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Open House

House And Senate Have Agreed To Boost Money In Flood Insurance Program; Finding The Right Home Inspector Can Save Money; Changes And Controversy Over How Real Estate Agents Market Themselves; Montpelier Renovations

Aired February 18, 2006 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BETTY NGUYEN, CNN ANCHOR: Now in the news, three American oil workers are among nine foreigners abducted in Nigeria. A group claiming responsibility for rebel attacks in Nigeria also claimed they kidnapped these workers. The group says it has been blowing up oil and gas pipelines in the Niger delta.
Now, a survivor of the massive landslide in the Philippines says there is nothing left. And you can tell that by these pictures. Rescue workers have been searching for survivors today, but none has been found. Some reports say 57 people were rescued yesterday. However, officials say up to 1,800 people are missing and feared dead.

The search is also on for 10 U.S. Marines lost at sea when their helicopters crashed. These are the pictures show the search of the coast -- search off the coast of Djibouti. Two transport choppers with 12 Marines aboard went down off the east coast of Africa yesterday. Two injured Marines have been rescued so far. Again, the search is on for 10 others.

Back now in the U.S., people in the Northeast are bundling up as a fierce new storm brought winds that gusted almost 80 miles an hour, and temperatures are still dropping. In parts of western New York, the storm knocked the mercury from 60 degrees to below freezing in just a few hours. Three people have died, two in New York, one in Massachusetts, after trees fell on them.

And those are the headlines.

"OPEN HOUSE" with Gerri Willis starts right now.

GERRI WILLIS, CNN ANCHOR: If you've ever had dreams of owning your own vacation beach home, you'll want to listen up. Congress may make it harder.

Good morning, I'm Gerri Willis.

Today on OPEN HOUSE, I'll look at the debate over beachfront development and flood insurance in the wake of Hurricane Katrina.

Also, the spring buying and selling season is upon us. I'll help you find the best real estate agent.

And you definitely want to check out our road trip to Montpelier, Virginia, the home of President James Madison, where a big reno project is uncovering secrets you may not have found in your history book.

But first up, flood insurance. Andrea Koppel is in Washington, where Congress is considering some very big changes to the only source of insurance for some homeowners.

Andrea, just what do lawmakers do?

ANDREA KOPPEL, CNN CORRESPONDENT: Well, good morning, Gerri.

What they decided to do, and they're still working out the details right now, but effectively, the House and the Senate have agreed, once again, to boost the amount of money that's in the Flood Insurance program. They've agreed, really the Senate has agreed to a little bit more. We'll tell you about it, $21.2 billion.

Now, the reason that this is so significant is that less than six months ago, there was only $1.5 billion in this fund, and they've actually increased it over the last five months three times.

And what you're talking about for homeowners out there who live in floodplains or who were affected by Katrina or Rita is that the exterior of your home, in other words, the structure itself, you would get about 250 maximum of $250,000. The contents, the inside of your home, is only about $100,000, Gerri.

But this is, you know, this has really become quite controversial on Capitol Hill.

WILLIS: So what is it lawmakers really think they're going to do here?

KOPPEL: What they think they're going to do is, first things first, they want to help out the people who were affected by Rita and Katrina. But they are saying, enough is enough. This fund was supposed to be self-financing. It's been around for decades. And really, if you lived in a floodplain, or if you had a federally backed mortgage, you had to buy this insurance, and it was supposed to be self-sustaining.

Well, we saw now with the massive hurricanes that there are more -- many more people who are dipping into this fund, and you and I are paying for it. So lawmakers are saying, BEFORE they will agree to any more money for the Rita-Katrina fund right now, which is what some are calling it, they want to have massive reforms take place. They want to expand the base, Gerri, of the people who are paying into the fund in the first place.

WILLIS: It's got to be an expensive program. Andrea, thank you so much for following it for us.

KOPPEL: My pleasure.

WILLIS: So what do you need to know about the National Flood Insurance program?

Bob Hunter used to run the program. Now he's insurance director for the Consumer Federation of America.

Bob, good to see you again.

BOB HUNTER, CONSUMER FEDERATION OF AMERICA: Good to be back.

WILLIS: Let's just reassure some folks here. Obviously, there are more approvals need for this financing. But look, Congress can't come back and say, we're not going to underwrite these expenditures, right?

HUNTER: No, they have contracts. People have flood insurance contracts. And they -- Congress has to come up with the money to pay the claims, and they will.

WILLIS: So help us understand, Bob, because you ran this program. It's over 30 years old, it has no money, it's flat broke.

HUNTER: Right.

WILLIS: The maps are out of date. Why is this program such a mess?

HUNTER: I think it's an administrative nightmare. The program, as designed, is pretty brilliant. It's -- the idea would be, we give flood insurance to people who are in floodplains who had made their mistake. But after that, after 1970, from then on, people were going to have to build wisely, they were going to have to not build in real high-risk areas ...

(CROSSTALK)

WILLIS: That hasn't happened, clearly.

HUNTER: Hasn't happened...

WILLIS: I mean, the program has actually simply expanded the number of people who are in high-risk areas, right?

HUNTER: Yes, it's become a negative instead of a positive, because it, in fact, because the maps are out of date, people are being subsidized unintentionally by getting flood insurance way below what the real cost is because the maps are so low, and ...

(CROSSTALK)

WILLIS: Here's what I don't understand about that. Why are the maps out of date? This isn't, like, a big mystery that nobody understood. This is something that's pretty well known.

HUNTER: No, we knew it. We -- our goal was to redo the maps every three years. And even at that, we thought we ought to add a little bit of a -- maybe a foot or so of safety margin, because when you're developing a floodplain, it's like sitting down in a bathtub. The more buildings that go, in the higher the water goes the next time it floods.

And that's what is going on. SO in places in Mississippi, I've studied Hancock County, the maps are about 12 feet too low.

WILLIS: That's unbelievable.

And, you know, what's really interesting, too, about this program is, we're not talking about a lot of insurance anyway. It only covers about $250,000 worth of value. So at the end of the day, people aren't even getting the coverage they need, because private insurers have said, Hey, we're not going to cover this.

HUNTER: Well, of course, if you have the $250,000 of flood insurance, you can buy private insurance excess of that. That...

WILLIS: And you'll pay for the privilege, right?

HUNTER: You'll pay a lot. But it is available.

And I think the program could be expanded, and those limits could be lifted, but not while the program is such a mess. But they've got to come in and fix it. They got to make sure people who are in the floodplains are actually buying the insurance, they got to make sure that new development and reconstruction is done right.

I mean, if they don't do that, they ought to get rid of the program.

WILLIS: But what's the possibility of that? Because even now, local governments and in the New Orleans area are approving people to rebuild in areas where they really shouldn't be.

HUNTER: Yes, this is a real test for FEMA. They've failed all the other tests, so they'll probably fail this one too. They ought to suspend New Orleans, if New Orleans doesn't require people whose homes are more than 50 percent damaged to elevate those homes as the program requires. Right now, New Orleans is just giving out new estimates, and lowering those -- that percentage...

WILLIS: Right.

HUNTER: ... below 50 percent. And therefore, people are going to build right back in the same place.

WILLIS: Exactly.

HUNTER: And it's terrible, it's terrible for the taxpayers.

WILLIS: Bob, I've got to get you to some advice for consumers, because there are people out there right now who are probably either buying or building properties, and wondering, Should I get flood insurance from the national program? Should they?

HUNTER: You should go and get the map for your community, where you're going to build. Find out what the map says, and find out how old the map is. If the map is real old, you may be in for a surprise. You may build what you think is a safe house, and actually you're not.

So if the map is real old, you better talk to the FEMA and see what they're -- when they're going to come out with a new map before you build in the floodplain.

WILLIS: And how much will I pay for private insurance?

HUNTER: Oh, if you -- the private insurance over is very expensive, but it's not -- it's -- since there's a $250,000, in effect, deductible, it's not as expensive as you might think.

WILLIS: Bob Hunter, thanks for your time today. We appreciate it.

HUNTER: OK, nice to be with you.

WILLIS: Coming up on OPEN HOUSE, spring is around the corner. Are you thinking about buying or selling? I'll show you how to find the best real estate agent.

And later, it's living history. I'll take you to the home of President James Madison, where restorers will show you how to preserve the legacy of your own home.

But first, your tip of the day.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Finding the right home inspector can save you lots of money.

But be wary of referrals given to you by your real estate agent. Instead, check out the American Society of Home Inspectors' Web site to find a reliable professional. Members of this group are required to have conducted at least 250 paid inspections.

Simply go to www.ashi.org. Go to Find an Inspector, enter your location, and you'll get an extensive list of qualified home inspectors in your area.

And that's your tip of the day.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: Spring is around the corner, even though it may not feel like it where you are. And that means the launch of the home-buying season. What can you expect? Well, this week, we'll tell you. We kick off our new multi-part series, buying and selling, to arm you with all the information you need in this ever-changing market.

We begin with some surprising changes and even some controversy about how agents market themselves.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): "No one can make you feel more comfortable and secure in your new home than a Realtor familiar with your particular needs." That is the pitch from a Web site promising to find you a gay real estate agent.

Most home buyers find a real estate broker from a friend, a neighbor, or on the Internet.

Now, new sites are popping up that target specific home buyers looking for brokers that share their lifestyle. Christian real estate brokers, Jewish real estate brokers, and gay real estate brokers are a few of the segments targeting home buyers on the Web. These sites offer to put you in touch with brokers that can share your background.

Critics warn that brokers advertising to one segment of the population may be breaking the law.

SHANNA SMITH, NATIONAL FAIR HOUSING ALLIANCE: Well, the Fair Housing Act is very specific in advertising. It says you can't advertise in a way that show a preference, a limitation to any group that's protected under the fair housing law.

So real estate agents, of all people, know this law and know that they can't hold themselves out, for example, as a Christian Realtor, because that could discourage non-Christians and people of other religions from dealing with them.

WILLIS: Several of these Web site operators declined to speak with OPEN HOUSE, or our calls went unanswered.

But on their home pages, they say that they abide with the Fair Housing Act. They say they're just helping buyers do business with someone they're comfortable with.

One of the Christian Web sites says, for example, "Wouldn't you rather have a Christian agent that is more interested in you than in the commission?"

Still, the Fair Housing Alliance says it's a fine line between referrals to like-minded agents, and discrimination against those who are different.

(END VIDEOTAPE)

WILLIS: OK, so whatever kind of agent you go for, you want one who will work with you. So how do you make sure you're getting the best?

Let's sort that out with Brad Inman, publisher of "Inman News," an independent real estate news agency.

Brad, great to see you.

BRAD INMAN, PUBLISHER, "INMAN NEWS": Good to see you, Gerri.

WILLIS: All right, well, let's talk about this. Everybody and their mother has gone out and got a real estate license in the last couple of years. There are tons of people to choose from. But how do you know you're getting somebody good? INMAN: Yes, the key here, at first, I think, is chemistry. You know, you've got to really connect with this person. And the chemistry's about trust. If you don't trust this person to be honest and to take care and look out for your interests, go to find another agent.

I also recommend people look for the top producer. Look around your neighborhood. You see that one Realtor, Debbie, who signs up everywhere, go to her. That means she's successful, and there is some relationship between success and finding a good Realtor.

WILLIS: You bet.

INMAN: And the third thing...

WILLIS: Well, let me interrupt you here, Brad. You say find somebody who tells the truth, who's honest. How do you know?

INMAN: Well, one, if they're successful, they've probably been in business long enough. That's one issue. But very important to get referrals. And I would narrow in right on that question, because if they don't represent the facts to you about the house, about the seller, if they don't go to bat for you and really find the information, if they're just trying to sell you -- and remember, these are commissioned salespeople, so they're motivated to sell.

But you got to make sure they're representing your interest. They're like a fiduciary, they're, like, representing you like a lawyer does...

WILLIS: Yes, but they, you don't...

INMAN: ... so take it that seriously.

WILLIS: ... they don't meet the same kind of criteria as a broker, as a stockbroker does. I mean, let's face it, the rules and regulations that these people have to meet are much -- not much more rigorous than that of a hairdresser.

INMAN: Well, yes, I always say that, Gerri, in California it's harder to qualify to be a licensed beautician than it is a licensed Realtor. So you're absolutely right, the barriers to entry are very low.

But the successful ones, if they endure up and down in, you know, these markets, you know, their colors are going to come through.

But check them out. Talk to their references. Check out their real estate license. See if they've had any dings against their real estate license. Be rigorous. You're going to pay them a hefty fee to sell your house, even if you negotiate the commission, which you should.

But that's a, that, you know, of a $500,000 house, we're talking about $25,000. So take the time to make sure you're working with someone that's truly professional.

WILLIS: I totally agree. And, of course, these people, you know, a good real estate agent can make all the difference in the world to you. I don't think, though, a lot of people understand the kind of conflicts that agents have and may work against, particularly a buyer. Let's talk about that.

INMAN: Well, they're paid by the seller, in most cases, so you start out kind of on the wrong side of the table, as I say. Now, fortunately, it depends state to state.

But there are rules that regulate what's called agency. It's a complicated term to say, to talk about representation. But they do have a duty to you, once they represent you. But they are paid by the sellers.

That's why you really got to hold them to the fire, and most importantly, be informed yourself. Go onto the Internet. Get information about the market, about prices, about the rules, all the things that you have to put into the decision. Don't just have someone, you know, hand you a contract and say, Sign here.

WILLIS: Exactly.

INMAN: Take the time to be informed, because as long as you're intelligent and aware, then you can hold them to the fire about their duty and their obligation to represent you.

WILLIS: And let's talk about one more of those obligations, particularly if you're the seller. That real estate agent has to give you every offer that it comes across the transom, even if it's not good for them.

INMAN: Absolutely. The first thing that agent must do is market the heck out of your property. That's why you're paying this commission. It should be put up everywhere on the Internet, the MLS, et cetera, et cetera.

But on top of that, they've got to bring you every offer. They have an obligation and a duty to do that, because you may be in a position where there's elements of that offer that you want to take.

So really, hold your agent, you know, to the line here. Make sure they're as responsive, and their work is equivalent to what you're paying them, which is, you know, as I said, pretty hefty.

WILLIS: Well, one quick question here, Brad. We don't have a ton of time. But if I want to end my relationship with my real estate agent, can I do that?

INMAN: Yes, now, it depends. If you signed a contract as a buyer, then you may have an obligation. So be careful. But often, in most states, there is no contract. There's a presumed relationship, and they'll make you feel guilty if you go off and use another agent. But the reality is, you don't have a legal obligation. But as a seller, you are signing a listing agreement. And be cautious and careful. But there are ways to get out of those contracts. And make sure the listing agreement you sign, you do have outs if they're not performing.

WILLIS: Well, Brad Inman, thank you so much. Of course, the best real estate agent can make all the difference in the world. Thanks for your help.

INMAN: Thanks, Gerri.

WILLIS: Coming up on OPEN HOUSE, President James Madison left us a great legacy, the Bill of Rights. But that's not all. His home also has lessons for the ages.

Here are the mortgage numbers.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

WILLIS: Welcome back to OPEN HOUSE.

You think your renovation is a nightmare? Take a look at this. It's the home of the fourth president of the United States, James Madison. And this is Montpelier. Over the next four years, they'll pour $23 million into this home to bring it back to its historic roots.

(voice-over): But it's not just history that stands to gain. There are lessons for anyone planning a renovation.

First lesson, do extensive research. In the case of Montpelier, foundation president Michael Quinn says they looked for old plans, photos, and even receipts.

(on camera): So Michael, tell me about the renovation, the restoration that's going on here at Montpelier.

MICHAEL QUINN, PRESIDENT, MONTPELIER FOUNDATION: We are literally setting a new standard in terms of authenticity and care and craftsmanship.

WILLIS: What's amazing to me is, how much house is being pulled away from the original.

QUINN: That is true. A later owner had more than doubled the size of the house. And unfortunately, that left the house so changed that no one could find the real history, no one could find James Madison.

WILLIS (voice-over): Lesson number two, look to the house for answers. That's the job of Montpelier's architectural historian, Mark Winger.

(on camera): Mark, you're really a house detective. MARK WINGER, ARCHITECTURAL HISTORIAN: Yes, sort of, yes.

WILLIS: Well, how did you figure out what the roof looked like during James Madison's time? I think it's hard for people to even figure out really what the house was like at all.

WINGER: Well, when they took the original Madison roof off in 1850, they pitched many of the shingles down into the attic. And we gathered all that material up and analyzed it. And from that, we could tell quite a lot about what the roof looked like.

WILLIS (voice-over): At the same time, they searched inside the house for more answers to the mysteries of Montpelier.

(on camera): So Mark, you really find treasures in unexpected places. We're actually standing on what was a closet, right, at one time.

WINGER: Right behind us, yes. And when we removed the framed- out corner that was here until recently, what we found down below was a painted wall surface that dates to the 1760 construction period, the initial period of construction. And that hand painting went up to about where my hand is, and then above that, all the painting was entirely in white.

So a really wonderful find of a very rare decorative technique.

WILLIS (voice-over): Sometimes, nature lends a helping hand.

(on camera): We're in Dolley and James Madison's bedroom, originally. And you found something interesting in this room. Your friend, as restorers, were actually mice.

WINGER: That's right, although mice are actually pack rats. Over a course of years, the mice accumulated a lot of materials between the framing members of this wall, and that included textiles and pieces of paper from the Madison era, including a document with James Madison's handwriting on it.

WILLIS (voice-over): The third lesson for homeowners, know your materials.

(on camera): OK, so this is Madison's library. This room would have housed the books that he would have used to actually draft the Constitution.

WINGER: This was the storehouse of ideas.

WILLIS: That's fascinating.

OK, now, over here in this corner, at this jamb, actually, you say there's something that would illustrate a problem that somebody with a historic home who has old bricks might encounter.

WINGER: Yes, we have repaired this wall using lime mortar, because that's compatible with the original mortar. We don't think of a brick wall as being an elastic system, but it really is. And when the wall moves, if the mortar is stronger than the brick, then it's the brick that fractures, and not the mortar.

So you always, in making masonry repairs, want to use materials that are compatible with the materials that are already there.

WILLIS (voice-over): And one final lesson from Montpelier. Take the time to do it right. When this four-year restoration is complete, this computer rendering will bring history back to life.

(END VIDEOTAPE)

WILLIS: The restoration continues at Montpelier, and they are always looking for new sources of information. So if you have any photos, letters, or even receipts related to the house, contact the Montpelier Foundation through their Web site, montpelier.org.

By the way, the house is still open through the renovation.

I'll be back with my final tip right after this.

(COMMERCIAL BREAK)

WILLIS: Does your house qualify to go down in history? Well, it's not enough just to say Washington or Elvis slept there. To be listed on the National Registry of Historic Places, it has to be over 50 years old, and connected with a significant event or person.

Even if your home was built by a famous architect, or the style exemplifies a specific era, you may be sitting on a landmark.

To get more information on registration, contact your state's historic preservation officer.

And in case you're asking what's in it for you, well, tax breaks, for one thing. Homeowners may be able to get tax incentives through their local government.

OK, so you heard a lot about renovations today. Here's one that's out of this world. A "Star Trek" fan in England has gone bankrupt making his home look like this, like the Starship "Enterprise." He spent about $50,000 on the reno in hopes of selling the place for a hefty profit.

I wouldn't buy that. And there were no takers. So he had to beam out. I guess it's a case of boldly going where no one has gone before.

We want to hear from you. Send us your comments, your questions to openhouse@cnn.com.

You'll find more on today's guests and topics on our Web site, cnnmoney.com/openhouse.

Thanks for watching OPEN HOUSE. We'll see you here next week.

The day's top stories are next on "CNN SATURDAY."

Have a great weekend.

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