Real Estate Investing

My brother just uploaded some photos of his house and the neighborhood where he lives in Dawson Springs, Kentucky where they are being clobbered with the ice storm.  My parents bought a generator yesterday - much to my relief - just in case they lost power.  My mother just told me that power is out intermittently throughout the area, but they are still good to go… besides they have a generator now just in case.  Meanwhile, here are a couple of pictures I’ll share from my brother.

This first is the back of his house where clearly a tree came tumbling down. Fortunately, no broken windows and the roof looks to be intact.

This next photo is his neighbor’s house.  There’s looks worse - I know the antennae on top of the house has been toppled and maybe the gutters were damaged, but otherwise they may also be okay.

I’ll post more photos if I get any in.  Email me your winter ice pictures at kathy (dot) tyson (at) comcast (dot) net if you’d like to see them featured on Banks.com.

Each week my company publishes a newspaper insert for our local paper featuring homes, open houses, and auctions.  Usually the editor also features a local charity (e.g., United Way, Elephant Sanctuary, etc.) that I don’t pay a lot of attention to.  I know, my bad.  I should be more sensitive to the needs of charity.  This week, however, the feature story was about avoiding foreclosure and my neck loudly cracked due to the speed of pouncing on the article.

The article is packed with good advice and since I’m all about sharing the good stuff, I’m passing it on to you.  First, credit where credit is due:  Janet Mills is broker of the Rutherford Office of Bob Parks Realty and wrote the article from information provided by Thom Scott of Fusion Real Estate Consulting.

If you are a home owner behind on your mortgage payment, you first need to be in touch with your lender.  Don’t put your head under a rock and hope the problem goes away - it will not.  By keeping an open line of communication with your lender, they should be more willing to help you through the problem times.  If there’s no way you can ever get caught up on your loan, however, a short sale is a better option than foreclosure.

The Short Sale results from a negotiation with your lender. This is often helpful to both lender/seller when the value of the property is equal or less than the money owed and the owner can no longer afford the monthly payment.  The negotiation involves setting  a reasonable market price; the owner and the lender agree to accept the price the market will bear. This can result in less than the amount owed on the property.  This will create a deficiency, i.e., a remainder on the loan that will not be paid off by the sale.  The lender can forgive this deficiency, or it can be recorded as an amount owed by the owner to the lender.

Forbearance is another option closely related to the short sale.  This is also negotiable with the lender to reduce the amount of your monthly payment for a defined amount of time - and you won’t be reported as being late or deficient to the credit bureaus, according to the article.

Forbearance will require all the same documentation and information as the short sale, plus a detailed budget showing all income and expenses for the household. However, it can work to the owner’s advantage. While the homeowner is making the newly negotiated payment and if you have negotiated correctly, the bank is reporting that you have made your payment on time. You are actually building positive credit while you work yourself out of a difficult situation.

When people are in a state of financial distress, they often don’t reach out for the help that’s available to them.  We urge you to make some phone calls for help… your lender is a great first step or find a financial advisor who can also help you find solutions.  A simple search on Google for “Financial Advice” brought over 15 million links.  Reach out.  Get help.

A large number of people have been refinancing their mortgages since rates have been at historic lows.  We’ve heard time and again that loans are hard to come by, but realistically even FHA is offering some great deals.  In addition to folks who retained a good credit score, others who were swept into homes via let’s just say “not completely honest” methods have also been looking for ways to get out of their high interest mortgages.

A friend of mine - and let me stress that I was *not* her agent - has told me hair-raising tales about how she got her home loan.  Not only did her Realtor encourage my friend and her husband to fudge numbers, but their lender did the same.  And she bought a home for a little more than $118,000 and they were paying a whopping $1200 p/month on the mortgage.  Her payment should’ve been closer to $850 - and that would include property taxes and homeowners insurance.  Given that obscene rate they received, I think it’s fair to say in today’s stricter mortgage market it didn’t quite pass the sniff test.

But here’s the rub.  I say STRICTER MORTGAGE MARKET, but I think lenders are *still* doing weird things.  Here’s why.  My same friend wanted a lower interest rate so she called her lender.  The lender didn’t tell her to do this, but said they couldn’t work on the rate with her unless she missed a mortgage payment. She has struggled every month since May of 2004 to make her mortgage payment on time.  She’s been late on other bills, has denied her children toys, passes on clothes… she’s done everything right to make that mortgage payment because she understands and honors her priorities.

Let’s let what the lender said sink in… they wouldn’t work with her until she misses a mortgage payment.  So December rolls around and my friend decided to skip out on her mortgage payment in favor of buying the kids Christmas presents.  They had a great holiday season!

She and her husband called the lender in January - after having missed December’s payment after paying ontime for four and a half year - to see if they’d NOW work with them to lower their monthly amount due.  The lender was incredibly kind and friendly to them where they were unhelpful and stubborn before.  She just heard today that her payment is now $880 p/month rather than $1200.  AND they think they can do a full refinance and get the payment down to the $700’s.

This is FANTASTIC for her, but it begs the question - what is wrong with this picture???  There is NO HELP for people doing the right thing, but be late on one payment and mortgage companies roll out the red carpet for you. Seriously, mortgage companies are just plain weird.