Smart Money: Buried gas tank could pose problems for home seller

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Bruce Williams is a national radio talk show host and syndicated columnist. He can be contacted through the Business Journal.|ret||ret||tab|

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Dear Bruce: I'm in the process of selling my home. The prospective buyers made it clear that an underground gasoline tank has to be removed. Half of the tank is situated under an asphalt driveway. I'm concerned about digging up the driveway. I heard about a method of filling tanks with an environmentally safe substance and then removing them. Where do FHA appraisers stand on the issue? The buyers are not scheduling an appraisal until we have dealt with the tank. They want it removed, not filled. W.A., via e-mail|ret||ret||tab|

Dear W.A.: You will have to consult your local state laws to determine whether a filling process is available. The procedure is that a company (licensed and bonded by the state) first inspects the tank by putting in a dipstick and oftentimes a TV camera, which can be snaked down inside the tank. If they determine that there is no leakage, they are allowed, in many states, to fill the tank with a plastic substance, which prevents it from ever being filled again. They then issue a certificate (which is covered by a bond) that guarantees this is environmentally safe. This is not available in all states. |ret||ret||tab|

I would start with the your state's department of environmental protection and see if such a plan is allowed in your state and if such companies exist. If they do, it is usually the cheapest route to go. If not, you will be obliged to yank the tank. (You'd want to do that anyway, because if some leakage is found years later you may still be in the liability loop.) |ret||ret||tab|

The big danger here, of course, is if the tank is leaking, you will really open a Pandora's box when you yank it. You will be responsible for correcting any pollution that may exist, which may amount to huge amounts of money.|ret||ret||tab|

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Dear Bruce: I purchased a home in Visalia, Calif., in 1991. We were required to get a certificate to avoid having to get flood insurance. This was approved, so we bought the property. We were not advised the home was in a flood zone. Three years later, we received a notice from our lender telling us that we must purchase flood insurance. The local authorities indicated the last flood had been about 48 years ago and the zoning would likely be changed. Well, we are still in a flood zone. I wouldn't have agreed to buy a house in a flood zone, or, at least, would not have paid the same amount based upon the years of flood premiums. What can I do? R.E., Visalia, Calif.|ret||ret||tab|

Dear R.E.: If your home is, or was, in a flood zone, the lender is going to require flood insurance. The fact is, whether or not you have had a flood doesn't necessarily mean anything. I have owned property that didn't see a flood in some 70 years, but when we had the 100-year flood, the property was under water. Be that as it may, as long as the property is in a designated flood zone you will be required to pay flood insurance. I don't see where you have any recourse against anyone. Unless you are in a very hazardous zone, such as my present home, the flood insurance premiums are not all that high.|ret||ret||tab|

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Dear Bruce: We would like to buy a home, but unfortunately my husband and I declared bankruptcy in 1995. Our 5-year-old son was very ill at the time, and we had no insurance. After recovering from that bankruptcy, my husband made some poor financial judgments and our attorney advised us to file for bankruptcy. Now that makes two. He has an excellent job and makes more than $100,000 a year with good benefits. However, we've been renting, and we hate it. We pay all of our bills on time and do not have any credit card debt. We've only saved $5,000. Are we destined to rent forever? S.P., via e-mail.|ret||ret||tab|

Dear S.P.: There is life after bankruptcy, but, it may be some time before a conventional mortgage will be granted to you. You may, however, find someone who's hoping to sell their home but despairs because of the little money the equity can earn in fixedincome securities such as CDs. For these folks, it may be attractive to carry a first mortgage while you pay them 7 percent or 8 percent, far more than they can get on a conventional investment with the commensurate safety. While you might not find these on every street corner, why not advertise? Explain your situation in brief terms in a classified ad in the real estate section. You never know who may reply. Restoring your credit is an arduous process. |ret||ret||tab|

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Dear Bruce: I need to decide whether to pay cash or mortgage for a house. How should I conduct the analysis? M.V., via e-mail|ret||ret||tab|

Dear M.V.: Let's not turn what should be very elementary math into rocket science. If the cost of the money (the mortgage) after taking into account tax deductibility (itemized returns only) exceeds the income that this money can earn taking taxes into account, then your decision is made. It is simply a matter of what is the least expensive way to go? Age of the mortgager is also a factor. Interest rates may be so low that in the short term they may not be viable, but in the long term borrowing the cheap money may be advantageous.|ret||ret||tab|

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Dear Bruce: My daughter is in the market to buy a first home. My husband and I would like to provide 70 percent to 80 percent of the financing. How do we set up such a mortgage, and where do we go for help? Are there rules and regulations that we should know about? Would it be better for the three of us to purchase the home outright, with the shares going to the survivor in the event of our death? A.L., Brogue, Pa.|ret||ret||tab|

Dear A.L.: Your attorney can set up the mortgage. You become the lender, and the payments are agreed upon. I'm going to suggest that you have your daughter pay you the taxes and insurance in 12 equal installments so she doesn't get behind. You can charge any reasonable interest; somewhere between 5 percent and 6 percent is appropriate. |ret||ret||tab|

You will need to declare this as income, and your daughter can claim it on her income tax as she itemizes. If you choose, you may put a balloon in the paperwork where the whole mortgage comes due in five or 10 years, or extend it. A deal of this kind is relatively simple to set up and will benefit you because you will receive a higher rate of return than you are getting now, and your daughter can get a hassle-free mortgage. It's a home run for everyone, assuming your daughter is responsible. Remember, it will be tough to foreclose on your own daughter.|ret||ret||tab|

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Dear Bruce: I am interested in advice regarding the sale of my home. I am 67 and was divorced 12 years ago. My ex just passed away this past January. I receive just more than $1,100 a month in Social Security. My house is worth about $225,000. My six kids think I should sell my home and rent, because I'm losing the interest on the money the house would bring in. I could afford to live better with the interest. |ret||ret||tab|

I have a small home-based business making wedding cakes and confections. I enjoy it, and it gives me some pocket money. If I move to an apartment, I may not be able to continue doing this work. I've lived here for 32 years and my neighbors know and don't mind my sideline business. I think I would be taking a chance in a different location, depending on neighbors and government regulations. J.B., via e-mail|ret||ret||tab|

Dear J.B.: The straight answer to your query is that you will very likely earn a lot more in interest on the spread between the value of your current house and what you pay for a smaller place than your part-time business generates. The other side of that is you are comfortable where you are, you enjoy your neighbors and there are no problems. |ret||ret||tab|

In that context, I would stay where I am. If you want a straight dollar-driven answer, consider getting a smaller house. But everything can't be measured in dollars. Your comfort level has a value and should be taken into account.|ret||ret||tab|

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