Home $$s & Sense

Dear Sue,

I have been renting a beautiful house in south Auburn for the last three years.

My landlord, who lives in the Bay Area, bought the house to live in when he retires. He assured me that I could rent it for at least five years.

Yesterday, I was reading the notices in the local newspaper and discovered that my home is in foreclosure!
I have until Dec 30th of this year remaining on my lease.

When the bank takes the home back will I be forced to leave? What about the contract I have with my landlord? I have kept my part of the bargain. I have been on time with my rent and I keep the place up.
Worried Walt

Dear Walt,

Dear Walt,

Tenants across the nation face the threat of eviction when the homes that they have been renting in good faith go into foreclosure.

According to the Legal Hotline at the California Association of Realtors, President Obama recently signed into law the, “Protecting Tenants at Foreclosure Act of 2009.”

All tenants including those under Section 8 must now get a 90-day written notice prior to eviction due to foreclosure. In addition, tenants that have leases can continue to live in their homes until the end of the term of their lease.


The National Housing Law Project (NHLP) will help tenants exercise their rights under this new law.

Under the new law, tenants with leases can occupy the property until the end of the lease term with one exception. If the new purchaser is going to occupy the property as their primary residence, the lease can be terminated with 90 days written notice.

In today’s market, a fairly high percentage of the buyers are investors. If an investor buys the property where you are renting, he will have to honor your lease and you will be able to stay in your home.

The only scenario where you will have to leave before the term of your lease is up is if the new buyer plans to reside in the property, in which case you will have to vacate after receiving a 90 days notice.

Many lenders are offering tenants cash to buy their leases out early. This is known as “Cash for Keys.” You can be proactive and initiate the negotiation. It will give you more control over your destiny.

This law became effective in May of this year and it expires at the end of 2012. This bill brings long overdue relief for the least blameless group in the housing foreclosure crisis, tenants.

Knowing your rights as a tenant is a matter of Good Home $$s and Sense.

To visit my company's website for more real estate information including new laws and property listings visit:

HomeTown Realtors

Labels: California Association of Realtors, Cash for Keys, Protecting Tenants at Foreclosure Act of 2009

Dear Sue,

Earlier this year, when interest rates were at an all-time low, we decided to refinance our existing 30-year loan on our primary residence.

We applied for the loan with the bank we have been dealing with for several years and they explained that the loan should be “no problem.”

We have supplied them with our tax forms, all our investment income, everything they have asked for. Yet, about every week, they ask for some other form—the latest, our Social Security income records.

So it goes, on and on for nearly two months and they say it will still be another two or three weeks before we have the loan, explaining that the bank has new owners and they are very careful with all their paperwork, etc.

Is this two or three-month period to get a refinance loan normal or is the bank simply stalling, as interest rates are now continuing to go up? Should we cancel and start over or just go along with their snail-pace approval process?

Very Concerned

Dear Concerned

I spoke with another borrower, Donna London McClaren. She is in the process of refinancing her home with Wells Fargo. She is in the third month and finding the process to be very frustrating. She said the lender calls her a couple of times a week asking for something new. She feels like she is forced to hang in there with Wells Fargo because they locked in her rate at 4.75%, saving her over $200 a month on her loan payment.

I shared your and Donna’s stories with Ryan Rivera, Broker with Goldmine Financial. Ryan explained that when banks make loans they eventually sell them on Wall Street as mortgage backed securities.

As a backlash to the recent laxity in qualifying borrowers, investors buying those mortgage-backed securities require that the buyer’s qualifications are fully documented. The loan package must be in perfect order. They don’t want any missing financial documents. It doesn’t matter how strong the borrower is or how much is being borrowed, all financial documents must be in the file.

Purchase loans always have priority over refinance loans. Purchases contractually stipulate certain time frames for the escrow period. Where the refinance has an open-ended time frame.

The huge number of loan applications that have been submitted because of the low interest rates has swamped the lenders.

“The typical loan should take between 30 and 45 days,” Ryan says. “A 90 day turn around is a very long time. I have never had a loan take that long.”

Ryan recommends that you contact the lender and ask where they are in the process. Have loan documents been ordered? Is the interest rate locked in? What is the interest rate? When is the lock due to expire? What is it costing you to get that rate?

Ask for a good faith estimate and have it reviewed by your financial planner. Verify that there are no hidden costs and that you are being offered a competitive rate. If you are not happy, don’t be afraid to negotiate. Nothing ventured, nothing gained.

While longer processing times seem to be the name of the game, you, the borrower, can be proactive by being fully prepared with all of your financial documents when applying for the loan. This doesn’t mean that the lender won’t ask for something unexpected, but it will help to shorten the process.

Ryan suggests bringing in all of the following:
1) 2 Years tax returns
2) Pay stubs
3) Current bank statements
4) Current mortgage statements
5) Property insurance agent’s name and number
6) Landlord’s name and number
7) Copy of drivers license and social security card

A tip is to keep a current document folder handy. When you receive your current bank statements or pay stubs, just throw them in your folder. Ryan guarantees that your lender will be asking for them.

You can help shorten the loan process by being proactive and prepared. It is a matter of Good Home $$s and Sense.

Since I wrote last week’s article I have received some more questions regarding wells. Here is a sampling. Please email me if I have not answered your question.


Do you need a permit to drill a well?

Yes! You cannot drill, modify, repair or abandon a well without first obtaining a permit.

The permit can only be issued to a person licensed by the state. Any person who constructs or modifies a well must have an active C-57 State Contractors License. The permit is good for one year.

I have heard some horror stories about well drillers who take short cuts by not installing annular seals that prevent surface water from contaminating the well. How do I know if a well has an annular seal?

Today’s ordinances require well contractors to include plans and specifications for installing the annular seal. An official from environmental health visits the site at the time the well is sealed.

The well driller is required to notify the County a minimum of two hours before sealing the well. The contractor must submit a valid permit number, date and specific time of well sealing, location of well sealing and the permittee’s name.

If a well doesn’t have a seal a well contractor can add one. I would recommend calling a well installer and inquire about the details of the procedure. Don’t forget that a permit is required.

It seems rather strange to me that you would be drinking water from the same ground where the septic tank is. How do you keep the septic system from contaminating the well?

When applying for the well permit, a site plan must be attached to the application. The site plan includes the well location, and all features that may potentially contaminate the well, including onsite sewage disposal systems, sewer lines and animal feed lots. The site plan must also include property lines within 150 feet of the well site.

Your environmental health professional will protect you by not allowing your well to be drilled in an area where it might become contaminated.

Remember the Environmental Health Department’s duty is to protect the health and safety of the general public.

Is it true that a well driller is required to file his well report with the State? If so, is the information public?

Yes. The report must be filed within 90 days of completion. No, the report is NOT public. It is considered confidential unless written authorization has been given by the owner of the well. However, the well reports are made available to state agencies for making studies.

I know that it is difficult to find water in the Foothills. I have heard that people “witch” to find the best location for a well. This sounds at the very least, very unscientific, not to mention supernatural. Is this “witching” thing for real? Does it work?

Yes. It works! I have done it myself and I have seen it done successfully many times over the years. It is also know as “dowsing.”

Before drilling my current well, my drilling contractor gave me two L-shaped metal rods. I held one in each hand straight out in front of me. As I walked through the field, the rods suddenly crossed over each other and pointed downward by some force other than my own.

The contractor and one other person independently dowsed the same area where he subsequently drilled a well that had a yield of 17GPM’s. (Gallons per minute). That’s a lot of water!

I once owned a parcel of land in a region that was known for being a spotty water area. Existing wells in the surrounding area had low yields. It was recommended by my well driller that I hire a geologist to do a fly over and look for signs of fractures beneath the surface where water was likely to be flowing. The geologist spotted various “good well” locations. My well driller chose the best site and drilled a well that produced 60 gallons per minute. I guess that makes me scientific as well as supernatural having used both methods.

Learning about wells before buying country property can be a matter of good Home $$’s and Sense.

Labels: annular seal, well drilling, wells

Dear Sue,

I am looking for a house in the country. I know that most country property has drinking water from a well.
I have heard that wells can produce the best water that you can drink or in some cases the worst.
How do you make sure the quality of water on a property is good? Anything you can tell me will be helpful.

Thirsty Thelma

Dear Thelma,

It’s very important for everyone to understand that ground water comes from the “hydrologic cycle”.

The description of the hydrologic cycle usually begins with evaporation from the oceans. However it must be kept in mind that it is a cycle with no beginning or end.

The evaporation from the oceans and other large bodies of water drifts across the earth’s surface in the form of clouds. The clouds create rain, snow, hail or droplets of fog. The rain and melting snow runs on the earth’s surface as creeks and rivers towards the oceans only to repeat the cycle. Much of the water is absorbed into the land.

The absorbed water is known as ground water. Wells are drilled into the earth’s surface as a means of tapping into that water.

As an owner of country property where well water is used for domestic purposes, one becomes their own water manager.

As water manager one has a responsibility to prevent pollution by adhering to minimum standards set by California Water Resources Board when constructing, maintaining and destroying a well. In fact, the Department of Water Resources suggests that well owners keep a maintenance and repair log. Even though the water quality is tested at the time of drilling it is smart to test the water quality on a periodic basis and log the results.

I should know. I was so busy cleaning annoying mineral deposits from my dishes and bathroom fixtures it was suggested that I consider getting another hobby. Little did I know that the residue was indicative of a serious water issue.

I called Stan Rafter from Service Engineering. He did a mineral and bacterial test on a well that I haven’t tested for 12 years. He was reluctant to report that I had been drinking from a contaminated well. It tested for total coli form and e.coli. He also reported that the water was very hard (too many minerals).

Fortunately for me it was an easy and relatively inexpensive fix. He poured bleach down the well and ran chlorinated water through the entire system. It worked. I no longer have to drink a morning cup of “Tea.coli.” He also installed a water softening system with amazing results. I am now looking for a new hobby.

Stan explained that most people don’t think about bacteria and other possible water issues as long as the water is being delivered into their home. It’s when the water stops flowing that he gets the frantic calls!

While making necessary repairs Stan discovers through observation and testing just how aggressive the water is and what kind of conditioning is required.

“Acidic water is very aggressive. It attacks metals. Blue green stains on your fixtures are an indication of copper pipes being broken down by the water.” Stan explained.

“There is an easy and inexpensive remedy. A typical system can cost between $1500-2000.00. Sometimes more depending on how aggressive the water is.” Stan said.

If you haven’t checked your well in awhile call Stan. He will do a general mineral test and well consultation for free! It can be a matter of good Home Dollars and Sense.

Labels: contaminated well, water quality, water resources, well

Dear Sue,

I appreciated the information you provided in you article on buying country property. I have been looking for a piece of land where I can plant an orchard and a good size garden.

I am told that it would be best to find a parcel that has irrigation water so that I don’t have to use the well. I was also told that not all country properties have access to irrigation water. Where do I find properties that do?

In my search I discovered that irrigation water comes from NID or PCWA. I have heard that I can buy irrigation water by the miners inch. I have no idea what this means.

Can you enlighten me?

Farmer Fred

Dear Fred

The picturesque and meandering canals that wind their way through the Foothills carry raw irrigation water to approximately 750,000 acres of agricultural land.

The source is the snowmelt from the Sierra Nevada Mountains.

During the Gold Rush days, all of the major rivers and streams from the snowmelt were diverted into canals to be sold to the mining companies for hydraulic mining.

The turn of the century brought the agricultural era to the Foothills. The mining canals were converted to serve the foothill farmers.

After World War II and well into the 1960’s, licensing districts were formed to control and convey the water. Local companies include the Nevada Irrigation District (NID) and Placer County Water Agency (PCWA).

These districts sell the water by the “miners inch”. A miners inch, described by one source as a quantity of water that will flow through a 1 inch opening in a two inch plank, with a steady flow of water standing six inches above the top of the hole. A miners inch does not represent an exact quantity of water flow. Different ditch companies have different standards.

A miners inch amounts to a flow of about 1.5 cubic feet per minute. That’s 11.25 gallons per minute if you live in Northern California and only 9 gallons per minute if you live in Southern California.

The water is sold by the season. It is possible to get summer or winter water or both.

Irrigation water is less expensive than treated city water. The use of irrigation water also prevents over use and possible depletion of one’s well. Irrigation well is also used for fire suppression, filling ponds and irrigating lawns and crops.

The water districts have maps available that show the parcels that they serve. It’s very important that you check in with PCWA or NID to make certain that the water will be available. Just because there is a canal running through a property does not mean that it can be tapped into.

Irrigate with gravity whenever possible. I once lived on a property that had NID that was piped from about a mile from its source. The water was under pressure due to the fall and distance. By the time it reached my house the pressure was measured at 90 pounds per square inch. I never once had to use electricity to irrigate.

I now live in an area where the NID canal actually runs through my property. The NID water gravity flows into a pond. I pump water from the pond for irrigation. The electric meter is running every time the pump clicks on.

Visit your local NID or PCWA office for more information including availability and cost of irrigation water. It’s a matter of Good Home $$’s and Sense.

Dear Sue,

We are finally making our move to the country! Building our own home has been a dream of ours for as long as we have been married. (Fifteen years!) We can’t wait to get out of the Bay Area!

We have been looking on the Internet for some acreage. We know that buying rural property is different than buying in a sub-division. We were wondering if there were any special things that we should be aware of.

Country Connie

Dear Connie,

I moved from the Bay Area to Auburn in 1974 and have never regretted it for a single second!

It did take some doing to get acclimated to country living. I didn’t know a GPM from an RPM.

Before beginning your property search I would recommend that you gather as much information as possible. My first trip would be to the County offices. Pay a visit to the environmental health department.

This is where you learn that before a building permit can be issued, the property in question must be able to handle sewage disposal and provide a potable water source.
The sewage disposal system known as a septic system can only be installed if the soils meet certain pre determined county standards. The testing, known as “perc and mantle” is conducted by a soils engineer.

Different soils will require different systems. Each system will vary in cost. The cost can be as low as $6500.00 for a standard system to as high as $30-50,000.00 (sometimes more) for an engineered system. For obvious reasons it pays to have a county approved soils test and septic installation estimate as a condition of your purchase.

A potable water source is required before the issuance of a final building permit. If public water is not available a county approved well will be required. A wise buyer will make a potable water source a condition of the purchase.

A power source is also necessary. Determining the location of the electrical lines and the estimated cost to hook up is very important. Installing power poles will add thousands of dollars to your building costs. While solar is a wonderful option, many lenders are reluctant to finance property that doesn’t have access to a public utility company.

Zoning is another area of concern. Verify with the planning department that the property is zoned for your intended use. For example, you may want horses for the grandkids and find out that the current zoning ordinance prohibits horses. Don’t assume that if the property is rural that horses are allowed.

Check for legal access to the property with the department of public works. I remember selling a rural property many years ago to a young family. The public works department wouldn’t allow ingress and egress to the property because it didn’t meet the county’s line of site requirements. A portion of a hillside was restricting the view of oncoming traffic. The permit was finally issued after costly excavation.

The verification of property lines is essential. Just to illustrate the importance, I once had an out of area client who sold a rural property that they had inherited and never seen.

A buyer made an accepted offer and relied on a cousin to verify the property lines. The buyer drilled a well. He received a thank you note in the mail from his new neighbor who greatly appreciated the new well that had just been drilled on his property. Enough said.

Easements are a consideration. They will show up on the title report along with any other recorded documents including liens and encumbrances that affect the property. I recommend sitting down with the title officer and going over the title report. It’s a good idea to have title prepare a color- coded map for your review.

If you have selected a potential builder, it would be wise to have him/her do a feasibility study before completing the purchase. The topography, soils and building location can have a major impact on building costs.

I am very excited for you. Doing the research before acquiring any property will be a matter of good Home $$s and Sense!

Labels: country property, property lines, rural land purchase, septic, well

Hi Sue,
I had a question I was hoping you may be able to help us with. I have a family member that is losing their home. They are being advised to do a short sale on the property. They have been told that if the house is sold through a short sale they will not be responsible for paying the second attached to that property. So, in essence by doing the short sale, they will be "debt free". They have also been told that it should have minimal impact on their credit and they would be able to purchase another house in six months. That sounds WAY to good to be true!

As you can imagine the Internet is FULL of various information. What the big question at this point seems to be is:
If someone does a "short sale" on their home, are they still responsible for paying the second? And:
Does the short sale have just as much impact to their credit scores as a foreclosure would?

It seems to me that if the short sale affects the credit scores as much as a foreclosure, why wouldn’t you just do the foreclosure?

Hope that makes sense. It's my mom that's losing their house. My husband and I have tried to help out, but as you can imagine, we can only do so much. I just hate to see them getting in to something without enough information.
Please help!

Anxious Anne


Dear Anne,

You are asking very good questions!

It is true that short sales don’t have the same negative impact on one’s credit. In a best case scenario a borrower can purchase a home the day after a short sale. That assumes that all of the borrowers other financial obligations have been paid on time and there is no other negative credit reporting of any kind.

The least desirable scenario is that the borrower must wait a minimum of five years before being able to purchase another home.

In contrast, if a borrower loses a home in foreclosure the waiting period before being able to purchase is typically seven years.

A short sale is when the lender agrees to retire the mortgage debt for less than what is owed. This process literally creates a “debt free” result for the borrower.
Lenders are learning through experience that short sales make more sense than foreclosures. A short sale is easier to manage and less costly than a foreclosure. Sales statistics show that short sales net approximately 20% more than a foreclosure which is also known as an REO or bank owned property.

The second lien holders are generally willing to cooperate in a short sale negotiation because they would get absolutely nothing if the property were to go into foreclosure.

An area of concern when dealing with second lien holders is determining whether or not the loan is recourse or non-recourse. If the loan was a purchase money loan it is generally non-recourse. If it is a re-finance or line of credit loan it is probably a re-course loan. Have a qualified tax professional or real estate attorney make this determination for you.

If the second is a recourse loan, meaning the lender would have the right to recover or go after the borrower for any deficiency because the money wasn’t purchase money, it would be wise to have the negotiator get the lien holder to sign a full release.

The current administration introduced a plan that subsidizes the losses that second lien holders are required to take for loan modifications. The plan has been expanded to cover short sales.

The tax impact from a short sale is also an area of concern. A bill duplicating the Federal Governments stance on taxing debt relief has been introduced. If passed, it would prohibit the State’s from taxing borrowers on debt relief. Always consult your tax professional before entering into a short sale agreement. It’s a matter of good Home $$’s and Sense.

Labels: non-recourse loan, recourse loan, REO, short sale tax debt, Short Sales