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Open House

Eminent Domain Growing Threat; Getting Your Finances In Order Before Purchasing A House; Choosing The Right Mortgage; Make Money On eBay

Aired February 25, 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: Here's what is happening right now in the news.
Early tests show a powder found in a dorm at the University of Texas at Austin is ricin, a potentially deadly poison. A student found the powder. There are no reports, though, of anyone getting sick. We are continuing to follow this developing story, and we'll bring the latest as soon we get it.

Now to Iraq today. Deadly violence across that area broke out during the funeral of an "Al Arabiya" reporter, who was gunned down this week. Two police officers were killed when gunmen opened fire on that procession.

Dozens of deaths have been reported despite a daytime curfew that ended last hour. Sixteen people were killed when gunmen stormed a house in Baqubah, and the bodies of 14 Iraqi police commandos were found near a Sunni mosque in Baghdad. A lot of violence there in Iraq.

Well, Japan has 600 troops in Iraq, but reportedly not for long. A Japanese news agency says Tokyo will begin withdrawing troops from Iraq in April, and complete the pullout in June. An official announcement is expected next month.

Those are the headlines. "OPEN HOUSE" with Gerri Willis starts right now.

GERRI WILLIS, CNN ANCHOR: You work hard, you save for the down payment, you make every monthly payment, and you still lose your home. Eminent domain, it's a growing threat across the country. But you can protect yourself.

Good morning. I'm Gerri Willis.

Today on OPEN HOUSE, I'll take an in-depth look at the problem and what you can do about it.

Also, I'll show you the best mortgage deals out there.

And I'll make it easy for you to make some money. I've got a crash course on eBay.

But first, eminent domain.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): In 155 cities across the United States, property owners are losing their homes through the use of eminent domain.

That's a case in Long Branch, New Jersey, where Bruce McCloud lost his beachfront home of 23 years.

BRUCE MCCLOUD, LONG BRANCH RESIDENT: Well, I had a 100-year-old, three-story, 17-room period Victorian home that sat right where this building is over here.

WILLIS: McCloud was forced out and given a mere $140,000 for his home.

And this fight in Long Branch is far from over. Dozens of homes and other properties have already been demolished, and new construction has gone up in their place.

But the remaining residents are putting up a fight to hold on to their homes.

FRAN DELUCA, LONG BRANCH RESIDENT: I'm choosing to hold out because I don't think this is a constitutional thing. I think that people are now at the mercy of the government.

BILL GIORDANO, LONG BRANCH RESIDENT: Well, I'm staying, OK? It is absolutely the definition of eminent domain abuse. And for viewers out there that don't understand the difference between eminent domain and eminent domain abuse, please come by, visit Long Branch.

WILLIS: Once a popular resort destination, Long Branch fell into decline throughout the years. But today, the city is in the midst of a rebirth. New condominiums, trendy shops and restaurants, and a restored boardwalk have revitalized the area, a victory long in the making for Mayor Adam Schneider.

MAYOR ADAM SCHNEIDER (R), LONG BRANCH: We have people spending money on the Long Branch oceanfront in the middle of the winter now. You know, it's become a destination again. This was the summer White House in the 1880s. This was one of the premier destinations in the country. And it's stopped being a -- you know, it was a place where even locals didn't come for a long time. And that's done a complete about-face. So people are very happy with it.

WILLIS: But as we've seen, not everyone is happy with the project. Residents that remain call this an abuse of eminent domain, because their land is being handed over to private developers.

GIORDANO: There is no public use here. I can't use the pool in that private development. That's a private development. No matter how they try to spin it, it's a private development.

You're kicking out people of low income and moderate income means, and they're trying to alter or modify the demographics of their population with a more affluent person. And that's wrong. You don't kick out people with moderate income, people on Social Security, so you can bring in wealthy individuals.

WILLIS: Traditionally, eminent domain allows governments to take private property for just compensation and turn it over for public-use projects, like a new highway or a school.

But last year's controversial Supreme Court ruling, Kelo versus New London, allows towns and cities to seize private property and turn it over to private developers as long as they can promise improvements for the community overall, like increased tax revenues.

So the city of Long Branch labeled the beachfront community "blighted," and proceeded with its plans.

GIORDANO: I don't know what the mayor is speaking of when he speaks of crime or speaks of areas in urban decay. That's not the case here. These are excuses for him to hand these properties over to a developer.

Well, if urban decay was in existence here, then maybe he would have a case. But there is no -- you can plainly see, there is not urban decay here.

WILLIS: In fact, this particular part of Long Branch was far from blighted. Residents here say they were told they'd be spared the fate of their neighbors. Even the city's master plan leaves them alone.

But now, even these homes are marked for demolition.

GIORDANO: The master plan would definitely, without a doubt, mislead any layperson looked at it. It was absolutely misleading.

WILLIS: So what's next for the holdouts? With the Supreme Court on its side, the mayor says they're out of options.

SCHNEIDER: I'm really done giving them advice. I've already -- I told them that they should have come to the table and negotiated out, that ultimately the courts are going to uphold what we're doing.

WILLIS: So the residents are pinning their hopes on state governments.

DIANE ALLEN, NEW JERSEY STATE SENATOR: I have a number of bills, and I think probably four or five right now on eminent domain that said that if your home is kept up, if it's basically up to code, then nobody should have the right to take it from you.

I'm trying to come at it as many ways as possible, with the hopes that I can get enough senators behind me that we can get something through.

WILLIS: But for the residents of Long Branch, it goes well beyond the law.

GIORDANO: The developers make their profit on passing on home ownership, which we know as the American dream, OK? And that's where they make their profit. But yet, they feel so free to violate the American dream of people already have it? That doesn't matter to them? To me, there's something really wrong going on here.

(END VIDEOTAPE)

WILLIS: Those fighting eminent domain in Long Branch are getting help from a group called the Institute for Justice. Its senior attorney is Scott Bullock, and he's joining us now from Washington.

Scott, good to see you again.

SCOTT BULLOCK, SENIOR ATTORNEY, INSTITUTE FOR JUSTICE: Good seeing you.

WILLIS: OK, let's talk about this group of people first in Long Branch. What are their chances for success?

BULLOCK: Well, I think they have a very good chance of success. This is an outrageous abuse of eminent domain, where the city is taking homes to build homes. They just want to take the homes of poorer folks to give to wealthier folks, in the hope that the city will make more tax revenue. This has got to stop.

WILLIS: That's crazy. It's just crazy. And I got to ask you, the prices they're giving these people for their homes? It just doesn't sound fair.

BULLOCK: These people have lived by the water for, often -- and many of them, decades. They're these gorgeous little beachfront cottages. They simply want to stay. They're not interested in money. They want to hold on to their homes that they know and love so dearly.

And it is outrageous that the city is trying to throw them out, just to bring in people just like them, but those who happen to make more money than the folks that live there now.

WILLIS: It's totally crazy. Let's talk about what people can do if they're in the situation themselves. It seems like it's incredibly hard to fight eminent domain. What are the steps people can take?

BULLOCK: Well, it is difficult to fight eminent domain. There's no question about it. There's a lot of power, money, and influence on the other side.

But the good news is, is that citizens throughout the country have fought back against these projects and have been successful. They've been successful in Pittsburgh, they've been successful in New Rochelle, New York, and in many other places.

The first thing that people have to do is, they have to find out what is going on. The city and developers love to hide the ball from people. They don't want to provide information. People...

WILLIS: But isn't -- aren't these things discussed in open and public meetings? BULLOCK: Well, they are at some point. And they have to be at some point. But oftentimes, these arrangements are made even before the first public hearing is held, and oftentimes the deal is many -- in many instances is already done, and the hearings turn into dog and pony shows.

Also, the government does not tell you about eminent domain, they talk about redevelopment, they talk about new tax revenue, all these good things.

WILLIS: Right.

BULLOCK: They don't talk about people losing their property.

WILLIS: Hey...

BULLOCK: So it's important for people to get educated, and then to...

WILLIS: Right.

BULLOCK: ... inform the fellow neighbors about this too.

WILLIS: Hey, Scott, how often are the politicians and the developers in bed together?

BULLOCK: Well, very often they are. You know, sometimes it's more direct, through campaign contributions and things like that. But oftentimes it's the developers come to cities, and they sort of wow them with Power Point presentations and plans for new shopping mall developments, and, in particular, more tax revenues that are going to be generated.

So city officials get excited about that, and they unfortunately oftentimes forget about the citizens that have invested in the city for so long, they're longtime homeowners that have hung on to their homes or businesses in good times and in bad.

WILLIS: All right, Scott. Well, we're going to be following this over time. We appreciate your help today. Thank you.

BULLOCK: Thank you.

WILLIS: Coming up on OPEN HOUSE, the spring buying season is coming fast. If you're a first-time buyer, or maybe just looking to move, I'll sort out the right mortgage for you.

And later, I'll show you how to clean up, well, in more ways than one. Clear out that closet and sell your stuff on eBay. Hey, it's not so hard, even for the computerphobic.

But first, your tip of the day.

(BEGIN VIDEO CLIP)

WILLIS: Shopping for a house online? Here's what you need to know before you begin.

First, determine your price range, and get all financial documents ready and organized.

Next, create a reasonable wish list by figuring out what amenities your new home must have, and which you'd like to have.

Never buy a house you've seen online without seeing it in person.

And be sure to check out both local and national realty Web sites.

And that's your tip of the day.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: What's the right mortgage for you? That's the question we're sorting out in today's installment of our multi-part series, buying and selling, getting ready for spring.

But before you can get an answer, you first have to get your financial house in order. We met one woman who's doing just that.

(BEGIN VIDEOTAPE)

LISA STEBNER, HOMEBUYER: Oh, hi.

KAREN KELLEY, REALTOR, THE CORCORAN GROUP: So, OK, Lisa, so this is...

WILLIS (voice-over): Lisa Stebner is looking for a place she and her husband can call home. But before she even began looking, she spent years planning and coming up with a down payment.

STEBNER: Not easy to keep saving money toward something like this.

WILLIS: Aside from socking away a healthy savings account, Stebner also turned to her real estate agent for advice.

KELLEY: Get a preapproval. You know, put together your finances with regard to, you know, your liabilities, your assets, what your net worth is. And then determine what you can be approved for.

WILLIS: Kelley also recommends all buyers work to improve the credit scores and have tax returns ready to show banks. It's part of a plan to ensure you're in good financial shape. And it should give lenders the confidence to work with you.

But even if you're offered a lot of money, don't let your eyes light up too much, or you could get caught in a tough spot.

KELLEY: There are a lot of hidden costs that you don't think about, like closing, and then moving, and then possible renovations, and utilities.

WILLIS: And you don't want to become house-poor. It's a situation Lisa and her husband are determined to avoid.

STEBNER: You'll get approved of a certain amount. But you realistically -- what we had to do is say we don't really want to max out to that point. We had to then reevaluate our needs and go into a smaller space, something we could see ourselves not sweating every month.

(END VIDEOTAPE)

WILLIS: One surefire way to keep yourself from getting in over your head is getting a great mortgage. So just what's out there?

Greg McBride, a senior financial analyst with BankRate.com, and he's got the answers.

Greg, it's great to see you.

GREG MCBRIDE, SENIOR FINANCIAL ANALYST, BANKRATE.COM: Thank you very much, Gerri.

WILLIS: So the environment this year is so totally different than last year. I saw recently that the number of mortgages that are being underwritten right now are 20 percent lower than last year. This is a big change.

MCBRIDE: It is a big change. The housing market is slowing. We're not seeing the bidding wars that were so prevalent the past couple of years. And there's not the level of activity that we've become so accustomed to these past several years.

WILLIS: And it's not just the level of activity, it's also the rates. The rates are higher here. Let's make some comparisons and show people the difference.

MCBRIDE: Well, two years ago, a borrower had their choice between an adjustable or an interest-only loan, where the start rate may have been 3.5, or the -- or a fixed rate, where the starting rate, where the, where the rate was 5.5 percent.

Now, that meant a big difference in monthly payments. That interest-only loan for, say, $300,000 would have been about half of what it would have been on a fixed rate mortgage.

Instead, that's not the case these days. That difference has narrowed tremendously. You cannot stretch the buying power like you could a couple of years ago.

Now the starting rates on those interest-only and adjustable mortgages are 5.5 to 6 percent. And that's just not much less than what you're finding on a traditional fixed rate mortgage.

WILLIS: And I think, for a lot of people, that means they'll really want to go for that plain-vanilla fixed rate 30-year mortgage. Is that right? And what will they pay for that?

MCBRIDE: Well, the conventional, more traditional products are regaining favor in this environment, because, on a relative basis, they just -- they really stand out. The adjustable rates have really increased, yet the fixed rates have not. A 30-year fixed rate mortgage right now goes for about 6.3 percent, and you have the certainty of locking in your rate, and your monthly payment, as long as you're in the home.

WILLIS: Of course, it take awhile to get a mortgage. Let's talk about the outlook for rates here. I know the Fed's expected to come in at least one more time, maybe twice, and raise rates. What's your outlook this spring for mortgage rates?

MCBRIDE: I think we're going to see more of the same. We're going to see those adjustable rates, those interest-only loans continue to move higher, because they are pegged to their short-term interest rates that the Fed controls.

On the other hand, the fixed rate loans that have been so attractive for so long, they're going to continue to stand out from the other products as the place to be. I wouldn't waste any time. There's no guarantee that rates are going to stay this low. However, I think the borrowing environment going forward in the next few months is still very conducive.

WILLIS: All right, so...

MCBRIDE: I think those fixed rates...

WILLIS: ... Greg, what do you...

(CROSSTALK)

WILLIS: Seven percent, 8 percent, what are you -- what's your outlook?

MCBRIDE: No, I think the fixed rates are going to stay below 7 percent for most if not all of 2006. That's a different story on the adjustable products. If you hold that adjustable rate too long, you're going to easily find yourself paying 7 to 7.5 percent.

WILLIS: And put that in perspective. That's really not that high of a rate, right?

MCBRIDE: It's really not that high. But again, if people took out that adjustable or that interest-only loan when rates were much lower, they've seen a big jump in payments. On the other hand, the fixed rate loans are still much lower than historical averages. Over the last 20 years, the average rate on a 30-year fixed is closer to 8 percent.

WILLIS: OK.

MCBRIDE: Even in the last 10 years, it's about 6.9 percent. So we're still below that average as well. WILLIS: All right, that's good news for everybody. Greg, thanks for your time today.

MCBRIDE: Thank you, Gerri.

WILLIS: Next on OPEN HOUSE, it's easy money, really, I'll show you how to sell your stuff on eBay even when you're not a computer expert.

Here are the mortgage numbers.

(COMMERCIAL BREAK)

WILLIS: The weekend is here, and it's always a good time to make a little extra money. So here's a how-to on getting some cash for your trash.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): This man's attitude is pretty common.

UNIDENTIFIED MALE: I'm a technological idiot, and the other thing is, it's a lot of work.

WILLIS: He wants to sell his stuff on eBay, but he's paying a service to do it for him, when, in fact, it's really not that hard.

To learn how, we turned to Brian Clark of the Tech Enthusiasts Network.

BRIAN CLARK, TECH ENTHUSIASTS NETWORK: Well, you know, maybe in the past, it was a little bit difficult. But right now, they have taken eBay and made it so simple.

WILLIS (on camera): How do I get started?

CLARK: The first thing you do is, you go up here, and you click on Sell at eBay.com.

WILLIS: Off, right off of the home page.

CLARK: Right off of the home page.

WILLIS (voice-over): Next, click on Sell Your Item. You have to create a username and a password. You can also click on Learn How to Sell for more help.

(on camera): So this gives you some stuff.

CLARK: It does, it gives you a lot of information here about what you should do...

WILLIS (voice-over): Next, choose your selling format. We're using an iPod as an example. So we select Sell an Item at Online Auction and click Continue.

(on camera): So you got to browse categories?

CLARK: You can browse categories here, so you can -- the -- you can see that people can sell antiques or cars or camera phones or coins...

WILLIS: Are we in electronics, or where are we?

CLARK: We're in electronics right now.

WILLIS (voice-over): Now, you have to describe your item and come up with a price.

CLARK: So what we're going to do is, we're going to put in a starting price here. And we're going to put in a starting price that's fairly low, because what that does is, it actually starts the bidding low and allows it to drive up...

(CROSSTALK)

WILLIS: Put that right in there, huh?

CLARK: So we put that in...

WILLIS: What happens next?

CLARK: We want to decide how long we want the option to last.

WILLIS: Now, how do you figure that out?

CLARK: Well, if you think you have a hot item, the longer you allow the auction to last, the chances are the item's going to get bid up.

WILLIS (voice-over): Now add pictures, then put in the payment methods and shipping information.

CLARK: We're going to use PayPal. Now, that's something else you're going to need to do is, register for a PayPal account, because PayPal allows anyone with an e-mail address to send you money. And you want to get your money.

WILLIS: Sounds like a good deal.

WILLIS (voice-over): To get it, you need to market your item wisely. That's where Jenelle Elms comes in. She's author of "The Seven Essential Steps to Successful eBay Marketing."

JANELLE ELMS, AUTHOR, "SEVEN ESSENTIAL STEPS TO SUCCESSFUL EBAY MARKETING": There's 55 characters in the title of your auction listing. This is the most valuable real estate you'll own on the site itself. Anything that a buyer may type in to find your item, your title should include it.

WILLIS: And remember, pictures are worth 1,000 words, and maybe even more dollars. ELMS: Eighty-three percent of the public on eBay, the buying public, will skip over your listing without a picture. Take a photo as though you do not have a description, and write a description as though you do not have a photo. If you follow that rule, and I still do after seven years of being on eBay, you will succeed in that area.

WILLIS: Also, keep it simple.

ELMS: Give the text very simple, plain information, everything black and white, because you have about 10 seconds to grab their attention before they're on to something else.

WILLIS: You'll attract more customers if they feel they'll be well served.

ELMS: If you put your listing up with a customer service sense to it, then you're going to attract more people. You're going to attract more bidders to that listing. eBay's even found that if you say the words "100 percent money-back guarantee," you're going to get 6 percent higher bids. Yet only 1 percent of the community is going to utilize that 100 percent money-back guarantee.

The next thing is to make sure that you have shipping information always in your listing. Never leave this part out, because, again, your buyers want to know exactly what they're paying for in the listing itself.

WILLIS: An added tip, offer free shipping. That's likely to generate more buyers.

Still thinking eBay is hard? Drop-off points around the country are always an alternative.

RUSSELL SCHERE, SNAPPY AUCTIONS: We are a full-service business. When somebody leaves an item with us, we take care of everything. You know, all they do is sit back and wait for a check in the mail. We sell convenience.

WILLIS: And for some, it's well worth eating into the profits.

UNIDENTIFIED MALE: You have to pack them, ship them, deal with the people who buy them. You got to hope they pay you. This way, I bring it over here, they take care of all that.

(END VIDEOTAPE)

WILLIS: I'm with him. It takes some work, but there is a payoff, especially for the three-quarters of a million people who now make their living selling all sorts of stuff on eBay.

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

(COMMERCIAL BREAK)

WILLIS: If you're in the market for a new home this spring, you may be pleasantly surprised. After all, in many parts of the country, it's a buyer's market. You may have more power when negotiating price.

Now, the trick is getting the information you need to hold your seller's feet to the fire. Before you start negotiating, understand how long the average home is on the market, and how that stacks up with the typical selling periods.

The longer a home lingers on the market, the more leverage you have negotiating price.

Also check out home prices per square foot. A real estate agent can help you with this data, which can help you get the very best deal possible.

And finally, the small town of Marne, Iowa, is hoping for a population explosion, relatively speaking. Right now, 149 people live there. Locals are hoping to increase that number to a whopping 200. So the mayor is offering free vacant lots, that's right, free vacant lots, as long as you build a home.

And the plan seems to be working. Marne's Web site has gotten more than 1,200 hits. Locals say they want to share their town because it's safe, it's quiet, and there's no traffic. Let's hope they're not too successful, or all that could change.

If you want to check it out yourself, go to MarnesIowa.com.

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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