Return to Transcripts main page

Open House

Housing Bill Will Help Homeowners from Foreclosures; Burglaries of Vacant Homes on the Rise; Spotting Sneaky Fees; Big-Time Freebies: Do They Really Work?; How to Find Affordable Airfares; Rodeo's Rough Ride

Aired July 26, 2008 - 09:30   ET

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

GERRI WILLIS, CNN HOST: Hello, I'm Gerri Willis and this is OPEN HOUSE, the show that saves you money.
We begin with a housing bill we told you so much about on this program, a bill to help hundreds of thousands of struggling homeowners may become law. President Bush reversed his position and he says he will sign it. The bill will provide aid to 400,000 homeowners from foreclosure by letting them refinance with more affordable, government insured loans.

The nation's two mortgage giants, Fannie Mae and Freddie Mac, will also get federal protection for some homebuyers, will get new tax credits and loan limits on conforming loans will increase. While policymakers now just don't see this bill as the silver bullet to save the hosing market, many believe it's a vital step in boosting confidence and adding stability to the economy.

Well, more and more homes are sitting empty these days. New home builders can't sell old homes foreclosed upon by troubled lenders. With no one to stand watch and no one to pay the alarm bill, burglaries of the vacant homes are on the rise.

CNN's Rusty Dornin has that story.

(BEGIN VIDEOTAPE)

RUSTY DORNIN, CNN CORRESPONDENT (voice over): Empty and boarded up, no one is supposed to be in these vacant houses.

UNIDENTIFIED MALE: Atlanta police.

DORNIN: When Atlanta police officers Brian Ernest and Bernatt Collins get a burglary call to these houses, they know everything inside the house will be stripped right down to what's inside the walls.

UNIDENTIFIED MALE: Every ounce of wire that you can see, it's all the copper is completely ripped out of this entire house.

DORNIN: From Boston to Stockton, burglarized vacant homes are becoming more common as foreclosures climb and developers are unable to sell newly built homes.

Here, a stone's throw from the skyscrapers of downtown Atlanta, the all too familiar signs of the housing crisis. It's so bad here the Atlanta police department created a special burglary detail. Ernest and Collins' main job is to watch over the empty homes.

OFFICER BRIAN ERNEST, ATLANTA POLICE DEPT: Especially recently, it's really picked up. The neighbors have been calling and saying that they're hearing banging or they see a vehicle parked in a house that's supposed to be vacant and they're loading up the vehicle.

DORNIN: Across town, Wanda Vaughn and her mother Vera run a contracting service. They're hired to fix what's been broken and replace what's been stolen.

(on camera): How bad is it when you come upon a house like this that's been foreclosed and vacated?

WANDA VAUGHN, CONTRACTOR: Well, you find the sheetrock has been ripped out, the hot water heaters have been stolen out for copper, the AC units are missing and the windows are busted out, doing thousand of dollars worth of damage -- thousands, for just like $30 or $40 worth of copper.

DORNIN (voice over): Rising copper prices are driving the thievery, but that's not all the burglars want. We followed Vaughn into a house where one room was nearly unrecognizable, the kitchen.

DORNIN (on camera): They took everything. So, they took the stove, the cabinets, the sink. Everything including the kitchen sink.

(LAUGHTER)

(voice over): Officers say "bold" is a polite word for these thieves who march down the street in broad daylight with their booty.

OFFICER BERNATT COLLINS, ATLANTA POLICE DEPT: They have book bags full of copper, sometimes baby carriages, shopping carts, little bit of everything, whatever they can be push, pull, to get this stuff out, they use.

DORNIN: On patrol, Collins and Ernest notify the code enforcement when houses are vacant, the owners are ordered to board them up. But, it's not always easy to figure out who exactly owns the house and if it's repaired, the burglars often rip everything out again and again making it less attractive for people to buy in these neighborhoods. Keeping Ernest and Collins checking on houses that no one wants to call home.

Gerri, this is an example of one of those houses that has yet to be boarded up. It's scheduled to be auctioned and this is the house we've been showing you, the one that had the copper ripped out, as well as all of the cabinets and even the kitchen sink. And one of the owners here, community developer, Bob Forbes.

You're trying to keep them out. What are you doing to try to keep these guys from ripping you off?

BOB FORBES, COMMUNITY DEVELOPER: We're putting steel over the windows, we're putting steel over the doors. We're trying to stop them from coming in any way that we can, just long enough so we can keep it in the condition where we can sell it.

DORNIN: Now, have you had it where you've put the things back in and repaired everything and then they've -- only to have them come back?

FORBES: We pulled -- put them in, they pull them out, we put them back in. Insurance companies are my -- I'm their best customer, right now.

DORNIN: Your best option is to try to just get somebody moved in here and you're trying to have these houses sold to police and firemen, that sort of thing?

FORBES: Police, firemen, anybody working downtown, it's a down market right now that makes these houses that once weren't affordable, they're now affordable to people that are working in downtown Atlanta.

DORNIN: But soon they may not be affordable if you have to keep fixing them, right?

FORBES: That's true.

DORNIN: OK, Gerri, as you can see, just for $30 or $40 worth of copper, some of these people are causing $15,000, $20,000 worth of damage and it's just tough to keep them out -- Gerri.

(END VIDEOTAPE)

WILLIS: Rusty, thanks. Amazing story.

Well, elsewhere in this economy this week, new numbers for the battered housing industry were released and it's not looking good. Continuing the worst slump in over 20 years, sales of existing homes plummeted more than 2.5 percent, more than double what was expected.

Minimum wage has been increased this week, 70 cents to 6.55 in hour, the second of three hikes that will take it to $7.25 next July. Jobs took a turn for the worse as the Labor Department reports that number of unemployed people jumped by 40,000. Last time we saw higher numbers, after Hurricane Katrina in 2005.

And women are now leaving the workforce at the same rate as men, a trend that could have critical consequences for families nationwide.

Coming up on OPEN HOUSE, thieves, how to spot them and what to do about them. And the not-so-friendly skies, the latest on the airline industry and how you can still find a good deal.

Plus, another victim of sky high oil, the good old American rodeo.

(COMMERCIAL BREAK)

WILLIS: Well, you probably know about the six percent commission paid by the seller of a home to the real estate agent. Typically, buyers pay nothing or so they may think, one blogger says 40 percent of buyer contracts now have what they call "sneaky fees" tucked inside. Joining us now with everything you need to know is Bob Sullivan, the author of "Gotcha Capitalism."

Bob, great to see you, and great book, by the way. Let's talk about the sneaky fees. This is annoying. So, buyers now paying some this -- why? Why are they charging us even more money?

BOB SULLIVAN, GOTCHA CAPITALISM: Well, you know, the real estate industry is in a lot of trouble right now and it's not surprising that folks who were involved in it: mortgage companies, brokers, real estate brokers, they're doing whatever they can to stay above water a little bit.

There has been for a long time a high water mark, if you will, that sellers would pay the commissions for real estate agents and buyers would shop for free. Now, of course, those costs ended up in the house, but for the most part they didn't pay those commissions.

WILLIS: But, it doesn't happen that way anymore as we were just saying.

SULLIVAN: No, no, that line apparently has been broken and now there are these administrative fees which are appearing in a lot of people's forms at the last minute of between $200 and $500. People really need to look for those when closing on a home.

WILLIS: I don't want to just look for them, I want to get rid of them.

SULLIVAN: Well, the good news, because this is relatively new, all of the folks who I've spoken to say the minute that a buyer balks at this, points that out and says I'm not going to pay that, for the most part the agents give in immediately, so it really is worth of taking the extra minute to read that and strike it out.

WILLIS: Excellent news. All right, you know, another really expensive thing, and it makes no sense to me, title insurance. Who needs title insurance anymore? Of course we can find out really easily who owns the property if a title is free and clear, there's lots of places to go on the Web. What's up with that and can I get them to charge me less?

SULLIVAN: Title insurance is a racket, now. I mean, it's a relic from an older time when there might be multiple claimants on a property. It's an incredible business, but what's really important for folks to know, of all the hidden fees that occur when you buy a home, outside of the stuff that goes on with the mortgage title insurance is probably the biggest one. Here in Washington, D.C., you can easily pay about $2,000 for title insurance on a regular priced home, that's a lot of money.

WILLIS: It's a lot of money, but how do I reduce that?

SULLIVAN: Well, it's very hard because there isn't a lot of competition in the title insurance business and for the most part, your bank is going to require it. But, the thing that everybody needs to do, even if your agent says I work with this title company all the time, why don't you use them, make sure you get at least two, and preferably three different bids for title insurance. At least you'll get a little competition going and you'll probably reduce the price a little bit. But, it won't go down a lot, but it's really worth getting the bids anyway.

WILLIS: Great idea. OK, here's my pet peeve. No fee mortgages. Who thinks there's anything such as no fee mortgages?

SULLIVAN: Well there are banks are generous, right? I mean, they just want people to buy homes. That's what they're in the business of doing. Right? No. There's no such thing as a no fee mortgage. It's very, very hard, I think, for consumers to compare apples to apples when they're getting mortgages and it's hard even if you just try to go to a couple banks on different days. So, there's no such things as a no fee mortgage, all the costs of that loan are going to be rolled into the loan somehow.

So, here's what I want people to do: When you're looking at house, when you're getting a mortgage, go to at least two banks and one mortgage broker on the same day, if you can, because mortgage rates fluctuate and get a good faith estimate, get three of them, make sure you're comparing exactly identical mortgages and that's easier if you do something very simple like a 30-year fixed loan with no points and then you'll be able to see what the real cost of the money is.

Even if you end up adjusting that and you decide to pay a point later on or, god forbid, go with a variable rate mortgage right now, but, at least when you're comparing banks, get a good faith estimate, get the simplest loan you can and then the fees will emerge pretty clearly from the piece of paper.

WILLIS: All right, Bob Sullivan, great information. Thanks for your time, today.

SULLIVAN: Thank you.

WILLIS: While we're on the topic of home sales, here's a pitch for you: buy a house, get a car. Well, it sounds like a pretty extreme incentive, but it's not the only one out there these days. Do these big-time freebies, though, do they really work? Well, it may depend on who you ask.

Here is CNN's Kate Bolduan.

(BEGIN VIDEOTAPE)

CATHERINE POE, HOMEOWNER: Come on upstairs.

KATE BOLDUAN (voice over): Maryland resident Catherine Poe bought this three-bedroom colonial with her daughter as an investment property in 2005, they share a love for restoring historic houses.

POE: They always had two parlors on those days. BOLDUAN: They have fixed up and resold two historic properties before no problem, but not this time.

POE: It was the beginning of what people just thought was going to be a blip and it sort of went blip, blip, blop. It dropped drastically.

BOLDUAN: The house has been on and off the market twice in two years. Poe's hoping the third time is a charm with the help of a Prius thrown in.

POE: I'm hoping that it makes people say, "Oh, let me go take a look," because that is something wonderful.

BOLDUAN: Extreme economic times calling for extreme house- selling measures, a free car, a free vacation, raffling off a house for $100 a ticket and even buy one house, get one free in the case of one San Diego developer. All examples of creative incentives and the lengths people are going in today's floundering housing market. Poe's realtor says it's a first for him, but worth a try.

CHUCK MANGOLD, REALTOR: You have to make a specific house more attractive to a buyer so that it can compete with the inventory that is out there.

BOLDUAN: But the National Association of Realtors warns the creative incentive may not be the best way to close a deal.

ELIZABETH BLAKESLEE, NATIONAL ASSOCIATION OF REALTORS: You're going to offer incentive, offer closing cost helps or if it is a condominium offer to pay condo fees for six months. Your incentive ought to deal with what you're doing.

BOLDUAN: Despite the draw of the free Prius is just a handful of people showed for Catherine Poe's open house. She is now expected to take a loss of $60,000, further proof the house slump has not yet passed.

POE: The love affair with historic houses is still there but we have to be realists also.

BOLDUAN (on camera): The National Association of Realtors says these kinds of incentives are often negotiated out during the sales process. Poe says if the buyer doesn't want the car, they will gladly the 20 grand off the price of the house instead.

Kate Bolduan, CNN, Washington

(END VIDEO CLIP)

WILLIS: Still ahead on OPEN HOUSE, long lines, plus countless surcharges equal customer dissatisfaction with the airline industry, but we'll tell you how you can still score some cheap seats.

Plus, we'll take you to the rodeo. The cowboy way of life threatened by sky-high fuel costs. (COMMERCIAL BREAK)

WILLIS: Fifteen successful fare hikes so far this year, fees to check your bags and exorbitant charges if you need to change your plans or add a bag or anything else. Yep, we're talking about the airline industry. And we're joined now by our friend Rick Seaney of FareCompare.com.

WILLIS: Rick, great to see you.

RICK SEANEY, FARECOMPARE.COM: Good to see you.

WILLIS: You're usually on our show when we have fare hikes, so I haven't seen you in awhile.

SEANEY: The airlines have been actually quiet for about three weeks.

WILLIS: How come, though, what's going on?

SEANEY: I think, personally, what they're doing is they're figuring out how to cut 10 percent capacity out of their system and messing with their flight schedules, so by the end of the year we're going it lose 10 years of growth in the airline industry. So, 10 years worth of growth that we had will have less flights, so we're going back to 1998 for the level of flights in the U.S.

WILLIS: So, fewer flights, let's see, that must mean higher price.

SEANEY: Right, so the idea is if we can keep the planes full, prices -- we can be kept high as we do increases they'll stick. Competition tends to drive prices back down and when the planes are full, competition isn't as big a deal because the bottom line is if there is no empty seats, there's no reason to discount.

WILLIS: You know, I think a lot of folks out there, they're thinking: I want to buy my tickets for holidays in December. What's advice to these folks?

SEANEY: Well, there's a couple of things you absolutely need to do, you need to start shopping right now, not necessarily buying, but you need to start shopping, right now. We're likely to have more price increases over the next two to three months. Prices are going up drastically after November 1, anyway.

WILLIS: What do you mean drastically?

SEANEY: Well, anywhere from $100 to $150 round trip. It's sort of this -- there's this October Halloween surprise that's occurring. If you buy your ticket before Halloween, prices are down about $100 less.

A lot of it has to do with capacity cuts on the flights that are out there. They've raised prices after travel, after November 1 to match up with fuller flights and also to -- you know, those two weeks around Thanksgiving and, you know, the last half of December where holiday travel is -- they're going to get a premium for that anyway because that's when everybody wants to go.

WILLIS: What are the best days to fly and what's best time of day to make your reservations online, if you're doing that?

SEANEY: Absolutely, the three best days to travel are on Tuesday, Wednesday and Saturday. In fact, the airlines file special airfares that say, this airfare is only go on Tuesdays, Wednesdays and Saturdays. Those are always your best bet. It's the slowest day, less crowds at the airport and cheaper.

Now, from a buying perspective, airlines tend to have sales and they do still have sales regardless to what people are saying -- they're just harder to tell. They tend to be on Monday and Tuesday and they tend to raise airfares on Thursday and Friday. So, really a good time to start shopping is around Tuesday afternoon. Maybe you get a sale in there and you're before the hikes occur later in the week.

WILLIS: Rick Seaney, great information. The Web site is called FareCompare.com. Thanks a bunch.

SEANEY: Hey, great.

WILLIS: Up next, bailing out of the competition. Rodeo riders forced to reconsider their profession all because of prices at the pump.

(BEGIN VIDEOTAPE)

WILLIS (voice over): San Diego, fun, sun and miles of sandy beaches. But this weekend bring 100,000 comic book fans to San Diego for Comic-Con International.

This four-day event dating back to 1970s has expanded to include everything from animation and video games and Web comics and don't miss the masquerade -- Comic-Con's annual costume competition. Prizes will be awarded for best recreation, best original design and most humorous. And while you're in town, stop by the Arco Olympic training center in Chula Vista.

The 150 acre complex is open 365 days a year and guided tours are available at no cost. You may even catch a glimpse of an Olympic hopeful in final preparations for Beijing.

And that's your "Local Lowdown."

(END VIDEOTAPE)

(COMMERCIAL BREAK)

WILLIS: OK, we're all feeling the pain at the pump these days, but have you given any thought to cowboys? That's right, rodeo riders struggling with sky-high diesel prices.

Our Thelma Gutierrez has that story.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Steer wrestler out right now.

THELMA GUTIERREZ, CNN CORRESPONDENT, (voice over): They are modern day cowboys on the rodeo circuit. Charles Harris from Salinas, California, Darrell Petry, Beaumont, Texas, Matt Reeves, Pampa, Texas. They travel the country to earn a living, and rodeo to make a name.

UNIDENTIFIED MALE: Steer wrestlers getting ready. Charles Harris.

GUTIERREZ: It's a sport where the athletes pay to play.

MATT REEVES, RODEO CIRCUIT COWBOY: This isn't like football where the best of the best get to go to college, it's all an even playing field and somebody else supplies all the equipment. We have to supply our own.

GUTIERREZ: It takes big money to stay on the circuit. Entry fees, animal costs, and now killer fuel prices.

(on camera): So how difficult has this gas crunch been on you guys?

CHARLES HARRIS, RODEO CIRCUIT COWBOY: Oh, very, very.

GUTIERREZ (voice over): Charles has been a professional cowboy for more than a decade. He says some of his friends are dropping out because they can't afford to go from rodeo to rodeo.

HARRIS: Like this truck right here, it's got a 75 gallon tank in the back and a 30 gallon tank for a manufacturer. Back in '99, it would cost you maybe $150 compared to now if I was to drive down to the Pilot in town it costs me $525.

GUTIERREZ: Consider this, these rigs get 10 miles a gallon. Darrell and Matt will drive about 70,000 miles this year to compete in at least 70 rodeos, just to qualify for the national finals.

CRAIG ANDRUS, CALIFORNIA SALINAS RODEO: I mean, last year fuel was $3 and now it's $5 for diesel. I mean that's almost double the expense going down the road because that's their biggest expense is fuel. So, you know, if you think you were going to make some money this year, it just got ate up in the fuel price.

GUTIERREZ: So far this year, Darrell has won $18,000.

(on camera): How much have you guys spent in the last month?

DARRELL PETRY, RODEO CIRCUIT COWBOY: Probably $3,500.

GUTIERREZ: $3,500 in one month?

PETRY: Yes, ma'am. GUTIERREZ: Just on fuel?

PETRY: Just on fuel.

GUTIERREZ: It really cuts into your bottom line.

PETRY: Yes, ma'am. There's almost not a bottom line. We just -- like I said, I mean, it all breaks down to, we do it because we love it, you know, not because we're going to make a ton of money and get rich at it, we do it because we love it.

UNIDENTIFIED MALE: You get to do what you want to do and you get to live your dreams.

GUTIERREZ: The cowboys you just met have second jobs to be able to afford to do what they love. Charles is a farmer, Matt was a schoolteacher and Darrell manages a Salvation Army warehouse when they're not on the road. They say they'd never trade their cowboy lifestyle for a permanent 9-5 job unless they're forced to because of what's happening in the economy -- Gerri.

(END VIDEOTAPE)

WILLIS: OK now, before we go, we want to alert you to a big change announced this week that affects your money. It comes from the Labor Department which wants to simplify reams of gobbledygook you get regarding investment choices in your 401(k).

Now, a new rule would require employers to more clearly lay out the fees associated with each investment offered. Also, employers would organize performance information into an easier to read fashion. Best of all, you'd be able to keep up with the cost of your investments with a summary of fees right up to the dollar.

If finalized, the rule will go into effect January 1, 2009. Some good news for a change. And of course, to keep that 401(k) on track, make sure you have money in lots of different pots: U.S. stocks, bonds, don't forget investing overseas.

You can hear much more about impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN.

As always, we thank you for spending part of your Saturday with us. Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.