Technology Transactionsby Peter G. Miller
Equity?
Peter G. Miller
OurBroker®
Murder and mayhem are the common stuff of each day"s news, events which create
a strange and bizarre real estate issue, the matter of "stigmatized" homes.
It"s easy to understand that the value of a home will be reduced if the roof
leaks or the basement floods, but matters become more complex when the issue is
psychological rather than physical.
Suppose a home is in flawless physical condition, but suppose as well that it"s
also been the site of a murder or a suicide. Everything works, nothing leaks
or floods, but is the home as valuable as a similar property where such events
have not occurred?
Some prospective buyers would plainly be discomforted by such news with the
result that either they would not bid on the property or they would reduce their offers.
While the feelings of many buyers are entirely understandable, it"s also easy
to see that sellers may be unfairly hurt in this process.
Suppose a home is the site of a suicide or murder. If the individual who died
was a friend or relative of the owners, they no doubt feel enormous loss and
perhaps wish to move. But under some state rules, when they offer their home
for sale the owners must tell buyers of recent events at the home, thereby
lowering its value.
The catch is that a number of states have so-called "stigmatized housing" rules
which say that owners and their brokers need not disclose the events at the
home related to suicides, accidental deaths, natural deaths, ghosts, or
felonies. These rules are inconsistent, however, so that the disclosure
requirements in one state may be vastly different than another. And many states
have no rules dealing with stigmatized homes, a legal gap which offers no
guidance to buyers, sellers, or brokers.
The result is that what must be said depends on where you live. A murder, for
example, may have to be disclosed in one state, not disclosed in another, or
disclosed today but not after several years.
In looking at the various guidelines which impact stigmatized homes, it"s
little wonder that state rules are often divided on this issue. Stigmas relate
to personal values, preferences, and perceptions, matters difficult to
legislate.
If you own a property which is or may be sitgmatized, or if you are considering
the purchase of such a property, be certain to first speak with knowledgeable
brokers and attorneys in your state to see what disclosures, if any, are
required.
Question Of The
Week
Q Are the terms "home equity
loan" and "second mortgage" the same? If not, how does the mortgage industry
define each?
A A "home equity loan" is
generally seen as financing added to a home at some point after purchase. It
can be a lump sum paid to an owner, or a credit line where the owner can make
withdrawals from time to time. As the owner repays the credit line, the amount
of available credit increases up to a given limit.
A home equity loan is typically a second mortgage or a second trust. A
"mortgage" and a "trust" are somewhat different financial instruments, but they
both represent debt secured by real estate. A "mortgage" in general terms is a
loan from a lender to a property owner, while a "trust" is a loan from a lender
to an owner that is administered by a trustee who can foreclose the property if
payments aren"t made or release the debt when the loan is paid off.
However, if a home is owned free and clear and the owner obtains a home equity
loan, the loan would be a first mortgage or trust. Or, if a home already
secures two loans, a home equity mortgage could actually be a third trust or
mortgage.
The result is that a "home equity loan" can be a "second mortgage," but this is
not always the case.
Weekly Resource
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