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Make the most of your home investment

End of the month?

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Ask Our Broker The Beginning?
CLOSING TIME Experts weigh in
on the right time to
make your move
My Area is Great, but the
BY CHARLES SCUTT
Local Market is a Bust. CTW Features
Was Buying a Bad Choice?
M
any buyers in the
process of purchasing a
home like to keep as
Q: I just bought a two-bedroom, two- close an eye on their calendar as
bath condo built in 1985. The area is they do their bank account.
great, but I’m now learning about the That’s because the time of the
month your transaction closes
local real estate bust. I’m not sure I made can have its financial advantages
a good investment. I bought the proper- and disadvantages – at least in
ty for $170,000 with no money down. It’s terms of your mortgage.
now available for rent for $850 a month First, it’s important to under-
but my monthly cost is $1,300. Did I make the right stand that interest on your
decision? mortgage begins accruing from
the date your home purchase
closes. Most mortgage loans,
A: You seem to have “buyer’s remorse,” a common condi- however, are due on the first
tion after purchasing real estate and one that typically is day of the month.At closing,
unwarranted. In your case, however, there may be good you prepay the principal, inter-
cause for concern. est, taxes and insurance
The slowing real estate between the date of closing and
market hardly is a secret.
“Buyer’s remorse” the last day of the month (the
vast majority of this prepay-
There should be nothing to a common condition ment almost always goes
learn and no surprises
because news coverage
after purchasing toward mortgage interest). If
you close on Jan. 30, for
regarding housing trends is real estate instance, you are responsible for
prepaying one day of PITI to
extensive.As an investor,
cover the remainder of January.
you have an obligation to read the local newspaper each In this example, March 1 would
day because area housing patterns can powerfully impact be the due date of your first
area property values. monthly mortgage payment.
You have a cash loss of $450 a month ($1,300 less $850), “If a buyer is feeling low on
but what is your loss after taxes? If you cannot afford a cash and is concerned with the
$450 cash loss each month how do you propose to keep amount of money that needs to
be provided at the time of clos-
the property? ing, I would suggest closing at
By any chance, have you financed with an “option the end of the month,” says
adjustable-rate mortgage” or interest-only financing? Are you Tyler Nevenner, a Realtor with
making only minimum payments? What will your monthly Kirkham and Friends Real
payment be for each of the next six years, assuming interest Estate, Salt Lake City.
costs do not rise? “This is particularly good for
a buyer who is putting no
You have made an investment with no money down, the money down and has very little
holy grail of late-night television barkers and seminar sell-
ers. But the point of real estate investing is not merely to See CLOSING TIME Page 2
acquire property, it’s to make money. How will you do that
with a yearly shortfall of $5,400?
You might be able to justify the yearly cash losses if you
can afford them and if property values are rising. In effect,
the annual loss is really just a deferred cost of acquisition.
Cutting Red Tape to Make Building Green Easier
However, you say the local market is a “bust,” an expression BY PAUL ROGERS finding a more mainstream audi- building products.To expand rolling out an ever-increasing ros-
that does not suggest a lot of appreciation, if any. CTW Features ence,” says Abby Mages, co- offerings and offer an even fuller ter of products.You name the
You need to determine if you have a sustainable invest- founder and one of the original in-stock inventory, the company remodeling need and most likely
ment. If not, it may be better to sell at a loss now then face a IN THE PAST, EVEN KERMIT the owners of Environmental this past summer merged with there is a green alternative to fit
frog would have a difficult time Building Supply, Portland, Ore., a Seattle-based Environmental the task.
bigger loss in the future. For specifics, sit down with several being “green” when it came to home-improvement retailer. Home Center. “We have always had a lot of
local real estate brokers who handle investment property. remodeling his pad or building an She should know: EBS’s sales To fill EBS, EHC and other strength in floor coverings and
Also, speak with a CPA, enrolled agent or a tax attorney to environmentally responsible growth – 20 to 30 percent annu- retailer shelves, building supply finishes. People tend to go for
home. No more. ally for the last five years – has manufacturers accelerated the green materials where they can
See ASK OUR BROKER, Page 2 “The green building material mirrored the booming popularity development of environmentally
market has a lot of strength and is and rising availability of green sound building materials and are See BUILDING GREEN Page 2

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BUILDING GREEN
It’s never been easier
than right now
CONTINUED FROM PAGE 1
see them versus in a wall that’s
closed up,” Mages says.
One of EBS’s most popular
newer products is a natural earth
plaster called American Clay from
American Clay Enterprises,
Albuquerque, N.M.The product,
made using a low-energy, low-
waste process, can be colored
with natural pigments, so no
painting is necessary.And clay
naturally controls climate by
absorbing and releasing moisture
as the environment changes, says
Mages.
Much green building material
activity revolves around products
that purport to create a healthier
indoor environment, particularly
low- and zero-VOC paints, adhe-
sives and caulks but also products
that replace PVC or vinyl, and
products without phthalate plasti-
cizers, brominated flame retar-
dants and fluoropolymers.
“These are compounds that
most people had never heard of a
few years ago, but that are raising
serious concerns in scientific cir-
cles,” says Alex Wilson, author of
“Your Green Home” (New
Society, 2006), executive editor of
Environmental Building News
and founder of BuildingGreen
CLOSING TIME
How much do you
want to put up front?
CONTINUED FROM PAGE 1
savings,” says Staci Mintz, a Realtor
with Pinnacle Estate Properties, a
real estate brokerage firm located
in Encino, Calif.“Their out-of-
pocket, up-front expenses are less-
ened.”
By closing at or near the end of
the month,“many buyers feel as
though they are receiving a free
month of housing,” says Patricia
Leon, CEO of RELO Direct, a full-
service relocation company head-
quartered in Chicago. However, if
the buyer closed in the middle of
the month, they would be
required to pay the PITI from the
Inc., Brattleboro,Vt.
Some of this year’s best new
green products are formaldehyde-
free panels (particleboard, medi-
um-density fiberboard, hardwood
plywood) and water-conserving
fixtures and appliances, according
to Wilson.
Formaldehyde was reclassified
in 2004 as a “known human car-
cinogen” by the International
Agency for Research on Cancer,
and California is expected to
adopt stringent regulations that
will, within a few years, eliminate
panel products made with urea-
formaldehyde binders, says
Wilson. Portland, Ore.-based
Columbia Forest Products Inc.,
North America’s largest producer
of hardwood plywood, is leading
alternative development with a
soy-based binder.
On the water-conservation
front,Wilson points to the new
generation of horizontal-axis
(front-loading) clothes washers
and dual-flush toilets (both avail-
able from multiple manufactur-
ers), low-water-use (about 1 gal-
lon per flush) pressure-assist toi-
lets using flush mechanisms from
Sloan Valve Co., Franklin Park, Ill.,
and Chicago-based Delta Faucet
Co.’s new 1.6-gallon-per-minute
showerhead with H2Okinetic
technology, which provides a
drenching, large-droplet shower
while saving water.
The list of green products goes
on and on, from structural insulat-
ed panels (foam sandwiched
between layers of particle board)
15th through the 31st of that
month.
“Granted, they would not have
a payment due for another 30
days, but they would be required
to have more cash at closing than
if they closed at the end of the
month,” Leon says.
On the other hand, closing at
the start of the month can have
its plusses, too, says Mintz. If you
closed on March 2, for example,
your first payment would not be
due until May 1: 60 days later.You
would be responsible, however,
for prepaying 29 days of PITI at
closing.
What’s more,“if a buyer closes
near the first of the month, even
though they will be charged PITI
for the entire month – making
their costs at closing a little bit
more expensive – it allows them
to get into their home sooner and
start the decorating process,” says
to cork flooring and carpeting.
(“Significant innovation has been
happening in the carpet industry,
where new green product lines
are being introduced all the time,”
says Wilson.) But the flood of
green is not without its problems.
There is no firm definition for
a green product. Organizations
are working to outline what is
and isn’t green, but no single, sim-
ple classification system exists.
No hard rules. In general, a green
product is one that – to one
degree or another – conserves
energy and/or water, contributes
to a healthy home environment
(by improving air quality, for
example), protects natural
resources and is affordable (based
on life-cycle costs).
But it’s not an exact science. In
wood, for example, debate contin-
ues over which agency is the best
to certify sustainably harvested
lumber – although both Mages
and Wilson believe the Forest
Stewardship Council runs one of
the most robust programs to pro-
mote responsible forest manage-
ment.
(Visit www.certifiedwood.org
and specify FSC-certification
using the “certified product”
search tool to find a supplier.)
But … “So-called ‘greenwash-
ing’ happens more and more fre-
quently, as manufacturers exag-
gerate environmental claims
about their products to appeal to
the growing demand for green
building products,” says Wilson.
“As green building has become
Nevenner.
In the long run, it doesn’t really
make a difference when you
close, says Mintz.“But some peo-
ple like to save their initial out-of-
pocket expenses to pay for costs
associated with moving or unfore-
seen expenses that may come up
associated with their new real
estate purchase.”
In the current housing market
that favors buyers, concerns
about the time of the month to
close are less worrisome, consid-
ering that buyers typically have
more leverage today to ask sellers
to pick up the tab on some or all
of their closing costs and PITI pre-
paids.
Ultimately, the scheduling of
your closing may be out of your
hands anyway, so it’s best not to
fret about it, says Mintz.
“Even when you want to, it can
be hard to accurately time the
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bigger business, this problem has
worsened.”
Wilson has addressed it by
compiling the directories Green
Building Products and
GreenSpec. Manufacturers do not
pay to be listed in either, and nei-
ther carries advertising (visit
BuildingGreen.com).
“Independent, third-party certi-
fication of environmental claims
is very important,” he says.
What sometimes slips through
the cracks in finding and using
green materials is their perform-
ance.A toilet that uses less water
for a year then breaks down and
requires a replacement may not
be so environmentally friendly
after all.
One green product that has
boomed in recent years has been
bamboo floors. But more than
one source has expressed disap-
pointment in the performance of
bamboo.A lot depends on the
manufacturer, but bamboo in gen-
eral does not distress “gracefully,”
says Mages.
People not only want to be
more environmentally responsi-
ble, she says,“they want perform-
ance; they want something that
ages well.”
With the abundance of green
products now on the market, it is
now easier than ever to find both.
© CTW Features
close of an escrow,” Mintz says.
“There are many things that can
cause the close to be a few days
late or even a little longer.There
are title searches, inspections,
escrow officers’ schedules, plus
the lender that has to approve
and fund the loan.These people
are all human and have to work
together.”
“The timing of a closing is all
about cash outlay,” adds Leon.
“There is no cost differential
dependent on the day of closing –
it’s all about how much money
you need to bring to closing.
Interest is charged for every day
that the loan is outstanding, so at
the end of the day, buyers and
sellers have ultimately paid the
same amount of money for their
housing.”
© CTW Features
Ask Our Broker
CONTINUED FROM PAGE 1
review your tax and write-off situation.
Consumer Notice:The federal government has issued an
important mortgage information guide regarding “nontradi-
tional” mortgages – the government’s term for potentially
toxic loans, financing with tiny payments up front and then
huge payments after “start” periods end.The credit-resource
pamphlet “Interest-Only Mortgage Payments and Payment-
Option ARMs – Are They For You?” contains important ques-
tions, examples and forms that borrowers should review
before considering these increasingly-popular loan formats.
The guide can be found online at www.occ.gov/ftp/con-
sumer/charmbrochure.pdf.
Q: What does a real estate broker do?
A: A real estate broker traditionally is described as some-
one who, for a fee, helps another buy, sell or manage real
estate. In effect, a broker is an “agent” of a “principal” or
“client.”As an agent, a broker has obligations to clients such
as care, obedience, accountability and loyalty.
In some jurisdictions, however, brokers may not function
within the traditional definition. For instance, you may find a
“transactional” broker, someone who brings buyers and sell-
ers together. Or, you may encounter a “disclosed dual agent,”
someone who represents both buyer and seller with their
advance approval.
A real estate salesperson or associate broker works under
the authority of a broker. Only a broker may enter into con-
tracts with the public or collect a real estate commission.
The commission paid to the broker is then divided with
salespeople or associate brokers on a negotiated basis.
Real estate licenses are awarded by state and provincial
governments upon the completion of certain educational
requirements.The term “Realtor” defines a real estate licens-
ee who is a member of the National Association of Realtors.
It’s important to know whom a real estate professional
represents. Most jurisdictions now require brokers to pro-
vide detailed disclosure forms to both prospective clients
and customers.These forms are important because they
explain whether or not the broker represents your inter-
ests.
Brokers can represent sellers as listing brokers, purchasers
as buyer brokers and both as disclosed or “designated” dual
agents.The terms of listing agreements and buyer brokerage
contracts are entirely negotiable.There are no fees or com-
mission rates set by law or regulation.
Given the complexity of real estate transactions, and given
the money involved, both buyers and sellers should use
experienced, competent real estate professionals when buy-
ing or selling property.
© CTW Features
Need real estate advice? Peter G. Miller, author of “The
Common-Sense Mortgage,” would love to hear from you. Send your
questions to peter@ctwfeatures.com.