Fiscal Health of Area a New Home-Buyer Query : Real estate: Experts say O.C. crisis shows that the financial status of a community should be checked before purchase.

NEW YORK —  Show me an English Tudor, please, with at least four bedrooms in a quiet town with good schools, low property taxes--and a sound investment portfolio.

Not quite the request real estate agents usually hear.

Yet the question of fiscal health is something some real estate experts think prospective home buyers should consider because of the financial fiasco in Orange County and budgetary problems elsewhere.

“If you’re buying a home or own a home, you certainly should be concerned with the local government,” said Peter G. Miller, author of “Real Estate Investing in the ‘90s.”

In any town there’s usually an abundance of information available for public perusal, like municipal budgets or tax records, although Miller acknowledges most citizens will have little say over something as complex as an investment portfolio.

Decisions on where to invest public funds rest with government officials and often depend on changing conditions in the economy and financial markets.

“You don’t have the ability to influence the investment decisions, other than to elect a new crop of officials,” Miller said. “By that time the damage may have been done.”

That appears to have been the case in California. Orange County--home of Disneyland and many of the nation’s rich and famous--was forced to file for bankruptcy protection late last year after incurring more than $2 billion in losses in its investment fund, where taxpayer money from dozens of municipalities and its own borrowings was put to work in the markets.

The county treasurer-tax-collector, who has since resigned, invested heavily in risky derivatives, complex investment instruments derived from underlying assets like stocks or bonds. Rapidly rising interest rates contributed to Orange County’s downfall, although its growing problems went unnoticed until it was too late.

The problems in Orange County are likely to serve as a warning to other municipalities of what can happen if they compromise their fiduciary responsibilities for safekeeping the public’s money. It also has brought calls for stricter investment guidelines. (Some states, like New York, already have them. Others, like California, don’t.)

“After the situation in Orange County was made known, newspapers across the country carried items from city managers, treasurers, supervisors . . . announcing, ‘We didn’t do that’ ” type of risky investment, noted Dorcas Helfant, former president of the National Assn. of Realtors who also runs Coldwell Banker-Helfant Realty, a large residential brokerage firm in Virginia Beach, Va.

To be sure, financial experts see Orange County as an isolated case.

After the county’s losses were disclosed, several bond-rating agencies and bond insurance companies looked at a number of municipal investment funds and found most were conservatively run.

“Other (problem) situations may occur, though minuscule in scope in relationship to Orange County,” said Phillip B. Lassiter, chief executive officer of AMBAC Indemnity Corp., a leading insurer of municipal bonds.

Lassiter believes companies like Moody’s and Standard & Poor’s--firms that rate municipal bond issues, the public borrowings used to build roads, sewage systems or schools--will continue to take a closer look at investment funds and how they could affect overall fiscal well-being.

Some of this information is available in the municipal bond prospectus, a fat document that details information about a city or agency, its financial health and the uses for issuing bonds.

Individuals expecting to become long-term residents of a particular community should also consider contacting the local economic development office, Miller suggested. The department has information on current and future development projects, which offer a broad look at a region’s economic condition.

Home buyers will want to know, for instance, whether there are plans for shopping centers or hotels, major projects that are likely to provide new job opportunities and help broaden a community’s tax base.

Developers will often choose communities in which to build based on their ability to sustain such business endeavors, Miller noted.

There’s other public information to consider, like the municipal budget, tax records and planning and zoning regulations. Home buyers may also want to read back issues of the local newspaper to get a feel for what’s going on in town as well as the official actions taken by the local government.

Helfant says few clients, though, ask about these things when looking for a home.

“The questions we’re getting are on the . . . crime situation, educational standards, and the tax rate, of course,” she said.

While Helfant thinks it’s a good idea for prospective home buyers to ask questions about municipal finances, she concedes that few realtors bother to make such information readily available. Realtors will refer clients to proper agencies to get whatever data they need, she added.

Lenders also seldom take into account a city or town’s financial health when reviewing mortgage applications.

“There is really no review of a municipality. We’re more concerned about the specific property and surrounding property values,” explained Gay Greene, senior vice president for loan originations at Sibley Mortgage Corp. in Rochester, N.Y.

She says a lender’s appraisal will sometimes take into account economic conditions, although it’s impossible to predict their long-term effect on property values. “It could play a role at some point in time. . . . If there are major problems, property values go down,” she said.

Financial problems--from budget shortfalls to business failures, even government fraud--can adversely impact a community’s quality of life, and that in turn, could indirectly affect home values.

Several cities and towns in Iowa had to put off numerous public works projects and curtail services after a $75-million investment fraud at the Iowa Trust Fund several years ago. One hard-hit town, Marshalltown, was even forced to turn out half its street lights to conserve money.

The full ramifications of Orange County’s investment portfolio loss have yet to be felt. So far, the county has instituted an emergency cost-cutting plan and announced recently it would eliminate 698 jobs.

A cutback in services could also occur since the county is prohibited by law from raising taxes to make up the investment fund shortfall.