Real Estate Q & A: Locking in a Low Rate on a Home Equity Line of Credit

Robert J. Bruss, a real estate lawyer and broker, replies to questions about housing and mortgages in a weekly, syndicated column. In his most recent Q & A piece, Bob addresses tax assessments, how to handle a real estate partnership in a slower Florida housing market, and how to manage a home equity line of credit — all potentially important issues for residents, these days especially. Let’s take a look at what he has to say…

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Q: I own 50 percent of a property with a partner. In February 2006 we hired an appraiser who valued the property at $295,000. But with the recent change in the housing market, only three comparable sales (comps) have occurred nearby in the last six months, and for an average of $260,000. What is a fair price to offer to buy out my partner?

A: If the recent sales of those nearby properties are comparable to yours, it sounds like a fair buy-out price would be 50 percent of $260,000, minus any debts such as a Florida mortgage or unpaid property taxes. Or you and your partner might want to hire an appraiser to make a new appraisal.

Q: I have a $30,000 Florida home equity loan, to use for home improvements. Currently, I am paying 8.5 percent interest and have borrowed $3,800. But I received a mailer from the lender offering to lock in 6.9 percent interest. However, the minimum must be $4,000 or higher. That will mean my monthly payments will increase. I will soon need another $4,000 to replace the roof. How should I go about this?

A: That 6.9 percent locked-in rate is much more attractive than the 8.5 percent interest you now pay. Why not borrow the additional $4,000 for the new roof and lock in 6.9 percent interest on the entire amount? That sounds like a bargain for an equity line.

Q: About 20 years ago, my husband inherited two parcels of vacant Florida land from his parents. Until the last few years, the market value was around $8,000-$10,000 per. Since then, their value has increased significantly.

We constantly receive solicitations and offers to buy the lots. According to the property tax assessments, each lot is worth around $32,000. But we have never actually seen these lots. Now that college expenses are quickly approaching for our children, we are trying to decide if it would be wise to sell them. What is the best way to handle this by long distance?

A: Take the money and run! However, before selling you should visit the lots and talk with local real estate agents who sell similar properties nearby. Or, you might want to hire local professional appraisers to give you an unbiased answer about their market value.

The local assessor’s valuation might be accurate, based on similar recent nearby lot sales. Or it could be too high or too low. The situation you describe is not a do-it-yourself sales project. Considering the low value of the lots, paying the customary real estate agent 10 percent commission for vacant lot sales could be a great investment to get rid of them after you learn their true market value.