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Insurance Settlement Rejected; Fight for Land Rights; The Good, the Bad, the Ugly of Basement Waterproofing
Aired January 27, 2007 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, HOST: Good morning and welcome to OPEN HOUSE.
If you think you own the land under your home or that sidewalk out in front, think again.
Plus, you'll learn about the lies that fly when you buy or sell a home.
And find out how to avoid flooding in your basement.
But first up, let's talk about homeowners insurance.
Susan Roesgen is in our CNN Gulf Coast bureau with the very latest.
SUSAN ROESGEN, CNN GULF COAST CORRESPONDENT: Gerri, this is a developing story here on the Gulf Coast for tens of thousands of homeowners whose insurance claims were denied after Hurricane Katrina. Take a look at this.
This was the beachfront home of Claire and John Tuepker in Long Beach, Mississippi. It was until a 29-foot wall of water from Hurricane Katrina swept the home away. But even worse for the Tuepkers, State Farm refused to pay their $350,000 policy.
The Tuepkers argued that State Farm hadn't required them to carry flood insurance and they argued that wind, which was covered by their policy, is what pushed the water that destroyed their home. Thousands of other property owners said the same thing, it went back and forth for nearly 17 months since the hurricane. Finally, facing a class action lawsuit just this past week, State Farm agreed to settle with about 35,000 policyholders.
The terms of the settlement would be a minimum of $50 million and probably hundreds of thousands more for 35,000 or so policyholders whose claims had been denied but who had not sued State Farm and who agreed not to sue. Both sides were happy with this deal. They expected a federal judge to just rubberstamp it.
Instead, the judge has decided not to approve the settlement. He says he needs more time to make sure the settlement was fair and legal.
Now, again, State Farm agreed to this and the policyholders agreed to this. State Farm has released a statement saying, "We look forward to addressing the judge's concerns. We believe given the opportunity he will come to view the proposed settlement as fair, just, balanced and reasonable."
Now, no comment yet from the legal team headed by Dickie Scruggs. He's a very prominent attorney, trial attorney in this area. He successfully represented several tobacco cases.
This was a huge case for him. He lost his own home in Katrina. He said it was a personal battle and that he, too, was very pleased that both the policyholders and State Farm could come to the table and agree to a settlement.
We have had no comment from Dickie Scruggs or his team yet. But again, the judge says he's not sure that all the I's were dotted and T's were crossed.
More now on where this might go legally. And again, all these thousands of homeowners who are very disappointed now that the settlement has not been approved.
For more on that, we'll go back to our legal analyst in New York, Jeffrey Toobin.
JEFFREY TOOBIN, CNN SR. LEGAL ANALYST: Susan, you know, nothing happens in the legal system very fast, but Judge Senter's message to the parties today was, not so fast. This is a case that is enormously complicated with a settlement involves 35,000 claimants, people whose homes were damaged or destroyed, and of tens of millions of dollars.
It was only reached this week. What the judge said is it's not enough that the parties agree, I have a different responsibility. I have to decide whether this settlement is in the public interest.
This is something that happens fairly often with class action lawsuits, and usually it ends with the settlement being approved after the judge gets some more information. So it does not mean that the deal is off. But the deal is not done. And that's where we stand today with unfortunately more uncertainty.
Gerri, back to you.
WILLIS: Well, from the Gulf Coast to the state of Florida, which has completed a massive overhaul of its property insurance, CNN correspondent Susan Candiotti has the story.
SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Now, you still have damage here from Hurricane Wilma that needs to be repaired?
EDDIE HERNANDEZ, HOMEOWNER: Yes.
CANDIOTTI (voice over): Florida condo owner Eddie Hernandez is not impressed with a new law that tries to blunt skyrocketing homeowners' insurance rates.
HERNANDEZ: What happened is just plastic surgery, makes things look pretty on the outside while not taking care of the problem. CANDIOTTI: The state did intervene to stop two rate hikes of 56 percent and 21 percent by Citizens Property Insurance, Florida's insurer of last resort for homeowners who can't buy coverage anywhere else. But critics say savings of up to 15 percent or so won't help many customers whose rates had already tripled.
Private insurance customers are expected to get savings of up to 20 percent. The savings are supposed to come from an expanded catastrophic fund that increases the state's risk, allowing insurers to pay less in claims. But if a big one hits, lawmakers say all bets are off.
FL. SEN. BILL POSEY (R), BREVARD COUNTY: If there's a big one, people are going to have to pay for it. But we won't presumably pay for it five times while we're waiting for it to happen.
CANDIOTTI: Eddie Hernandez says he can't afford to insure the contents of his home, and he can barely afford condo association insurance that covers the outside of his building. The premiums went up 250 percent.
HERNANDEZ: I am not a rich person. And finances, it's something very difficult.
CANDIOTTI (on camera): If the rates continue to go up, do you think you'll be able to stay?
HERNANDEZ: Absolutely not.
CANDIOTTI (voice over): And if a permanent solution isn't found, that could hurt already declining home sales.
The new law may bring some relief, but...
FL. REP. DAN GELBER (D), HOUSE MINORITY LEADER: Anybody who thinks it's time to uncork a champagne bottle ought to really get their head examined.
CANDIOTTI (on camera): Expect lawmakers to revisit the insurance crisis this spring when they go to work again just a few months before the start of what could be a busy hurricane season.
Susan Candiotti, CNN, Miami.
WILLIS: We will, of course, continue to follow the property insurance story and how it impacts you and your home.
The figures for 2006 home sales are in, and we're seeing numbers not seen in 17 years. Home sales fell 8.4 percent last year. That's the sharpest decline since 1989. This according to the National Association of Realtors. As for the median home price, that held steady from a year ago at $222,000.
And the final 2006 foreclosure numbers are in, too, and they're not good. RealtyTrac reports 1.2 million foreclosures were filed last year, and that is up 42 percent from 2005. In case you're counting, that's one foreclosure for every 92 households.
Up next, you might not own as much of your property as you think.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I own this property, and I love it here, plan to stay here forever. And I just know that my life shouldn't have to change because somebody has the mineral rights.
(END VIDEO CLIP)
WILLIS: We're going to tell you all about mineral rights, why you should be concerned about them.
And floods no more. We'll show you how to stop those basement floods for good.
But first, your "Tip of the Day."
WILLIS (voice over): Keep your driveway and walkway slip free during winter months. Shovel as much snow as possible, shovel early, and shovel often.
Only use salt on icy spots that can't be removed with a shovel. Use calcium chloride rather than sodium chloride salt. It's less harmful, and you can easily find it in most home supply and hardware stores.
While calcium chloride costs three times as much as standard rock salt, you'll only need one-third as much to get the job done. You can also mix salt with sand or kitty litter so you use less of it.
That's your "Tip of the Day."
WILLIS: Think you're the king or maybe the queen of your castle? I know I do. But we talked with some folks who found out the hard way that while you may own the surface, well, what lies beneath may belong to someone else.
WILLIS (voice over): When Tracy McDaniel bought her land on this Tennessee mountain, she thought she found the perfect home.
TRACY MCDANIEL, LANDOWNER: It's trees and forest and hike -- we hike and do four-wheelers and have the horses. Just very relaxing, very, very quiet.
It's pitch black at night. You can see stars everywhere. And it's just -- you know, we just really enjoy the solitude. There we go.
WILLIS: But a couple of years ago, a letter came that threatened to change it all. A local man who owned her property in the 1960s kept the mineral rights when he sold it.
MCDANIEL: I didn't really realize I had a problem until I got the notice from Greer's office saying that he had the mineral rights, which I knew he had the mineral rights, but I had assumed it was for coal, something underground, and he was coming after -- he wanted to come out for the stone.
We have all kinds of thickness.
WILLIS: In recent years, homebuilders have been demanding the rock that makes up the mountain itself. It's become fashionable for countertops and fireplaces, and that makes it profitable.
Now McDaniel and eight other landowners are in a court battle to keep the mineral rights owner from quarrying the stone and disrupting their quiet lives.
THOMAS A. GREER, ATTORNEY FOR MINERAL RIGHTS OWNER: This concept goes back hundreds of years. In America in the Anglo-Saxon jurisprudence it's nothing new. It's really a basic case.
WILLIS: These cases are frustrating and costly for property owners who often don't know what they don't own beneath their property. In fact, as energy and building material prices have risen, more and more landowners are getting the knock at their door.
Farmers in western Pennsylvania were surprised to see bulldozers driving across their land preparing for coal bed methane wells. Trim Gresh confronted a gas company rep he saw driving through his hayfield.
TIM GRESH, FARMER: He said, "Well, we've got the call rights, and we can go and drill any place we want to and we can do anything we need to in order to get to it, just as the old-time coal reserves were set up as."
WILLIS: Landowners often get no compensation from the mineral rights owners who come onto their land to drill or mine, and they generally have no recourse but to put up with a complete change in their way of life.
MCDANIEL: Even if they do own the mineral rights, I still don't think that they have the right to come and destroy the surface, come and destroy my property, come and destroy my life.
WILLIS: What a nightmare. Well, clearly, there's a lot you should know about your property, how much of it you actually own.
Nancie Marzulla is a property rights attorney in Washington. She's here to help.
OK. Do the McDaniels have a case in fighting this or not?
NANCIE MARZULLA, ATTORNEY: Well, they find themselves in a very terrible situation, and I think the major problem they face, of course, is the fact that they don't own the mineral rights.
Now, of course, we don't know for sure, and the courts are going to have to decide if the building stones, in fact, do meet the definition of mineral rights under state law. And that is a key issue here.
WILLIS: Well, Nancie, let me interrupt you here for a second. Is it just a simple title search that would have settled this question to begin with? Shouldn't you know before you buy your house?
MARZULLA: Absolutely. If you own property, you should know if you own the mineral rights or not. And if you don't know and you haven't looked at your title, you definitely should look because any encumbrances or any ownership by anybody else of your property should be clearly and explicitly set forth in your title.
WILLIS: Well, how do I do that? How do I find that if I didn't take notice when I bought the house?
MARZULLA: You can go down to the county, where your title records are kept, where they're recorded. You could contact your title insurance company or your attorney that handled the closing, the sale of your property. It's public record.
MARZULLA: In other words, you should be able to. You should, particularly if you live in a state...
MARZULLA: ... where there are heavy coal deposits and so forth. You should determine if you, in fact -- if there's any question in your mind.
WILLIS: OK. Thank you, Nancie, for setting us straight on that.
MARZULLA: My pleasure. Thank you.
WILLIS: Coming up on OPEN HOUSE, we're going in the basement. It's time to stop those floods once and for all.
Angie Hicks from Angie's List will be here.
And calling out all liars. We're going to help you sort out the lies from the truth in the buying and selling of your home.
But first, your mortgage numbers.
(COMMERCIAL BREAK) WILLIS: OK. Let's talk about your basement. It's where people keep clothes for the next season, stuff they can't bear to throw away -- you know, things like that. And when a major storm hits, the water reaches the basement, and the damage can cost you thousands, or at the very least you stay up all night pumping the water out.
We want to know the good, the bad, the ugly of basement waterproofing to make sure your home is ready for whatever comes your way.
Angie Hicks is the founder of Angie's List.
Good to see you again, Angie.
ANGIE HICKS, FOUNDER, ANGIE'S LIST: Thank you.
WILLIS: So, the holy grail of every homeowner, a dry basement. How do you get one?
HICKS: Well, first, you want to make sure you're do a lot of preventative measures. A lot of times water in the basement could be very -- a very simple problem, gutters that aren't installed properly, downspouts that don't reach out far enough, or even the grading around your house that starts to settle in towards your house -- you're making a nice path for water to creep down in there in the basement.
So check those kinds of items first and make sure that's not a problem before you do actually get those heavy storms.
WILLIS: I was once shown a house that has an actual spring in the basement. It was built on rock, and the realtor said, "You know, this is just the way it is." I mean, do you have to worry about every home having some kind of water in it?
HICKS: Well, you need to check, and you should -- you know, that's one of the things you're asking potential -- asking the sellers about houses, is to find out if they've had problems with water in the base many. Also, if there's a sump pump installed. I mean, a sump pump...
WILLIS: But you know...
HICKS: ... actually going to be a great preventative measure to make sure.
WILLIS: But you know they have problems if you look at a house and it has a sump pump.
HICKS: No, a lot of houses, a lot of newer houses, even, already have them installed. The builder is putting them in automatically, because naturally the water wants to come into that hole. So you want to make sure that you're prepared.
And if you have a sump pump, make sure it's got a backup generator, too, because a lot of times when the storm comes in, the electricity goes out. So you want a battery backup on that sump pump. WILLIS: OK. So the sump pump, number one thing to get if you do have a water problem.
What other kinds of solutions are there out there?
HICKS: Well, you want to make sure that if you do -- another preventative item is, you know, a lot of times you can put some waterproofing paint on the walls which acts as a sealer for it. But if you've got water in the basement, you probably want to talk to a waterproofer.
Make sure you're getting a reputable one. Waterproofing is not an inexpensive task. It can be anywhere from...
WILLIS: Whoa, look at these pictures.
HICKS: Yes. But here's an example of some -- you know, before and after pictures of waterproofing. You could be spending anywhere from a simple job of $2,000, all the way up to $20,000.
WILLIS: Wow. That is a lot of money.
WILLIS: And you have lots of complaints on your Web site from people who are saying, you know, "I was duped. I wasn't given the service that I expected" by these waterproofers you're describing.
HICKS: That's right. In 2006, 28 percent of our reports that came in were either F or D-rated on waterproofers on an A through F scale. So you'll make sure you're getting someone who's reputable. States don't license waterproofing. So you're going to have to rely on your own research.
WILLIS: Or your Web site, though, Angie.
HICKS: Absolutely. We collect ratings on that. And then also make sure you get a lifetime warranty and make sure the company is going to be around to stand behind it in case problems do arise later on.
WILLIS: Angie, thank you so much for your time. I appreciate it.
HICKS: Thank you.
WILLIS: As always, if you have an idea for a "Weekend Project," send us an e-mail to firstname.lastname@example.org. And you can watch past weekend projects on our Web site, cnn.com/openhouse.
Up next, we're out to find the truth and the lies and everything in between. Why buyers are liars and sellers are, too, next.
But first, your "Local Lowdown."
(BEGIN VIDEOTAPE) WILLIS (voice over): Chicago, home to nearly three million people, is the most populous city in the Midwest and third in the U.S. It's also the birthplace of air travel. The first commercial air passenger, a female reporter for "The Chicago Herald-Examiner," departed Chicago for San Francisco in July of 1927.
Take a walk on the world's longest street, Western Avenue, which stretches almost 26 miles. The Magnificent Mile has 3.1 million square feet of retail space, including 460 stores, 275 restaurants, two museums, and one aquarium.
And every year Chicagoans dye their river green to celebrate St. Patrick's Day.
That's your "Local Lowdown."
WILLIS: Lies, we all tell them. Well, I don't, but when it comes to buying or selling a home, let's just say the truth can really be stretched. Well, we've got a little cheat sheet today to help you keep from getting duped.
Richard Courtney is author of "Buyers are Liars & Sellers are Too."
Richard, good to see you.
RICHARD COURTNEY, AUTHOR, "BUYERS ARE LIARS & SELLERS ARE TOO": Good to see you.
WILLIS: All right. You say buyers and sellers just keep making the same mistakes over and over again.
COURTNEY: That's correct. That's why I wrote the book. After the first 200 or 300 transactions, I realized the same mistakes were being made over and over, as buyers and sellers alike try to overstrategize. And they try to see into the psychology of one another.
And I wrote this to explain what people are really thinking on both sides of the deal.
WILLIS: Let's get right to some of these lies.
COURTNEY: All right.
WILLIS: You say buyers and sellers, hey, you can accept counteroffers.
COURTNEY: That's right. Many times a buyer will make an offer that is a lowball, for example, offer, and they say, well, they can always counter. And many times there is no counteroffer coming.
So if they make a really bad offer to begin with, there would be a counteroffer. And on the same time, when a seller receives an offer that should be acceptable, they think, well, the other person expects me to counter. So, therefore, I will. And many times that's the last you'll see of that buyer.
WILLIS: OK. The one I really like here, the basement never leaks. Hmm. True or false?
COURTNEY: Basements always leak at some point and somehow. Count on that.
WILLIS: Exactly. I love that. That's great, because you always get told that, and then it turns out not to be true.
COURTNEY: That's right.
WILLIS: Who says advertising sells houses?
COURTNEY: Sellers think advertising sells houses. If we took out -- and certainly, of course, if we'd advertise on CNN or somewhere, we would absolutely sell the house.
But in most cases, advertising does not actually sell the house. It's usually through networking, through realtors, or people driving through the neighborhood, open houses, or other ways. But there's no way to advertise a house, and there's no proven way to sell a house through advertising.
WILLIS: And this is important, I think. You say truth in lending, not so much.
COURTNEY: Right. Law dictates that any lender must send out a form called a Truth in Lending Statement. And what -- a Truth in Lending Statement really has to cover the lender for the worst-case scenario that could absolutely happen in that transaction.
So people receive their Truth in Lending statements, and they're shocked because the annual percentage rate, APR, is higher than the percentage rate they've been quoted, and that's because the government requires the lenders to add all the miscellaneous fees that are charged into that statement.
WILLIS: You know, I love this. You say everybody expects houses to be priced just a little bit above where they should be, maybe a little 10 percent in there. But is that true?
COURTNEY: That is not true. Normally, when a person lists a house, we look at it in a number of ways.
First, is how long does the seller want to have the house on the market? And if it is for an extended period and they don't care, sometimes the price can be a little higher. But normally, the price is exactly where it should be for that market, for that time period, in that condition.
WILLIS: You say that there are people out there that say that buyers don't need a real estate agent. True or false? COURTNEY: Well, I wouldn't want to go into court and use the other guy's attorney. So that's the way I look at a real estate transaction. I think each side needs to have representation.
WILLIS: Because it's really a conflict of interest, isn't it?
COURTNEY: I think it is. And some -- some companies believe in dual agency or facilitator. But I feel like if the listing agent has gone into that house and told the seller, "I'm going to get you the absolute best price with the best terms that you can receive," and then for the buyer to use that same agent and think that they have an advocate there, I think, is a mistake.
WILLIS: One of the dirty little secrets of the industry. And you brought many of them out today.
Richard, thank you for joining us.
COURTNEY: Thank you.
WILLIS: Next week on OPEN HOUSE, we're going to tell you how to cheat at cleaning. And we want to hear from you. Send us your cleaning shortcuts, and then we're going to share them with your fellow OPEN HOUSE viewers.
Send us an e-mail to email@example.com.
And you'll find more on today's guests and topics on our Web site, cnn.com/openhouse.
As always, we thank you for spending part of your Saturday with us.
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