Philadelphia Weekly

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Despite lifestyle benefits, hidden costs exist

Benny Kass
Inman News®

DEAR BENNY: Our double-lot property is at one end of an unincorporated island in the midst of a city of 13,000. The extra amount we pay for water/sewer surcharge and county trash pickup is currently about the same as what the extra taxes from being annexed would be. We like the idea of being able to vote for the officials in the city that has such an impact on our surroundings.

We are considering annexing our property into the city but would like to weigh the pros and cons. --Brian

DEAR BRIAN: Annexation in general means that your property becomes part of the city, and is no longer an unincorporated area. You will have to determine the annexation process used by your city since the process can differ from state to state.

There are advantages and disadvantages. In general:

Pros: Perhaps the primary reason for wanting to become a part of the city is to avail yourself of all of the services provided by that city. Currently, you are paying for water and trash pickup; there will no charge if you are included in the city. Additional benefits include street maintenance, lighting and snow removal (if applicable), health protections, and free access to parks and recreation.

Equally important, it is my understanding that since annexation provides more services, property values increase when annexed to the city. And this means that your house will most likely be more marketable.

Cons: Taxes will no doubt increase. You would be subject to more restrictive local ordinances, regulations and licensing requirements. I have heard about towns being sued or recently filing for bankruptcy relief, so you may have some indirect liability as a citizen of that town.

I would talk with the town's attorney and get more details and information before you take the plunge. I don't really know if your double lot will be an issue, but presumably the town's lawyer should be able to assist.

DEAR BENNY: It seems like there is no way to get out from under an underwater mortgage for people who are making their mortgage payment on time.

My daughter, a county police officer for six years, purchased a townhome with a state-sponsored interest-only loan right before the housing market went down. After five years, she tried to renegotiate with the lender for a 30-year loan, but with no luck.

Other lenders will lend up to 90 percent of the appraised value, but she paid about $160,000 and now the townhomes are selling for $120,000 at best. There's no way she would ever be able to come to the table with that much cash. She is basically paying rent with taxes and will never be able to pay this off.

Sometimes I think she would be better off with a foreclosure. If she had missed payments, the lender would have worked with her. Any suggestions? --Jan

DEAR JAN: I cannot recommend that your daughter let her house go by way of foreclosure. Not only will she be out of her house, but, more significantly, she will damage her credit rating. It will take a long time for her to repair her credit.

Has she explored the various local, state and federal programs that are available to homeowners who are in similar situations? She works for the county; she should contact the appropriate agency within the county. Clearly, the county should be able to provide some level of assistance for its own employees.

Do you have any resources that can assist your daughter? Can you gift her some money so that she can refinance her mortgage?

I know it may sound like a "cop-out," but my advice is to hang in there. Your daughter is getting tax deductions for the mortgage interest and real estate taxes she is paying. And hopefully down the road, property values will start increasing. We are seeing evidence of this now in many parts of the nation.

DEAR BENNY: Unfortunately, my parents don't believe me when I tell them it's always better to inherit a home because the person who inherits gets the "stepped-up" basis after assuming the home at its current market value. What's the correct answer? --David