Smart Money; Homeownership not right in every situation

Bruce Williams is a national radio talk show host and syndicated columnist.

Dear Bruce: I'm a 56-year-old childless divorcee. I rent a duplex, but I would like to own my own home. I earn $22,000 a year with very small cost-of-living raises in my future. I've been looking in the $60,000 to $65,000 range. I will continue to work for another four to six years. I can come up with as much as $5,000 to $6,000 down. Do you think it's wise for me to invest in a house? My family doesn't think I should. I would like your opinion. C.K., Saginaw, Mich.

Dear C.K.: In this instance, I'm with your family. A $60,000 house is at the edge of your price range, and at this point in your life, why do you need the aggravation? It's true that you could make the argument that you are not building equity in anything, but in most cases a single person can rent a small apartment for far less money net than you could own a home. If you invest the difference between what it would cost to own and what you pay in rent, then you'll have more money socked away for retirement than you would have equity in a home. Furthermore, that money is liquid, not dormant in the home.

Dear Bruce: My husband and I recently purchased our first home. It may not seem like much, but it's the Taj Mahal in our eyes. We've only been in the home for a short period of time, and one of our neighbors is giving us a ration of grief. The house is surrounded on three sides by a traditional picket fence. My neighbor, while being very pleasant, advised us that the fence was in the wrong place and at least 10 feet of property on the inside of the fence belongs to them. I referred to my survey, which was required by the lender, and it appears to me that the fence is right where it belongs.

When I showed the survey to my neighbor, she became very irate and said, "When I bought this house they told me where the property line was and I intend to see that it is enforced." While we want to get along with our neighbor, we want what is right. N.W., via e-mail

Dear N.W.: Property lines are not a matter of subjectivity. They are clearly defined in legal descriptions and surveys. Talk to your neighbor and let her know that you are not trying to be argumentative. Ask her if she can come up with her survey, and between you, go back to either one of the surveyors and have them confirm the property line. This may cost you a couple of dollars, but it's better than being at each other's throats. There's always the issue of adverse possession, which means that if someone has had unrestricted use of property for a long period of time they may have acquired an interest. I hope it doesn't come to this.

The first thing I would do is to try to work up a conversation and have the two of you get a licensed surveyor to establish precisely where the property line is.

Dear Bruce: I'm 48 years old with two children and owe $240,000 on a $380,000 home. We have very little in savings, about $35,000. I've just procrastinated over the years and spent what we've earned. Our combined income from primary and part-time jobs is approximately $160,000. If we stay in our current home, we would like to update and add a patio and remodel the kitchen. The problem is we don't have the money. We can borrow against the home. Do you think interest rates are going up? Does the strategy of improving our home rather than trying to buy a new one make sense? We would like to retire in our 60s. Chip Folsom, California

Dear Chip: You can't have it all. Your current house is worth almost $400,000, which is not exactly chopped liver. Right now it might seem attractive to add to your home and make your standard even more pleasant, but the reality is you are not a spring chicken. If you are going to think about retirement, you'd better get to it. That means investing more monies in securities and retirement plans. You also have two young children, and the likelihood is that college is somewhere in their future more money going out. You have a very substantial income but, as you have come to find, even substantial incomes have to be husbanded or you can wind up with very little. Social Security is not going to be enough to maintain your standard of living.

Dear Bruce: I have half an acre lot on a riverfront. It is the only remaining vacant property in the subdivision. The assessed value is fairly high. I cannot build on the property the way it is deeded because it has a right-of-way to the water for the other property owners. I have been paying taxes on it for 15 years with little hope of selling it since no one can build on it. I have tried to give it to the Nature Conservancy, a university and the county to try and gain some tax benefit.

All say that they are not interested. I hate to give it up for a tax sale but I'm not sure what else to do. Have you got any ideas? Reader, via e-mail

Dear Reader: I am perplexed by your circumstance. You didn't indicate how you acquired this half-acre. Why would anyone purchase it knowing of the restrictions? You mentioned the assessed value is fairly high. On what basis? If the property is totally unbuildable, under any circumstances, then the assessment should have been appealed years ago. It has little value. What can it be used for would be the appropriate question. Could one build if a variance was applied for and granted? Without this kind of information, I'm not sure which way you could go. The locals feel there is no value. If they are right then, of course, allowing it to go for taxes might be the best avenue. Until you have researched and found the answers to the questions that I have raised regarding a variance, possible usage and further, is there any value to an adjacent property owner, I have little more to offer. I urge you to get back to me.

Dear Bruce: What are the disadvantages to a reverse mortgage? My wife and I applied for one. When our home was built in the 1890s, a well was drilled inside the foundation. When it was inspected for the reverse mortgage, the well was a no-no and we couldn't get the mortgage. It would cost more than $5,000 to sink a new well. I have since taken out a line of credit, but that means extended payments. J.T., Pine City, N.Y.

Dear J.T.: There is no fault with a reverse mortgage. While your well may be operating for 100 years, the troublesome part is that if it malfunctions, it would be very difficult to service.

I suspect the house was built over the well some time after the original construction. I once owned a home that was very similar. The well was in the back of the home originally, but then the owner put an addition on right over the top of the well and the in-ground oil tank. While you might have gotten away with that years ago, it would never be allowed today. You were made aware of a serious deficiency in your house and lenders were reluctant to loan money on a house that was so flawed.

While you are perfectly content with it, it would seriously detract from its marketability when that time arose for the reverse lender to sell.

Dear Bruce: We had some work done by a contractor on our home. He did not pay his bills. After we paid him, we received a letter from an attorney that had placed a lien on our home. How is that possible since we had paid? How could we have prevented this?

The contractor dissolved his corporation and opened a new company. Is there a timeframe that the supplier can collect his money and how? Please do not use my full name, as I have been told that he can sue me for slander if I speak of this. A.S., via e-mail

Dear A.S.: I don't see how you can be held for slander if you speak the truth, which is a great defense. How this happened is fairly common. You paid the contractor and assumed that this was the end of the obligation, but the law has long held that when improvements are made to the property, the person supplying the materials can go after the property owner if they are not paid. The way one protects oneself is to insist upon a paid bill for all materials that are used on the job and any material that is delivered by a supplier. The problem that you have outlined is a very common one, and the steps that I've outlined are the only ways that I know to protect oneself. Regarding a timeframe, the likelihood is that they have a lien on your property, which can be renewed almost indefinitely. When it comes time to sell the house, you're on the hook.

The title cannot be cleared until the obligation is paid, along with accrued interest.

Dear Bruce: I am thinking of hiring a high school senior to paint my house this summer. He really needs the money toward college. If he falls and breaks a leg, am I liable for his treatment? Do I have to pay Social Security and unemployment insurance for him? If so, how could all this be avoided? H.S., Vicksburg, Mich.

Dear H.S.: Check with your homeowners' insurance and see if, for an occasional worker of this kind, workers' compensation can be or is provided. You didn't mention this individual's age. If he is under 18, in most jurisdictions he will be required to get working papers. In addition, his wages are subject to Social Security tax from both the employer and employee. I know this sounds complicated and difficult but, unfortunately, the appropriate steps must be taken to protect your interests, as well as his.