Real Estate Investing

For some people, foreclosure doesn’t mean they’ll be losing their house.  Fannie Mae is offering a Deed for Lease program for people where people may rent their homes back from Fannie Mae for up to 12 months.  In return, they hand over the deed rather than going through foreclosure.

According to Miranda Marquit over at Loan Shak, there are benefits and problems,

These might be an elegant solution for those who are desperate to stay in their homes rather than lose them to foreclosure. However, it is important to note that if you participate in this program, you will no longer own your home. The money you have put into so far is basically gone, and when you pay your lease, it will be like you are renting again. Although, there is a strong possibility that you will avoid the credit stigma that can come with foreclosure.

When the option is to ruin your credit score and live on the street, I think it’s a pretty good choice for some people.  But not everyone will be eligible.  Fannie Mae says,

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property.  Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Once a property is sold by Fannie Mae, the lease is assigned to the buyer who may then continue accepting rent from the former owner or ask them to find another place to live.  Meanwhile if it keeps a roof over someone’s head for another year and all the other planets line up, it sounds like an excellent option.

Buying a house for practically nothing seems to be all the rage these days.  I cruised through my MLS earlier finding foreclosed, bank-owned, and HUD-owned homes for a buyer.  I was absolutely shocked that probably 90 percent of the houses I saw were distress sales - I’m talking about homes valued under $120,000 in my market.  So the deals are easy to find, but there are things you’ll need to know:

1. If you’re in a hurry, stay away from short-sales.  There’s no guarantee that they’ll close in 30 to 45 days.  In some cases, it could take up to a year!  Short sales are perfect for peole who DON’T CARE how long it takes and for those who DON’T CARE if they have to walk away from the house.
2. If you buy something AS-IS, go ahead and hold on to your right to an inspection.  Make sure there are no major systems that need to be replaced - an surprise huge expense.
3. If an AS-IS home is on septic, get the septic inspected both for capacity and that it works.
4. Get the water tested if it’s not city water.  There are plenty of places out in the country that still have well water.  Don’t think for a second that e-coli or other contaminants can’t have gotten in if it’s covered.  You don’t want to spend your new home time in the bathroom - or hospital!
5. Be prepared to replace carpet, fixtures, and paint.
6. Be prepared to replace the broken heat/air unit.
7. Be prepared to buy a new roof, new windows.
8. Check the age of the home - if it’s older you may also be replacing the old plumbing pipes.

Buckle up and hold on because it could be a bumpy road.  It’s a road that you could maneuver but expect plenty of surprises. And maybe in the end, someone’s trash can be your castle.

I was torn today about what to write:  who cares if Wall Street talent leaves or imagine no foreclosures (it’s easy if you try).  So I’m giving you my $.02 worth on the whole “losing our best and brightest” on Wall Street if we don’t give ridiculous bonuses.  My take?  Don’t let the door hit you in the behind. So what if you leave? You’ll just go somewhere else who’s lost someone because of greed.  It’ll be like wife swap, except we won’t get to send you up in a metallic type balloon at the end.  No, you’ll get the parachute - a golden one.

Or you’ll join the millions of other people who are unemployed - join the throngs that you are partially responsible for causing job loss to.  Clearly had you been doing a better job, we wouldn’t have seen the economy dive anyway.  So again, don’t let the door hit you in the behind.  Let’s give someone else a chance and hope they don’t mess up like you did.

Someone who has ideas like how to end foreclosures.  I love this idea!

How about this. Let’s have a federal bill that states that any bank that took a bailout loan and hasn’t paid it back yet isn’t permitted to foreclose on anybody’s primary residence. In addition, bonuses for senior officers at lending institutions will be reduced by a factor tied to its foreclosure record for that year. High rate of foreclosures would mean low bonuses.  At the same time, institutions that refrain from foreclosing on people’s homes would be granted tax abatements on their profits indexed to the amount they are putting at risk by allowing homeowners to renegotiate their loans and remain in their residences.

I can only hope Stanley Bing - through his work at Fortune magazine - gets this idea out… complete with how it’s a two-way street.  No more walk-aways or jingle-mail by homeowners either.  I’ve done my part!  Spread the word!