Friday's Business News

Reverse mortgage offers flexibility, income boost

Robert J. Bruss
Inman News Features
Oct. 16, 2004 12:00 AM

QUESTION: I am a 67-year-old, healthy retiree, and my wife and I need to supplement our Social Security and other income.

Our two daughters do not want us to sell our home or get a reverse mortgage. After my wife and I pass on, one of them will buy out the other and live in the house with her family. In return for this setup, they will jointly pay half of our current mortgage payment, $1,200 per month.

If we accept their offer, I will add their names to the deed as joint tenants with right of survivorship. Will I be doing the right thing?

ANSWER: The situation you describe can be dangerous. Why let your daughters control your life by putting their names on the title to your home?

Depending on the market value of your home and the ages of you and your wife, a reverse mortgage can provide the cash flexibility you need. You can choose lump sums (perhaps to pay for a new car, a new roof or a vacation cruise), lifetime monthly income or a credit line, or a combination of them.

Q: My wife and I plan to sell our home in a month or so. We interviewed several agents. One works for Re/Max and emphasizes her firm's Web site and relocation referrals. Another works at a successful local independent firm, which has been here since 1924. A third works at Coldwell Banker and explained its "famous name" franchise benefits.

Should we go with a franchise or independent listing agent?

A: It doesn't matter where your listing agent works. You are hiring that agent, not the brokerage, to make a sale of your home.

Phone the agents' most recent home sellers to ask: "Were you happy with your listing agent, and would you list your home for sale again with the same agent?"

Recommendations from satisfied home sellers are the most important references a real-estate agent has.

Q: I have outlived my wife and two sons. My closest relatives are in Europe, and I hardly know them. I have real-estate and other major assets in my living trust. My estate probably will be less than $500,000.

Upon my death, does my executor have to pay tax on my assets before distributing my property to my European heirs?

A: Why leave your assets to relatives you hardly know?

There are worthy charities that will accept your assets.

In 2004, the federal estate- tax exemption is $1.5 million. Because your total assets are below that amount, estate tax is not an issue.

Q: About three years ago, I bought a condo. I later discovered the homeowners association is ineffective. Many of the monthly director meetings are canceled for lack of a quorum. When the directors hold a valid monthly meeting, they often disagree and refuse to take any action.

The result is poor property maintenance. I would like to sell, but fear taking a loss. I tried becoming involved in the buildings and grounds committee, but it never meets. What should I do?

A: If you couldn't help correct the condo-management situation, maybe you should sell your condo and move on.








Greenspan Not Too Worried by the Rise in Energy Prices

By EDMUND L. ANDREWS
The New York Times
October 16, 2004

WASHINGTON, Oct. 15 - Alan Greenspan, the chairman of the Federal Reserve, said Friday that the long-term outlook for global oil supplies is reassuring even though anxiety about dwindling reserves has helped push spot prices to nearly $55 a barrel.

Mr. Greenspan carefully avoided giving even the slightest hint of how this year's surge in oil prices might affect the Fed's plan to raise interest rates over the next year. But he did acknowledge that higher oil import costs have reduced the country's gross domestic product by about 0.75 percent this year. Crude oil prices crossed the $50-a-barrel threshold in New York this month and climbed 17 cents on Friday, to $54.93 a barrel.

More disturbing than the run-up in spot prices, Mr. Greenspan said, has been the sharp rise in the price of long-term futures contracts for oil that would be delivered as late as 2010. Long-term futures prices remained steady at about $20 a barrel from 1990 to 2000, even though spot-market prices fluctuated from $11 to $40 during that period. This time around, long-term prices have climbed to about $35.

"Unlike past concerns, the current situation reflects an increasing fear that existing reserves and productive capacity have become subject to potential geopolitical adversity," Mr. Greenspan said in a speech here to the National Italian American Foundation, according to a text of his remarks. "These anxieties patently are not frivolous, given the stark realities evident in many areas of the world."

But he went on to argue that higher oil prices would eventually lead to the discovery of new reserves, greater investment in new production and alternative energy sources that would allow supplies to keep up with demand over the long term.

Though Mr. Greenspan conceded that there have been relatively few new oil fields discovered in recent years, he said the world's net proven reserves have risen by 100 billion barrels over the last decade even though more than 250 billion barrels have been extracted.

Noting that the Energy Department predicted in the 1970's that oil prices would reach the equivalent of $120 a barrel, Mr. Greenspan said market forces would lead to both increased oil production, greater energy efficiency and faster development of alternative sources of power.

"If history is any guide, oil will eventually be overtaken by less-costly alternatives well before conventional oil reserves run out," he said.

Despite that generally sunny prognosis, which is consistent with Mr. Greenspan's deeply held belief that market forces will eventually solve almost any kind of shortage, the Fed chairman suggested that the short-term outlook might well be bumpy.

Gasoline prices, which actually declined during the summer because refineries increased their output to take advantage of higher profit margins, are likely to mirror movements in crude oil prices for the rest of the year.

Mr. Greenspan offered no hint about whether the run-up in oil prices would persuade the Fed to change its current plan to keep raising interest rates gradually over the next year.