Wisconsin Realtors' political contribution riles some real estate pros

More than 120 agents and brokers are listed as supporters of Real Estate Professionals for a Better Wisconsin, which is protesting the Wisconsin Association of Realtors' backing of Gov. Scott Walker and its donation of $150,0000 to his campaign, according to the Wisconsin State Journal.

Walker has been at the center of the state's highly controversial efforts to cut its budget, including the cutting of state jobs and limiting collective bargaining for state employees.

"We are petitioning the WRA to stop endorsing individual political candidates, focusing instead on educating the public about issues affecting our industry and where the candidates stand on them," reads a statement on the group's site.

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Workarounds for seller financing pitfalls

DEAR BENNY: I purchased a condo in California in January 2009 and was able to get a second mortgage through the seller to help me purchase. Dealing with the sellers has been a bit of a hassle.

When I contacted the sellers in order to assure that I received a statement of the interest paid on my loan about two months ago, they informed me they were unable to deposit two payments I sent them through my online banking system. One of these payments was in April 2010 and the other in September.

How long does the lender have to inform me of a missed or late payment? Since it has been so long it has been somewhat difficult for the bank to figure out what exactly occurred with the April payment. I am planning on refinancing in order to avoid dealing with this lender. --Brandy

DEAR BRANDY: That's an interesting question that has never come up before. And I must confess that I really don't know the answer. I do know, however, that commercial mortgage lenders who receive more than $600 a year in interest must send their borrowers a Form 1098 by the end of each January. However, if your lender (the seller) is not in the business of lending money, he has no legal obligation to send that form to you.

My suggestion: Figure out how much mortgage interest you paid. You can get some assistance from the calculators at www.mtgprofessor.com/calculators.htm.

To protect yourself, however, you should check with your bank to see if those checks were, in fact, cashed. Most banks allow their customers to research their account online, and this may be helpful to you.

One additional suggestion: Especially when you are not dealing with a commercial financial institution (such as a seller take-back mortgage), check with your bank monthly to see if your payment was negotiated and cashed.

DEAR BENNY: Regarding a recent column, sorry but you are wrong about the capital gains tax on the gifted million-dollar house. The tax would be 28 percent of the capital gain, not 15 percent. The alternative minimum tax (AMT) applies to capital gains, not just income. That million-dollar gain on sale of the house would push your reader way into AMT territory.

I received assets from my father's bypass trust when my mother died. I sold the assets expecting to pay 15 percent on the capital gains. The capital gains pushed me into the AMT and I had to pay 28 percent tax on the appreciation of the assets since my father's death in 1996. Look at page 2, line 53 of the AMT form for the calculation. No one mentions this little trap when they talk about the so-called Bush tax cuts. The bypass trust turned out not to be a great thing tax-wise. --William

DEAR WILLIAM: I don't profess to be a tax accountant, and learn a little every day. I believe you are correct (I did look at Internal Revenue Service Form 6251). However, I cannot provide specific legal or tax advice and accordingly urge readers to consult with their own tax and legal advisers.

DEAR BENNY: I hope you can help me. I am a 78-year-old single woman living alone. Some weeks ago, my next-door neighbor fenced in his backyard with Gothic picket fencing. There was an old wire fence about 4 feet tall on my property separating our backyards. Before he started, he called me over and said he would do whatever I wanted: put the fence on the property line or take down my fence and put his in its place. Knowing he wanted an answer right away (as the installer was there with him), and thinking the fence was probably a foot or two at the most inside the line, I told him he could put it in place of mine.

I now believe the fence may be further into my yard than I first thought. Do you think it would be a good idea for me to ask him to purchase the strip of land, the entire length of which is 139.28 feet from front to back? I'm concerned there may be a problem (especially for him) if and when I sell my property. --June

DEAR JUNE: The first thing you should do is to obtain a survey of your property. A surveyor can quickly determine whether the fence is on your land or not. You can find surveyors in the Yellow Pages (or online) and the cost should not exceed $300-$400.

If the fence is really on your property line, you have three choices. First, demand that he remove it, since he is trespassing on your property. Second, ask him to buy that strip of land, although he may not want to do that. Third, you can just leave the situation as is.

However, the last alternative can cause problems for you if and when you ever want to sell your house. Mortgage lenders usually require that their potential borrowers (the homebuyers) obtain a survey, and if the fence is on your land, your buyer may be concerned about this.

Why? Many states have laws called "adverse possession." This means that if your neighbor openly, notoriously and hostilely puts his fence on your property, and the requisite statutory period of time has elapsed, your neighbor can claim the land as his own. This does require court action, but generally, when a person puts up a fence, the courts don't have to spend a lot of time deciding the case.

If you opt for the third alternative, at the very least you should send your neighbor a polite letter, advising him that you are consenting to his encroachment for the time being, but nevertheless reserve all rights in the future to demand he take it down.

Why this letter? Remember that one of the tests for adverse possession is "hostility." That means that the fence was put up against your wishes. If you consent (and keep the letter in your files), you have removed this defense.

DEAR BENNY: I own a manufactured home and recently paid off my chattel loan. However, in order to clear the lien, our secretary of state requires that I pay an additional cost. The bank stated we might not have to do this. Will this impact selling the home in the near future? --Phil

DEAR PHIL: That's a good question, and I first have to explain what a chattel loan is. Oversimplified, it means "personal property" -- whether that be a car, a refrigerator or a mobile home. It is something that is not real estate. A mobile home can be moved from place to place.

When you get a loan on a house, you give a deed of trust (also called a mortgage) to your lender, who records that document on the land records in the jurisdiction where the property is located. Recording puts the world on notice that there is a lien (a cloud) on your title.

However, when you get a loan for a mobile home, technically there is no mortgage document to be recorded. But the lender still wants to make sure that if you are in default, there is security against your property. Accordingly, many years ago, a system of recording such personal property was developed and was called "chattel loans"; this recording system put the world on notice of your financial obligation to the lender.

In recent years, most states (except Louisiana) have enacted the Uniform Commercial Code (UCC), and chattel loans are now recorded in the UCC filing in each state.

Since I suspect that your mobile home loan was, in fact, recorded in the UCC filing, you have to have it released from the records. Otherwise, when you go to sell your home, that obligation will show up in a search.

Accordingly, I strongly suggest that you pay the nominal fee to the secretary of state and have that loan released from the records.

DEAR BENNY: We have recently paid off our mortgage loan and received two documents from the bank that state the loan was "paid and canceled." We also received a "disbursement check voucher" that states the mortgage was paid in full. Are these two documents all we need or are there more that we need to prove that we own the house outright? --Luis

DEAR LUIS: That is not all you need. As discussed above, your mortgage (called a deed of trust) was recorded in the county where your property is located, and you have to have it released from land records. You can either have your attorney do this, or you can go to the recorder of deeds in your county and they should be able to assist you.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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New-Home Sales Increased in March, but Stayed Low

Buyers signed contracts in March at a seasonally adjusted annual rate of 300,000, an 11 percent increase from the month before but down from 384,000 in March 2010, the Census Bureau said Monday.

In March 2005, when a lack of income or savings was no deterrent to getting a dream home with granite countertops and a walk-in pantry, families and investors flocked to new homes at an annual rate of 1.43 million houses.

The millions of homes built during the boom have created a drag on the current market as the owners surrender them to foreclosure. Builders cannot compete against relatively new construction offered by banks for large discounts.

The March sales numbers modestly exceeded analysts’ expectations but nevertheless did not impress. “Still miserable,” concluded Joshua Shapiro, chief United States economist for MFR Inc. While February sales were revised up to 270,000 from an initial 250,000, it was still the lowest of any month since records were first kept in 1963.

Builders told potential buyers in March that they might want to make a deal before new rates came from the Federal Housing Administration, which guarantees many loans. That probably contributed to the rebound.

In a separate report issued Monday, the HousingPulse Tracking Survey indicated that nearly half of the housing market is distressed properties. Because banks generally pulled back on foreclosures over the last six months, the survey underlined the long-term pressures facing the market.

If the banks start processing foreclosures faster, that will create further downward momentum on the housing market. A coalition of state attorneys general and the Obama administration is negotiating with the lenders to persuade them to do more loan modifications instead.

Home prices have been falling for the last six months, and the release on Tuesday of the Standard & Poor’s Case-Shiller Home Price Index for February is expected to show another decline. Before that release, Morgan Stanley lowered its forecast for prices by an additional 4 percent. Morgan Stanley analysts now say prices will drop 6 percent to 11 percent from their levels at the end of last year.

The drop in home construction and sales is in some ways good news for would-be sellers, because it means new supply is not coming to a market that already has excess inventory. But lackluster construction is a drag on the larger economy, contributing to high unemployment and weak consumer spending.

It would take about seven months to find buyers for all the new homes now on sale, a period only slightly longer than normal. Builders are clearly skittish about anything for which they do not have a contract.

No relief is in sight.

“Sales remain very low by historical standards and, considering that a number of home builders reported large drops in orders recently, there is likely more weakness ahead,” wrote Jennifer Lee, senior economist at BMO Capital Markets.

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The Hunt: A Pied-à-Terre for East Coast Sojourns

To her, however, a cabin was a small apartment. Her idea of woods was towering high-rises. Her idea of a getaway was New York City.

Ms. Baiz, who owns a jewelry and diamond wholesaler called Big Sky Gold and Diamond Brokers, has lived her whole life in Great Falls, Mont. Nearly 20 years ago, when she and her husband were having the kitchen of their century-old house remodeled, they hired a contractor who had a gem brokerage on the side. Ms. Baiz, formerly a radio reporter, seized the chance to learn the business, and later branched out on her own.

She had never been to New York until she came for a trade show a dozen years ago. After that, every time she returned for business, she liked the city more. “I had a knot in my stomach getting back on the airplane, because there was so much more that I didn’t do,” she said. “It felt like going to your favorite restaurant, ordering an appetizer and then leaving. I had too much of an appetite for New York.”

So she began visiting for weeks at a time, staying in hotels or taking sublets. Her longest stretch was last year — a 10-week stay in a Chelsea high-rise while she took a writers’ workshop. Ms. Baiz, who blogs at wedgeblog.net, writes for jewelry magazines and Signature Montana magazine.

Her husband, Tom, a lawyer who also works for her, came to visit. Over breakfast at the Aroma Espresso Bar on West 72nd Street, he suggested that she avoid the expense of hotels and the hassles of sublets by buying a small place. With their son and daughter out of college, the time was right.

“While he was in the mood for something,” Ms. Baiz said, they ran across the street to an open house for a sunny studio co-op.

“I stood outside that building and asked people, ‘What is the best thing and the worst thing about living here?’ ” Ms. Baiz said. Location was the best thing, residents told her. High maintenance was the worst. The studio’s monthly maintenance was more than $900.

The Baizes made an offer in the low $300,000s. It was declined. That was when Ms. Baiz, who ended up making four trips from Montana in the course of a year, began the hunt in earnest. Her budget maximum was $400,000, and she was determined to keep the monthly outlay under $2,000.

Her many sublets had taught her what to avoid. After staying in a high-rise, she knew she wanted a prewar building with thick walls and less risk of neighbor noise. After staying near a firehouse, “even though my dad was a fireman,” she said, “I didn’t want to live across from sirens.”

At one Upper West Side place, the seller rejected her offer in favor of a lower one from a colleague. She was disappointed, but “this did give me faith that money isn’t everything, even in New York real estate.”

Near Union Square, the selling agent guaranteed that she could move a wall to create a sleeping nook, but a contractor informed her the wall was immovable. That undermined her faith.

At the Orienta on West 79th Street, the seller accepted her offer of $353,000. Maintenance was in the $800s. She had been told that the co-op allowed pieds-à-terre on a case-by-case basis, but her case was declined.

“I was devastated,” she said. “They had a willing seller and a willing buyer.” Knowing she needed guidance from someone with expertise in Manhattan co-ops, she e-mailed three agents she found online, and chose Robyn Frank-Pedersen, a senior vice president of the Corcoran Group.

Ms. Baiz told Ms. Frank-Pedersen that she didn’t mind a studio, as long as the layout allowed for some kind of sleeping spot, eating area and writing nook. She wanted a diverse neighborhood, one that provided the “yang to Montana’s yin,” she said. “I wanted to walk down my hall at dinnertime and smell at least three continents.”

Ms. Baiz liked the bachelor-pad aura of a place on West 15th Street, even though she originally mistook the Pullman kitchen, behind folding doors, for a closet. The price was around $410,000, maintenance a reasonable $560.

But the building had no doorman. She decided she needed one, primarily to keep houseguests at bay when she was back in Montana. “I didn’t want friends and relatives to look at my apartment as a key exchange, like, ‘Oh, well, just get the keys from Claire and use her apartment,’ ” she said.

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Square Feet: Projects Shelved in the Downturn Spring Back to Life

The developer spent the last several years studying the engineering of a deck over the rail yards on the site, and says it has found a way to build it cheaper and quicker. It will start construction later this year, with plans to deliver a two-million-square-foot office tower designed by Skidmore, Owings & Merrill on the northeast corner of the parcel by 2015. There are plans to eventually construct as many as three towers.

“We will start building the deck on spec but are confident that by the time we get around to building the tower, we will have found an anchor tenant,” said Ric Clark, the president and chief executive. While he declined to give asking rents for the tower, Brookfield has begun preliminary conversations with tenants and expects to be competitively priced with the Hudson Yards buildings the Related Companies is planning a few blocks west.

As rents rebound and vacancies fall in the New York office market, some developers like Mr. Clark who shelved projects in the recession are resurrecting their plans. Several buildings are in the pipeline, and nearly 9.5 million square feet could become available over the next few years — in addition to several million more square feet at the World Trade Center in Lower Manhattan and the Hudson Yards.

A number of factors are driving the trend. Commercial rents are rising in certain submarkets and have held steady in others. Builders who believe the market has turned are preparing sites now in the hopes their projects will come online when higher rents are firmly established.

The city’s aging office stock is another factor. Nearly 83 percent of the office buildings in Manhattan were built more than three decades ago, according to the real estate company Cassidy Turley, and just 6.6 percent have been built since 1990. Many tenants, particularly law firms and financial services companies, crave new space that can be more efficient and tailored to their needs. Finally, construction costs could fall as union contracts begin expiring over the next few months and contractors push to exclude costly labor rules.

“A year ago people were saying the market was so bad they wouldn’t contemplate ground-up construction,” said John F. Powers, the chairman of the New York tri-state region for CB Richard Ellis. “But now, there is upward pressure on rents in some segments of the market, and certainly there is no more downward pressure, so developers are beginning to run pro formas again,” he said, referring to the method of estimating a project’s cost.

In the first quarter of this year there were 15 office leases in Midtown at rents above $90 a square foot, compared with 23 for all of 2010, according to Cushman & Wakefield. At the same time the vacancy rate in Midtown has dropped to 10.3 percent, compared with 12.6 percent at this time last year.

Tenants considering locking in new space now, before rents rise further, include Time Warner Inc., the financial services behemoth UBS and the law firm Mayer Brown. According to Cassidy Turley there are 446 tenants in the market chasing less than 28 million square feet of space.

Particularly well-poised are those developers who had begun preparing before the recession and can resume construction now at points further along. Pacolet Milliken Enterprises, the sister company of the textile firm Milliken & Company, demolished the building at 1045 Avenue of the Americas, a full block between West 39th and West 40th Streets, in 2009. The company has completed the schematic design for a 350,000-square-foot office building at the now-vacant lot, and has hired the Houston-based real estate firm Hines as a consultant.

“We feel very confident about the market and the location,” said Richard C. Webel, Pacolet Milliken’s president. He said the company had been speaking preliminarily with tenants, though it had not yet hired a broker. As for timing, “based on who we have talked to, the market should be there by 2015 or 2016, if not sooner,” Mr. Webel said.

Timing is critical as the market starts to revive, experts said. “The first buildings to be up and running will be most successful in grabbing an anchor tenant,” said Robert Sammons, the vice president for research services at Cassidy Turley.

Boston Properties is banking on this as it revives construction on a 1-million-square-foot office tower at 250 West 55th Street; building stopped in 2008 after the foundation was poured. Since it is partially built, it will be a relatively short time — mid-2014 — until Boston Properties can deliver the building to tenants. Already, it is in lease negotiations with the law firm Morrison Foerster as an anchor tenant.

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Habitats | Carroll Gardens, Brooklyn: The Reconstituted Row House

A friend suggested Brendan Coburn, a former boyfriend whom she described as a “brilliant architect.” Ms. Ceccarelli was impressed by such a glowing recommendation of an old flame, and even more impressed by what Mr. Coburn envisioned.

“He sketched everything out perfectly, to a T,” said Ms. Ceccarelli, now an executive vice president of the Wildlife Conservation Society, which is headquartered at the Bronx Zoo. “Originally, I just wanted to redo the kitchen. But Brendan suggested things like staining the floors black to emphasize the horizontality and make the space seem larger. I was bowled over.”

At the time Mr. Coburn was working from his parents’ apartment in Cobble Hill, Brooklyn, and at night, he and his client, then in their mid-30s, often studied drawings and examined samples of cabinetry and countertops over drinks.

Once his work was done, Mr. Coburn called Ms. Ceccarelli with a proposal. “Could we have dinner and talk about something other than your apartment?” he asked. The dinner turned out to be a bona fide date — no samples of kitchen tile or wood veneers this time. The next day Ms. Ceccarelli broke up with the man she had been seeing, and by March 2001 she and Mr. Coburn were engaged.

But their wedding, which took place five months later, occurred during a tumultuous period. Mr. Coburn’s father had died in May. His brother had divorced. Then came Sept. 11.

“It had been an intense year, with lots of untethering in the world,” Mr. Coburn said. “All these things made us feel that we needed to build a home.” Weeks after the attacks, they began house hunting.

The couple had two criteria. As Mr. Coburn summed them up: “The place had to be a dump, so we could redo it. And there had to be a garden on the south side of the house.” He loved row houses, the defining architecture of his Cobble Hill childhood, but having grown up in one that faced east and west, he knew they could be dark.

The house they settled on, a two-story structure on Sackett Street in Carroll Gardens, had been built in 1847 and according to Mr. Coburn, “had been getting worse for 150 years.” Ms. Ceccarelli agreed. “During the open house,” she said, “people were literally rolling their eyes.”

They bought the building for $575,000 in March 2002, and over the next nine months spent $550,000 to transform it, a cost that would have been far higher had Mr. Coburn not served as both architect and general troubleshooter, working closely with Marty McKenna, his general contractor. They moved into the house in March 2003, three months after the birth of their son, John.

Few people strolling along Sackett Street would guess that behind the worn red brick facade with the weeping cherry out front there sits a sleek modern structure in which everything — walls, floors, the top-floor extension — is brand-new. The parlor floor seems as open as a loft, and even on the darkest days, the rooms are unexpectedly bright.

“The big design idea,” Mr. Coburn said, “was to make the house into a light box, one that captures different light all day long and all year round.” To achieve this, he used two major elements.

One involved building a switchback staircase in the middle of the house, punctuated with landings made of slabs of glass and topped by a skylight that lets sunlight flood the room. The other involved constructing huge windows facing the rear garden. “One of the most compelling architectural qualities of row house neighborhoods is the relationship between the house and the garden,” Mr. Coburn said. “And Brooklyn is particularly blessed when it comes to finding and exploiting this relationship.”

For some couples, allowing one member to design an entire building would be a sure-fire recipe for disaster. Marriages have teetered over the choice of doorknobs. Yet Ms. Ceccarelli struggles to remember something about which the two of them disagreed.

“The only thing we didn’t see absolutely eye to eye on was the Viking stove,” she said. “I wanted something sexier, like maybe a Gaggenau. But really, it was such a silly conversation.”

And while Mr. Coburn privately yearns for a proper dining room, as opposed to the table by the front window that seats six, there too the couple were on the same page.

“We had to be honest with ourselves,” Ms. Ceccarelli said. “We hardly ever use the dining-room table. Most of the time when we have guests, everyone sits in the living room and we serve them wine and cheese.”

The parlor floor opens onto a deck that leads down to the garden, designed as a series of outdoor rooms. John has a treehouse, with a secret door so his friend from next door can visit. The tenants in the basement apartment also have outdoor space.

The second floor is home to Mr. Coburn’s tiny office, along with what he describes as the “TV and Lego pavilion.” In the rear is John’s room, outfitted with his father’s wooden building blocks, along with a huge map of the world on which John can trace his mother’s travels — most recently a safari in Bangalore, India — and a large plush tiger. (Having a mother with an office at the Bronx Zoo has its upside.) The top floor is devoted mainly to the couple’s bedroom.

Architects invariably yearn to build something of their own, or at least to get their hands on buildings they can retrofit. Mr. Coburn is no exception. “If it were up to me,” he said, “we’d have a tiny Greek Revival farmhouse somewhere in the country and change row houses every couple of years.”

Ms. Ceccarelli looked slightly ashen at the possibility. “Um, maybe not,” she said. “I didn’t quite sign up for that.”

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