Smart Money: Don't sweat mechanic's lien threat

Dear Bruce: I am curious about how this situation should be handled. My wife and I hired someone to do window treatments in our new home. After many problems and delays with the completion, we contacted our credit card company to dispute 30 percent of the charges. We received a letter from them (while we were on vacation), stating that if they did not hear from us by a specific date they could not proceed.

However, by the time the letter arrived, the work had finally been completed, so we didn’t even respond.

The problem arose four days later when they credited my account with 30 percent of the total bill. Needless to say, the merchant was furious and threatened to put a lien on the house and destroy my credit rating.

We contacted the card company and said to reverse what they had just credited. They said they would, noting that it might take 10 business days. We notified the party that did the window treatments, but he said that was unacceptable. We told him it was already in the works. He called within seven business days and wanted us to sign a form from the holding company to release the money. We refused, because we were told that it was reversed. I saw the money debited from my account, and I have never heard of the buyer having to sign a holding company form. Now I received another threat that he is filing a lien on my house, even though we told him we have proof the money was charged to our account.

How do you see this playing out? I’m planning to seek legal advice to sue for harassment. – W.W., via e-mail

Dear W.W.: Sounds like the big bad wolf is huffing and puffing and trying to blow your house down.

The business about putting the item in dispute and then going on vacation is extraneous. The facts are that you are apparently happy with the work, or at least it is acceptable, and that you have arranged to re-credit his account and debit your own.

He could put a mechanic’s lien on the house, which is no big deal. It’s a new house, and you’re not going to sell it.

As to ruining your credit, don’t worry about it. That’s nonsense.

I don’t know what this holding-company form is. It’s likely that he has in some way sold his debt or borrowed money against it. By the time all of this gets done, he will have his money, and that will be the end of it.

As to suing him for harassment, you can forget that as well. Put it behind you.

Postpone renovations to chip away debt

Dear Bruce: I have a 30-year fixed mortgage for $348,000, for which I make payments twice a month. My question is regarding the credit card debts that I want to consolidate; they amount to nearly $30,000.

Is it wise to get a home-equity loan or home-equity line of credit to pay off this amount? My house is worth $498,000, and it was appraised recently when I refinanced. The fixed interest rate I am paying for the $348,000 loan is 5.75 percent. I want to have at least $50,000 to pay off my $30,000 debt. I also want to renovate my kitchen and add a deck. If I have a mortgage of $348,000 and planned home-equity line of $50,000 – which will then amount to $398,000 – and make improvements to the house, won’t it increase the home’s appraisal value? How smart is this move? – T.N., via e-mail

Dear T.N.: First of all, you mentioned that your house was recently appraised, but it may not still be worth that amount. Real-estate values are topsy-turvy, and an appraisal that is more than 30 days old isn’t worth very much.

I have no objection to your borrowing the money for improvements through a home-equity loan. I would not consider disturbing the 5.75 percent interest rate, as you will not duplicate that in the current market. But I am not happy that you’re borrowing money to pay off credit cards. To finance a vacation or a hamburger or clothing purchase for 30 years is totally irresponsible. If you can run up that kind of bill, you ought to change your standard of living.

The home improvements are a different matter. Whether renovating the kitchen will add to your home’s value is sometimes questionable – what you think looks wonderful may turn off potential buyers. But I would forget about the home improvements for the moment and address the $30,000 credit card debt by paying it down through sacrifice and perhaps an extra income.

I would not even consider borrowing against your house. All it does is encourage you to make the same mistakes again.

Condo living limits exterior appearance options

Dear Bruce: I am considering purchasing a condo. I see many good things about living in a condo, especially upkeep. But I would like to know the downside as well. Any help that you can offer would be greatly appreciated. – Reader in Michigan

Dear Reader: You are correct in your observation that the exterior upkeep is not your responsibility but that of the condo association.

You should also be aware that you are not allowed a great deal of latitude or individuality. To put it another way, the association will tell you what color the condo is to be painted, how the outside is to be landscaped and, in many cases, what color trash container you are obliged to use. Condo living is clearly a communal type of habitation that is not for everyone. On the other hand, if you are looking to have as little responsibility as possible and still be a homeowner, a condominium can be the way to go.

Rent payments better than bank interest?

Dear Bruce: My friend has a little money in the bank, less than six figures. She likes to buy cheap homes with cash and then rent them out.

She considers the rent as interest on her money and thinks that she comes out way ahead of what the bank pays. I say that there are too many problems, and that she’s better off investing the money in mutual funds and avoiding the hassles. What do you think? – Reader, via e-mail

Dear Reader: This boils down to different strokes for different folks.

If she’s buying these homes for very little money, collecting a decent amount of rent and doesn’t mind all the hassles that go hand in hand with being a landlord, she could conceivably receive a higher return than she will from a bank. She may outperform mutual funds, too.

If she’s happy with the results, why change?

Bruce Williams is a national radio talk show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.