transaction. A successful agent will coordinate the complex tasks and personalities involved in price negotiations, building inspections, legal procedures, demands of finance professionals, appraisals, repairs to be completed before the closing - and even sometimes arrange for bids by contractors for work to start immediately after the closing. I promise you, once you have been through such a process with the best qualified real estate professional of your choice, your agent will indeed become your best friend!

Will It Pay to Remodel? By Shari Marquis, GRI Marquis GMAC Real Estate. 384 Washington Street, Brighton, MA 02135. 617-782-1234, e-mail smarquis1@aol.com. Director of GBREB, MLS-1 & MAR Chairman Technology Committee, MLS-1 Realtor of the Year, Greater Boston Real Estate Board and the Massachusetts Association of Realtors. It pays to know which home improvements will increase your home's resale price as well as add comfort and convenience to your lifestyle. Many sellers think that if they make an improvement, they will recoup the cost with the sale or even make more money based on the improvement. Remodeling a room or two does not mean you will recoup the entire cost. How much you recoup depends on your entire cost and how soon you sell after completing the project. A report was recently completed by the Realtor Magazine and Remodeling Magazine which compared the costs of 12 popular home remodeling projects. The remodeling report focuses on projects ranging from kitchens, baths and master suites to family room, bedroom and second floor add-ons. The report provides average costs of the renovation or add on and also calculates the average amount a homeowner can expect to recoup if the home is sold within one year of the project's completion. A minor kitchen renovation can differ from a major one. The minor project which consisted of installing new vinyl or ceramic tile and under cabinet lighting was found to have the highest return at resale time, 94% of the national average of the estimated cost of $9,182. By comparison, the report found that a major kitchen renovation, which includes a total remake right down to installing additional shelving, upgrading appliances, and adding a second sink and cooking area, generated an national average return of 84% on a national average cost of $24,486. Keep in mind these costs are based on the home selling within one year of the project's completion. When it comes time to sell your home, very often your real estate professional can help you determine how much value you can add to your home through various renovations and remodeling. When you are aware of the costs and value of various improvements projects you can increase the chance of your home selling quickly and for the price you want. According to the report, add-ons such as family room, additional bedrooms and even second floors were found to recoup more than 80% of the national average costs at resale time. The report also found that the home improvements that proved nationally to have the least potential to recoup their cost included deck additions, (70%), replacement windows (68%) and home office additions (64%). It is also important to remember that how much value a renovation or remodeling project adds to a home will also depend on a number of factors specific to its location. For example, how much you can expect to recoup from a remodeling project may depend on your market area?s housing stock, current market conditions, buyers? preferences in a certain area and the location's climate. If you plan to move within a year or two it is wise to limit yourself to relatively inexpensive touchup projects you can do yourself or have done for little cost. Cosmetic improvements will easily give your home a fresh look, add to its market value and create a favorable impression that will make it easier to sell. The market value of your home is mainly determined by the value of homes around it, regardless of renovations. Of course, if you plan to stay in your home forever, recouping costs is not a factor. You can let your imagination and your budget be your only limitations.

Hiring a Home Inspector By Steven Petitpas, NCARB, ACSE, Aesthetic Images Homes Inspection Division, 617-323-4955. He is a Boston based registered architect who also performs home inspections. He has over 20 years of experience in residential and commercial construction and is also a licensed builder. He is an active member of the National Council of Architectural Registration Board and American Society of Civil Engineers. The home inspection industry is currently unregulated in 49 states, including Massachusetts. However, starting in May of 2001, all home inspectors in Massachusetts will be required to be licensed. There is no substitute for an opinion by someone who is actively involved in the building industry, such as a licensed builder, registered architect, or professional engineer, all of whom are regulated and licensed by the state to protect public safety and welfare. The ordinary home inspector is not regulated in this manner. Building codes have changed over the years and even though existing buildings do not have to comply with current codes unless altered, certain building practices have been abolished. Your home inspector should be able to tell you if your new home contains such outdated practices and inform you of the current requirements. That information alone is worth the price of the inspection and could possibly save a life, especially when dealing with electrical or heating systems. Every home buyer should have their prospective purchase inspected by a knowledgeable home inspector who is experienced in current building codes and practices. A basic home inspection for a single family house should take on average two hours and should contain a visual inspection of all building systems and components contained within the house itself, such as the structural, plumbing, electrical, heating, exterior finish, and roof systems. There are literally hundreds of items your home inspector should be looking at. The final report should be typed and contain written descriptions of problems found recommended solutions. A good report will also contain additional information besides the report itself such as different materials used in construction of houses or tips on how to maintain items. After all, information is the name of the game. The more you have the better the decision you can make. A basic home inspection is not the only inspection you should have done prior to the purchase of a home. Every home should also have a termite inspection and, if small children are going to be living in the home, a lead paint inspection. Termite and lead paint inspections should only be performed by licensed inspectors because these types of services are regulated by the state. Beware of any individual inspector who says that those types of inspections are part of their basic inspection service. It is next to impossible to perform these multiple inspections with only one inspector. Most good inspectors associate themselves with specialty inspectors and may be able to coordinate these other inspections for you for an additional cost. The least expensive inspection is by no means the best. If you're spending one or two hundred thousand dollars for your new home you should be prepared to spend at least $250 for the basic home inspection and $125 each for lead paint and termite inspections. Even newly constructed homes should be thoroughly inspected. I can not begin to tell you of horror stories told to me by people who purchased brand new homes and thought that they were exempt from problems - basic problems that a good home inspector would have seen. Building practices have changed and not necessarily for the best in some cases. The best way to determine if someone is qualified to inspect your home is to ask lots of questions about their background and test their knowledge of how basic building systems work. For example, have them explain how various heating systems work or the differences in construction of older homes or what kind of electrical service is required for a house. Even if you don't know how these systems work, if the inspector can't give you coherent understandable answers or they don't sound like they know what they're talking about, move to the next inspector on your list. Beware of inspection companies that charge extra for distance or for going up onto the roof, or who refuse to tell you the cost of the inspection until you tell them the location of the house. Is the person you're talking with knowledgeable about the inspection process or buildings in general? Remember, for the next 30 years you may be paying a mortgage based on that inspector's opinion of the house. How valuable is the opinion of an inspector who does not have a license, registration, or professional standing to protect? If the inspector has some kind of additional license or registration regulated by the state that's a definite plus.