Christmas in July

There's something really offensive about encouraging people to make unnecessary purchases in the midst of the Great Recession. In California 12.4% of our fellows don't have jobs. Many more face wage and/or hour reductions, furloughs, and other attacks on their income. While retailers are in the business of parting people from their money, they seem to be unaware that their sales in the early years of the New Millennium were dependent on credit--and the credit has dried up. People are just not in need of Christmas presents in July, and may not be in need of them in December. In fact, those who have money may think it's a bit unseemly to be buying when so many of our friends and neighbors are having a hard time.

State Workers and the Governor

The Governor is trying to force state workers in California to sign egregious contracts by threatening to pay minimum wage. As the spousal unit of a state worker, I'm none too happy about this, but rather than vent uselessly, I will instead provide some practical advice for those who may suffer from this.

1. There's a difference between rent and mortgage payments. Homeowners can skip their mortgage payments for a couple of months with little danger that they will lose their homes, although it may have a nasty effect on their credit ratings. Lenders don't typically file a Notice of Default until a homeowner has missed three mortgage payments, so the mortgage probably isn't critical for a month. (I know this only because I've written about tenants and foreclosure for a couple of years now.)

It's a whole different matter when you rent, as the landlord can begin eviction proceedings within a few days after a missed payment. It's possible that your landlord (particularly if s/he is local) will be understanding and accept partial payment or wait until there's a state budget and you're reimbursed for the withheld wages). If your landlord does agree to this, get the agreement in writing, as you want any understanding to be clear and unambiguous.

If your landlord won't agree to this and you don't have sufficient savings to cover the rent, or can't borrow from friends, relatives or your credit card, you have to make a nasty judgment call. You can either give notice now and move in with relatives or friends for the duration, or wait, hoping that a budget will be signed before the end of the month.

What you cannot do is fail to pay rent and then have your landlord take you to court. Your landlord would likely be successful in an unlawful detainer action, and those are reported to the landlord screening services. A successful eviction action would make it very difficult for you to rent for a very long time. If you receive a three-days' notice to pay rent or quit, you MUST move before the three days expires. Period.

Update: I've already been asked what happens if you rent with roommates. It's the same thing that happens in any roommate situation in most leases and rental agreements. The co-tenants are all responsible for all of the rent. That means that if one tenant doesn't pay rent, the other tenants are responsible for the entire amount of the rent. (This is why many young people move back to their parents' homes, rather than renting with roommates. The risk is just too great.) If the other tenants can't cover the rent, the landlord can, after the three-days' notice to pay rent or quit has expired, evict all of the tenants living in the unit. If you find yourself in this situation and can't raise the money for rent next month on your own, you should let your roommates know as soon as possible.

2. Your car payment is somewhere between your mortgage and rent, in that the lender may not come to repossess your car immediately, but isn't going to wait more than a couple of months before taking back the car.

3. You can make the minimum payment on your credit card(s). You may not like the interest charges, but the important thing is not to go into default.

4. You may have no choice but to skip your gas, electricity, cable and cell payments for the duration. With your public utilities, particularly SMUD, you should let them know that you can't make a payment. They will likely be more understanding than Comcast and Verizon and, in fact, are probably planning right now for just this situation. In addition, public utilities are required to give substantial notice before suspending service, which will give the Legislature more time to pass a budget.

5. You have short grace period on your car insurance. Insurers must give you 20 days after the due date to pay your car insurance before canceling your insurance. However, losing insurance means that you can't drive your car and will probably have to pay a reinstatement fee to restore your coverage.

6. It's difficult to determine what childcare providers will do. Sacramento providers may, on the one hand, be more understanding. But they may also care for several children whose parents aren't being paid and may not have the cushion to wait for payment. State workers may have to take their children to work with them.

7. If you have a 457 deferred compensation plan, you MAY be able to borrow from it. (It depends on the terms of the plan, and the costs may be high.)

8. Keep track of every penny that you have to pay because of this. If the Governor's actions are found to be retaliatory, you may be eligible for compensation for your costs. If you have to give up your rental, keep track of the costs of moving and storage. And track the costs of finding a new place, including any deposits, fees, time taken off work, and so on. Note any late fees, interest charges, penalties and such that you have to pay for delayed payments. Check your credit rating and note any changes resulting from the crisis.

Rooting for a Republican

The only Republican I'm rooting for is Orly Taitz. I want her to be invited to all the debates.

Aaaargh!

Why is it that Project Sentinel can't provide accurate information in the Rent Watch column published in the real estate sections of newspapers around the State? Really, don't they have a lawyer they can call for information? Are they too cheap to pay for research? My only hope is that most people don't read the column and won't be confused.

In this letter a tenant is evicted after foreclosure from a house owned by the tenant's father. The father does not live at the property, but at another property that also was foreclosed. The realtor handling the eviction gave the tenant a 3-days' notice to quit. Project Sentinel did note that the tenant's lease probably would not survive the foreclosure, as the tenant was a close relative of the owner. So the tenant's two year lease would not survive foreclosure, nor would the lender be required to give the 90-days' notice required under the federal law.

BUT that does not mean that the tenant must move within 3 days or face an unlawful detainer action. Simply not true. Only the owner of the property can be evicted on a 3-days' notice to quit. If the tenant son is not an owner, he should receive the 60-days' notice required under California law. The only exception to the 60-days' notice requirement is that the owner of the property cannot live with the tenant. (This can cause problems for tenants who share housing with the owner of the property, but that does not apply in this case.)

I used to propel myself around the Internet, stamping out incorrect information wherever I found it. But the various forums all required login and passwords, and I found that it wasn't worth my trouble to keeping hunting down error. But I hope that people find information from more reliable sources that the various forums--or Project Sentinel, for that matter.

Stupidity in the World

J and I were talking last night about the oil slick heading for the Gulf Coast. I suggested that BP should pay the cost of everything--the booms, the chemicals, the Coast Guard, the National Guard, the cleanup, the salaries of the fisherpersons until they can be fisherpersons again. All of it. Every penny. J informed me that the liability of BP is limited to $75 million, thanks to the members of the US Congress, and that BP had lobbied for the limit.

I wonder at what point a campaign contribution becomes a bribe?

Not only that, BP lobbied against requiring a blowout cap that is required, yes required, on all of the oil rigs in the North Sea. It would have cost $500K.

Oh, I so hope that Obama is serious about lifting the liability cap and that they go after BP for the total cost of their slick. And not only the immediate costs, but all the long-term damage and costs. They could be paying out for 30 or 40 years.

And while I don't ever want to do this, I must, painful though it is, give the Governator credit for changing his mind. He may not have been paying attention the the Santa Barbara spill, but did note what could happen if an offshore rig blew up. And decided that he didn't want to be remembered for an oil slick when one of the proposed rigs blew up.

Birthday Weekend

Friday was my birthday (55th) and the great J took the day off to begin the long weekend worth of tasks I had for him. Most of the tasks involved pulling weeds and moving plants, but he also installed a trellis for me and, without even being asked, cleaned up my potting bench. He rearranged all the pots, swept, organized and generally cleared out all the assorted junk and garbage. I have three plants to pot, but I'm afraid to use my potting bench, for fear it will get messy.

And then he solved a router problem, which had kept me from getting my KPFA (in Berkeley) and KVMR (in Nevada City, but drowned out by a commercial Christian station in Auburn). I can also get KALW and KCSM, which we haven't been able to get since we moved from Oakland almost 10 years ago. I am a happy woman.

But I think we should get some cheap dedicated computer, so that I can run the radio through the stereo speakers and work at the same time.

Oh, and he took me out for an expensive dinner, and grilled steak, and made muffins.

J is also very tolerant of my web surfing. I called to him, "Come here. Someone has our exact TV stand and TV. And it's in New York City." J asked, "Why are you looking at the furniture in apartments in New York?" It was actually research, the slide show that came along with an article on rising rents for NYC apartments. In general, the furniture was disappointing--not the sort of vintage street finds pictured in house magazines, but more the non-vintage stuff you find at IKEA and Target. One apartment featured chair pillows that read "Hugs" in large letters. I thought NYC had laws against that sort of thing.

A Few Things Financial

First we received a notice from the IRS last week. And the news: we had neglected to take the $800 Making Work Pay tax credit to which we were entitled. So they were notifying us that our tax refund would be substantially larger than we had expected. We accepted the money with as much grace as we could muster. (If you neglected to take this credit, don't worry. So many people didn't that they recompute your taxes for you and send a form letter notifying you of your good fortune.)

I hesitate to give financial advice. One need only look at the state of my investments (non-existent) and bank balance (small) to see that I am not one to whom one should turn for help in matters financial. But I'm going to take a stab at it here to assist some tenants who may find themselves in a situation those of us who do foreclosure counseling haven't seen much of.

In the early days of the foreclosure crisis lenders tried to bully tenants out of their homes and, in a lot of cases, still do. But it appears that, in some cases, lenders are trying to sell foreclosed properties to the tenants who live in them. I don't have a sufficient number to determine why a particular property, or a particular tenant, is selected for this.

It may be that the lender looks at the contract rent and thinks, hmmm, these people could pay a mortgage that would be less than the rent they're paying now. It may be that the lender looks at the tenant and thinks, wow, these people are really gullible. I can palm this turkey off on them. I don't know. Herewith are some guidelines for those who are in this situation.

1. Make sure that you pay for a thorough inspection of the property. You want to know how long the roof will last, whether or not there are problems with the foundation, whether there are any bug problems, the age and life expectancy of the heating/air-conditioning, the state of the wiring--all the stuff you don't have to worry about as a tenant, but will have to pay to fix or replace if you buy the house.

2. Pay for an appraisal. It's worth it. Remember that a lender trying to sell you the property is just as sleazy and disreputable as one trying to get you to vacate the property. You want to know if the lender is trying to eke more money from you than the property is worth, and the lender's appraiser is likely to come in with the price the lender wants. (Shocking, I know, but true.) The appraiser should measure the property, look at the rooms, amenities, appliances etc., and then compare the property to other recent sales in the neighborhood. The appraiser should also look at whether the housing market is rising, falling, or stable. If there are a lot of foreclosed properties or properties that are about to be foreclosed, that's probably a bad sign.

In addition, you want to look at rents in your community. Are they rising or falling? Are there a lot of rentals that have been sitting on the market for a long time? You don't want to buy if it turns out that rents are about to fall 15% and you just bought a house with a mortgage payment comparable to the rent you're paying now.

3. Do you really like the house and the neighborhood? If you have children, do you like not only the school they're attending now, but the schools they'll attend when they're older? How long are you planning to stay? If you're thinking of moving to a new city, or your children are almost grown and you want to downsize, or your job is unstable, this house is probably not for you.

4. Can you pay the mortgage easily? If the rent is the same as your mortgage, you don't want to lock yourself into payments that are at the edge of your ability to pay. In addition to the mortgage, you have to pay property taxes and insurance, as well as make necessary repairs. You can decide to move for cheaper rent much more easily than you can sell the house.

5. Run a mortgage calculator. The New York Times calculator is very good. Real estate industry calculators much less so. The calculator will tell you how long you have to stay in the house for buying to make sense. (Note that as you get close to the point where buying is sensible, the additional cost of buying is very small.)

6. And demand that any Notice to Vacate served be withdrawn in writing. Yes, get it in writing. Should your negotiations fall through, you want a full 90 days to vacate the property, not the short time that remains at the end of the negotiating process.

Update 10/30/10: With the foreclosure documents problem, it is essential that, before even considering a purchase, you THOROUGHLY check the history of the property. You must find out whether there are any loans outstanding on the property, liens of any kind, and whether you can get title insurance for the property. If any of these problems exist--if there's another loan on the property, the utility service has put a lien on the property, or the title insurer gives only limited title insurance--give the property a pass. Remember that the lender may be trying to get rid of a turkey--a house with problems--and you don't want to get stuck with it.

And another update 1/2/11: Please be specially careful if you're being offered a condominium or a house in a planned unit development (houses where there's a homeowner's association responsible for maintaining the common areas and community amenities). These are particularly dangerous, because you're buying into a whole community and not just a house. You need to know whether other units are in danger of foreclosure, as the remaining homeowners may have to pick up the cost of dues not paid on foreclosed units. Banks are loathe to finance communities with too many tenants, so a community with a lot of tenants could be a problem if you had to sell. (Banks may change their policies though, when it becomes clear that having a renter-occupied unit is better than having an empty unit.) You'll need to look at the finances of the association to insure that they have sufficient funds for ordinary maintenance and a reserve fund for major repairs (roofs and the like.)