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Preconstruction Home Floor Plans: Your Square Footage May Vary

When buying a condominium, co-op, or new house that has not been built yet, the homebuyer has to do a lot of imagining of what his or her finished home will actually look like. To help, developers show prospective buyers floor plans and maybe even a sample kitchen.

What you actually get may be substantially different from what you were shown. It may have fewer square feet than represented, room sizes and layout may vary, and finishes may not be what you expected. Here is a story about some homebuyers who got less than they paid for.

How do developers get away with that?

*MOUSE PRINT:  Buried in your contract may be language such as:

“The gross square footage of a unit is greater than the approximate square footage of a unit measured by using the legal definition of the unit. … As is customary in New York City, these gross square footages exceed the usable floor area of each unit.”

Or, there may be a fine print disclaimer on the floor plan itself, such as this:

floor plan

How in the world could this be legal?  It is going to depend on what was represented to the buyer and how conspicuous the disclaimers are.

In New York, for example, there is a law governing developers’ plans for renovations and new housing. In part, it says graphics in advertisements must be accurate depictions:

“An artist’s rendering of a property in an advertisement must be marked as an artist’s rendering and must accurately and realistically depict the dimensions, …” [See New York regulations.]

The bottomline is that you need to read the developer’s plan thoroughly, and not rely on oral representations of salespeople. Better yet, have your lawyer review all the documents to find the weasel clauses.

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Tide 32 Load Bottles: Are They On The Level?

Tide cup smallFor years, laundry detergent has been sold by the number of uses or loads. One hundred ounce bottles of regular liquid detergent are typically good for 32 loads, for example.

Have you noticed, though, that it seems to run out way before you have done that many washes? The secret is in the cup, and how laundry manufacturers come up with that usage figure of 32 loads. See that little diamond to right of the word “uses”?  That leads you to a fine print disclosure on the back of the bottle.

*MOUSE PRINT:

Tide lines

You only get the promised number of washes if you do “medium loads” and fill the cap up to line number one — which is less than half a capful. That will use about three ounces of detergent.

If you fill the cap to line number two for “large” loads, you will use a hair over four ounces of detergent and only get 24 washes per bottle — 25% less than the front of the bottle promised.

Many people, no doubt, are used to filling detergent caps to the top line if they are doing a full load. In this case, that is line three — a fill line number not even explained on the bottle. Doing so will use up about five and a half ounces of detergent and get only about 18 loads out a 32-use bottle.

Most name brand detergent manufacturers play the same game. Since they are not required to use realistic “serving” sizes the way food makers are, you most likely will get less than you bargained for.

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Quicken Loans: Cut Your Mortgage Payment by 50%*

quicken loansHave you seen the commercials on TV for mortgage loans where you can get a $150,000 loan for only $450 a month (rather than the usual $1000)? [Watch commercial]

The ad is for Quicken Loans’ “Secure Advantage” loan. Among the other claims being made are, “Choose a low payment month after month,” and “Cut your payment by over 50%.”

Who wouldn’t want to pay $450 a month for a loan that others charge $1000 a month for?  That is some bargain, right? And the offer is coming from the namesake of the popular and respected financial software product, Quicken. How can you go wrong?

*MOUSE PRINT:  

Like the credit card companies, Quicken Loans is quoting only the minimum payment you can make on this loan each month. What is the downside of making only the minimum payment?

“When you choose to pay the minimum payment, you’re paying less than the full interest that is due for that month. By deferring your interest, the unpaid interest is added each month to your outstanding principal loan balance.

If you defer payment of interest, your outstanding loan amount could exceed the value of your home. This may affect your ability to refinance your loan or sell your home since you will owe more than what your home is worth. A higher loan amount may also result in larger payments down the road.”  [Quicken Loans website]

In dollars and cents, the website’s example says that a $150,000 loan would only cost $438 a month because it uses an artificially low 3.5% interest rate during the first five years of the adjustable rate loan. If you only paid the minimum, by month 53 of the loan, your payment would jump to $934, then to $1078 after five years, and finally to $1389 after 10 years when you finally start to pay off some of the principal (the amount of which at this point is not stated, but higher than the original $150,000).

Negative amortization loans (where the loan principal increases rather than decreases) is a dangerous type of loan to enter into for the financially unsophisticated. It is shortsighted financial thinking to make financial decisions  based only on affordable monthly payments, whether it be for a mortgage, car purchase, or credit card payment.

For more information about adjustable rate mortgages, here is a consumer handbook from the Federal Reserve Bank. [.pdf format]

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