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Open House

Foreclosures Are On The Rise; Avoiding Scammers Who Take Advantage Of Financial Problems; Problems To Disclose When Selling Your Home; Asylums Turning To Condos; Getting A Perfect Lawn

Aired June 10, 2006 - 09:30   ET

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

REYNOLDS WOLF, CNN METEOROLOGIST: Hi, folks. I'm meteorologist Reynolds Wolf in the CNN Weather Center, keeping an eye on the tropics, and the very latest that we have for you is tropical depression number on in portions of the Caribbean, mainly western Caribbean.
Here's Havana to give you your bearings. You've got Cancun, and here's this big mass that we now know as tropical depression number one, which could bring anywhere from 10 to 20 inches of rainfall to portions of Cuba. In the higher elevations, possibly as much as 30 inches of rainfall.

Now, the question is where is this system going go? The late of the computer models that we have indicate the storm will make its way into the Gulf of Mexico, 2:00 a.m. Sunday and here's the position. It will become a tropical storm, first named storm of the season. By 2:00 a.m. Monday, it is expected to follow a path to the north and northeast and by 2:00 a.m. Tuesday it should be right near Cedar Key, Florida.

That's the path. One thing you need to remember about the storms is they do not move on a linear path, they wobble, they tend to wobble, they tend to shake around a bit so you need to watch the cone of probability which you see which stretches from Perdido Key, Florida, all the way down to Naples.

So it could be anywhere in this cone of projection where the storm could make landfall. There is also the potential this storm could die out. And there's also the potential the storm can increase in power and become a hurricane. It all bears watching, which is exactly what we are going to do throughout the day and throughout the afternoon and throughout the weekend, keeping a close eye on this system.

All right, folks, Gerri Willis and "OPEN HOUSE" is coming up next.

GERRI WILLIS, CNN ANCHOR: Why foreclosures in the U.S. are rising at an alarming rate, plus the true meaning of full disclosure when it comes to selling your home. And how about the best lawn in your neighborhood from the people who keep Tiger Woods happy on the golf course?

Good morning, everyone. I'm Gerri Willis and this is OPEN HOUSE. Big cities across the country are seeing a big jump in the number of people losing their homes. To blame, unexpectedly high interest rates, rising inflation and real estate that some say is headed toward trouble.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Interest rates are rising, gas prices skyrocketing, homeowners are feeling the pinch. The result, bigger cracks in the housing market. Also on the rise, foreclosures. Some estimates show more than 300,000 homes in foreclosure in the beginning of 2006.

That's about one in every 358 households struggling to make their mortgage payments. You can blame high home prices and aggressive mortgage lending. The Mortgage Banker's Association says more than a third of loans in the past three years are carrying adjustable rates.

As a result, monthly payments on those mortgages will jump as much as 50 percent in the next year and a half. That's more than 2.7 trillion in risky loans, loans stretching some to the breaking point. In past months, Hurricane Katrina pushed the trend upward, but now states like Georgia, Colorado and Indiana have the highest statewide foreclosure rates.

Some argue the numbers are still historically low, but economists worry an increase in foreclosures could mean problems for the nation's economy and your pocketbook.

(END VIDEOTAPE)

WILLIS: Now, if your home is heading for foreclosure it might seem like all is lost, but watch out, scammers look out for people with financial problems and could make a bad situation even worse. Rick Sharga follows foreclosures for Realtytrac in Cincinnati. Rick, welcome. Good to see you.

RICK SHARGA, REALTYTRAC: Thanks for having me, Gerri.

WILLIS: So we found out why there are so many foreclosures. Where are they? Where are people like you and people who read your Web site, where are they finding the deals?

SHARGA: Well, we pull foreclosure information from 2,500 counties across the country and unfortunately there are 650,000 of those properties in our database, but the hardest-hit states right now are in the Midwest, Ohio, Indiana, Colorado and some of the southern states like Texas and Georgia.

WILLIS: All right. You know, you're in a strange business where your gain is really somebody else's pain. Let's talk a little bit about a minority in your industry who have shoddy practices when it comes to doing businesses. They're really ripping people off out there. Who are these people and what are their tactics?

SHARGA: Well, there are people who will prey on folks that are in distress and there are a few common fraud schemes that are going on right now that people should watch out for. One is something called a subject two purchase.

WILLIS: What does that mean?

SHARGA: Well, basically, it's somebody who is saying they're going buy your house or take title of your house subject to other conditions happening, and, basically, what happens is they come in and get somebody to sign over the title for their house under the premise that these people will go and take care of the defaulted amount on the loan, cure the delinquency and what often happens is the people who sign these documents don't realize they're actually giving away their house.

WILLIS: Right. And another problem is they never really get the true value of that home either. They're losing money across the board. What's the other scam?

SHARGA: Well, the other scam is actually a little more basic. It's someone coming and telling you they'll make payments for you to get you out of default and in fact they don't. What they do is say they monitor your house toward foreclosure and wind up bidding on it at the auction.

WILLIS: Wow.

SHARGA: So they are very similar schemes that people may pay chose attention to what they're signing.

WILLIS: Pay attention to what you're signing, but also, is there anything else you should do? Is there any other way to prevent being ripped off by one of these guys?

SHARGA: There are a couple of things people need to do if they find themselves in default. The very first thing they need to do that they may absolutely not want to do at all which is they need to get in touch with their lender. Lenders have lots of different workout programs. They have refinances, they have forbearance programs and they can change all the stuff.

WILLIS: Right. Absolutely.

SHARGA: So that's the first good resource. The second one is get in touch with the real estate professional, whether it's an agent or real estate lawyer to go through what your options are and find out what other ways you have to get out of the foreclosure.]

WILLIS: You can also legitimately sell the house, of course, but let's talk about talking to the banker because people wait until they get the foreclosure notice to really start talking to their lender. It makes sense to really contact them earlier, right?

SHARGA: It makes sense to contact your lender if you miss some payments and you know you're not going to be able to make them up easily. The fact is in some states like Texas or Georgia, if you wait until you get your notice of default you only have about a month at that point to get out of the foreclosure which just simply is not enough time to either sell the property or find out an alternative finance method.

WILLIS: Is there a way out of the problem if you've already gotten a foreclosure notice?

SHARGA: Yes, and again, the very first thing to do is to get in touch with the lender. The next thing to do is look at the options in terms of being able to sell the property or if you have equity in the property and being able to refinance it and there are, again, professionals, there are some governmental organizations, there are some community groups that will help you explore the options but the worst thing to do is to go into denial and basically go into hiding and hope this goes away.

WILLIS: So easy to do, but the wrong choice. You're right about that. Rick Sharga, thanks for being with us.

SHARGA: Thanks again, Gerri.

WILLIS: Coming up on OPEN HOUSE, why you might have to tell others you have a haunted house. Plus we're talking turf, how to have the best lawn in the neighborhood. And why in some cities former asylums are hot property. The new trend, next. First, your "Tip of the Day."

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Here's how to avoid a foreclosure notice from the bank. First, don't overextend yourself. Spend no more than 28 percent of your gross income on housing. Second, live on a budget. Eliminating small day to day items could add up to big savings.

Third, build a safety net. Financial planners generally recommend a six-month savings cushion, that way if you run into problems you'll be able to meet your financial obligations. Make sure you take the first step before the late notices start piling up. Foreclosures are a mess for everyone involved so there's a good chance they'll help you work something out. And that's your "Tip of the Day."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: OK. When your home is on the market, prepare to spill all those dirty little secrets about the house, mold, even if you got rid of it, deaths in the house and even the presence of ghosts. Peter MacDonald is with lendingtree.com. Peter, ghosts? I have to disclose the presence of ghosts?

PETER MACDONALD, LENDINGTREE.COM: You sure do, Gerri. Anything that affects the use, enjoyment or value of the home needs to be disclosed to the consumer.

WILLIS: So having ghosts would cut the value of my house, I guess. What if about if somebody died in the house would I have to make that public, too?

MACDONALD: In some circumstances, yes. Different states regulate this differently, most people do not need to disclose deaths outside of three years. However, if the death was notorious or ...

WILLIS: So if you had the Manson house, let's say.

MACDONALD: The Manson house is a case where you have to disclose. Heaven's Gate home in San Diego, the Jeffrey Dahmer home. Things like that.

WILLIS: That's crazy. OK. Well, let's talk about serious stuff that might actually happen to a lot of people. For example, if you have mold, you have to disclose that even if you clean it up, right?

MACDONALD: Absolutely. The idea behind this is material defects need to be disclosed to the consumer. Anything that would affect the use, enjoyment or value of that property needs to be disclosed not only from a legal sense, but from a practical sense. Why not tell the consumer more about the home rather than less and avoid litigation later?

WILLIS: That's a great idea. I'm thinking about people in the New Orleans area and everywhere that hurricanes hit, if your house has been flooded, even if it looks great right now you have to tell people that you've had water damage?

MACDONALD: You should tell people you've had water damage. They need to be informed of this so that they can either address it themselves, hire an expert to take further investigations or otherwise be aware of the condition of the home.

WILLIS: Now, of course, the rules are different all across the country.

MACDONALD: Sure.

WILLIS: What states have the most strict rules?

MACDONALD: I would suggest California is the most aggressive in this manner. California has a very, very lengthy transfer disclosure document that addresses everything from material aspect of the home to earthquake damage, flood damage, termite issues as well as things as common as neighborhood nuisances like barking dogs.

WILLIS: Wow. I've read somewhere that you may even have to tell people if you had a neighbor who was just sort of a busybody or a pain. I can't imagine doing that. Would people actually take the law that seriously?

MACDONALD: They would. Because, again, it comes down to the consumer's perception of the value use and enjoyment of that home. And if you're selling your home because your next-door neighbor is miserable or has unpleasant tendencies or has a dog that's awful and that's the reason why you're selling the home, then that's a material issue that you need to disclose. It doesn't mean you have to correct it. You just need to tell the consumer. Some people will care about it and others won't.

WILLIS: All right. Well, Peter MacDonald, I guess we have to fess up everything now.

MACDONALD: That's the best way to go.

WILLIS: Thanks for being with us today.

MACDONALD: Thanks for having me back.

WILLIS: OK. No one is hiding the details of one new trend, former asylums being turned into condos. Now it used to be people used to do everything they could to stay out of asylums, but these days many want to move into them. Allan Chernoff explains.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): It's one of the most infamous locales in New York City. Site of the nation's municipal lunatic asylum on Roosevelt Island just across from Manhattan. Charles Dickens described it as having a listless madhouse air. And journalist Nellie Bly exposed inhumane conditions here.

The building was abandoned for the past 50 years and the legend has it that the site is haunted by former residents of the asylum. Why would anyone want to live here? At a rent of $3,000 a month, no less.

DONNA CREAGH, OCTAGON RESIDENT: Most people who know me think I'm kind of nuts anyway, so ...

CHERNOFF: Donna Creagh has just committed herself to living in the former asylum now renovated into the city's newest high-end department complex, the Octagon.

CREAGH: It's almost apropos they found a building that used to be an insane asylum.

CHERNOFF: Old asylums are the latest trend in residential real estate. Yes, Americans appear to be mad about living in former mental institutions.

BRUCE REDMAN BECKER, BECKER & BECKER ASSOCIATES: These doors have an interesting resemblance to the madhouse bars that were on the windows. I think it's just a coincidence.

CHERNOFF: Maybe just a coincidence that pets are acting strangely in the building.

BRENDA GUYER, OCTAGON RESIDENT: She absolutely refuses to walk up the stairs. She -- we can drag her on her -- and she just won't do it and I've never seen her have that behavior before.

CHERNOFF: Donna Creagh suspects she just my have supernatural neighbors.

CREAGH: There are times when I'm walking down the corridors and I almost feel as if there's something around.

CHERNOFF: As skeptical journalists we invited ghost hunters to find the Octagon's old residents. In the 21st century, ghost hunting is a high-tech affair. The searchers use digital cameras to capture what they call apparitions. Apparently, ghosts like to pose even if we can't see them with the naked eye and then the hunters upload their photos to a laptop computer.

UNIDENTIFIED FEMALE: This is an orb and over here.

UNIDENTIFIED FEMALE: Almost like a face.

UNIDENTIFIED FEMALE: Over here is almost like a face. So we probably would -- we might have more than one. So it looks like you have multiple, looks like three or four of them living with you.

CREAGH: As long as they're friendly and bring their own beer, I'm cool with it.

CHERNOFF: In years past you had to be crazy to live in one of these places. Now the developers brag you'd be crazy not to live here. Though with rent for the largest Octagon apartments at $6,500 a month, perhaps some of the new residents really deserve to be institutionalized.

Allan Chernoff, CNN, New York.

(END VIDEOTAPE)

WILLIS: That's creepy. Still ahead, how to protect your children and your pets from dangerous lawn and garden pesticides and your weekend project, how to have the best lawn in the neighborhood. We're taking you to the home of the 2006 U.S. Open to find out. That's next on OPEN HOUSE.

(COMMERCIAL BREAK)

WILLIS: If your neighbor's lawn is leaving you green with envy, listen up. Today's weekend project gives you all of the ingredients you need to grow the best turf on the block. And we went straight to the pros to get advice from the ground up.

(BEGIN VIDEOTAPE)

WILLIS: Everyone wants a perfect lawn and we found the best place to go for advice on how to get one: the historic Winged Foot Golf Club. In just a few days these stands will be full of fans as the U.S. Open gets underway.

(voice-over): Eric Greytok is making sure this grass in tiptop shape for the event and he let me in on a few secrets on how we can all get our own greens up to par.

(on camera): Eric, let's start with mowing. I have got to tell you, how often do you mow, how much do you mow? How high should that grass be?

ERIC GREYTOK, SUPERINTENDENT, WINGED FOOT: It really depends on a lot of things. If you have warm, wet weather the grass is going to be growing tremendously and you might have to mow it twice a week. You should really just mow about two to three inches.

Anything higher than that, you are going to be bagging a lot of clippings. Anything lower than that, you might kill the grass. You only you only want to remove one-third of the plant at any time. That way the plant can continue on with its photosynthesis and food production.

WILLIS (voice-over): Another key ingredient for a healthy lawn is the right amount of water.

(on camera): Generally when you are watering, its what, only two three minutes, five to 10 minutes, 10 to 20? How long should it go on for?

GREYTOK: I would say anywhere from five to 10 minutes if you're doing it every day, less.

WILLIS: I don't have time for every day.

GREYTOK: If you're watering every day then I would only recommend four to five minutes and if that's not enough, then you increase it from there.

WILLIS (voice-over): Proper maintenance is also the best defense against weeds.

(on camera): What is the worst weed here at Winged Foot?

GREYTOK: Every spring we go around and we take the time and we treat for clover and dandelions like the average home owner.

WILLIS: Just like me.

GREYTOK: The problems that we have here are all over.

WILLIS: And so what do you do, though? Because I'm having no success against dandelions.

GREYTOK: We generally go out and spot treat with herbicides.

WILLIS: So if there's one thing you can tell homeowners, what would it be?

GREYTOK: One thing -- it's a two-part question. Proper fertility and proper water management and you'll have a great lawn.

WILLIS (voice-over): But despite the best care, you might end up with thin spots, areas where grass is scarce or nonexistent.

GREYTOK: What you can do is taking this rake here and he's raking up the ground and distributing the seed in the thin spot.

WILLIS (on camera): I've done this myself before and I don't necessarily get grass after you put the seed down.

GREYTOK: The key to this is good seed to soil contact. If you have small areas like this, Ben is going to show you a real scientific method for getting seed to soil contact. He'll work it in with his hands and then he's going step on it.

WILLIS: And step on it?

GREYTOK: Right. That's what we're talking about.

WILLIS: That makes it mix up ...

GREYTOK: The seed needs to be in contact with the soil to germinate.

WILLIS: If you're looking for a quick fix, try this.

GREYTOK: You can go to any home lawn center and you can buy sod by the piece. You can buy one piece or 20 pieces.

WILLIS (on camera): It probably costs a ton of dough, though, right?

GREYTOK: It is a lot more expensive. Seed is the more economical route to go, if you really desire an instant lawn than sod ...

WILLIS: Nothing beats this.

GREYTOK: Nothing beats sod.

WILLIS: It's not that the hard to do. Right? How tough can this be? You just roll it out, right?

GREYTOK: Basically, coming in you can see that we've stripped the existing grass away from here and the guys have hand raked it out and applied lime and starter fertilizer, come in, laid the sod and now really all you have to do is water it.

WILLIS (voice-over): So there's just one more thing to do. It looks so easy when tiger does it.

(END VIDEOTAPE)

WILLIS: Let's just say that cheering was not for me. As always, if you have an idea for a weekend project send us an e-mail at openhouse@CNN.com and you can watch past weekend projects on our Web site, CNN.com/openhouse.

A healthy lawn is important, but not nearly as important as the safety of your children and pets. Everything you need to do about treating your lawn and garden safely. That's next when OPEN HOUSE comes right back.

WOLF: I'm meteorologist Reynolds Wolf in the CNN weather center. We're watching the tropics finally begin to heat up. The latest we have, tropical depression number one. The center of the storm located just to the south of Cuba, the center of that 50-mile, south southwest of Cabo Can Antonio in western Cuba.

The storm expected to bring anywhere from 10 to 20 inches of rainfall to western Cuba. Higher elevations may see as much as 30. Now we're watching this very carefully. The storm is expected to move through the Yucatan Channel and eventually moving into the Gulf of Mexico by 2:00 a.m. on Sunday, 2:00 a.m. tomorrow and should be a tropical storm and will be the first named storm of the 2006 Atlantic hurricane season.

We'll talk more about this storm and show you where it's heading coming up in a few moments right here on CNN, your hurricane headquarters.

(COMMERCIAL BREAK)

WILLIS: Don't let bugs trigger turn your field of green into a lawn care nightmare. To keep your lawn pest-free and safe for pets and children this season, forget the fancy fertilizers that have crab grass or grub killers mixed in with them. You are best off getting generic fertilizer and buying repellents separately. Of course, make sure you apply these pesticides on a day when there is no breeze and hake sure your children and pets stay off the lawn for at least 24 hours after you apply the product.

Now to get rid of slugs you just entice them with alcohol. Put beer in a shallow saucer to attract ask drown them. If you're wondering, slugs prefer Bud over Bud Light. I'm not kidding, this have been studies. You will also want to rotate your annual flowers to disrupt the life cycle of the pests.

Even 10 feet can make a difference. To stop deer from making a pit stop, a common problem, put soap bars in a pouch made out of pantyhose or cheesecloth and then the pouch near trees, shrugs or any other plants you want to protect.

We've heard Irish Spring works the best. It must be the strong scent. Do you have tips you want to share with us and your fellow open house viewers? Send us an email to openhouse@CNN.com. We'll be reading some of the tips on future shows and check out our Web site at CNN.com/openhouse.

As always, we thank you for spending part of your Saturday with us. OPEN HOUSE will be back next week NASCAR style and we'll take you on the track to see how NASCAR's stars and their families live their wild lives on the road. Don't go anywhere, your top stories are next on CNN Saturday and have a great weekend.

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