Real Estate Talk and Views

Yesterday I had the privilege of meeting with a couple of sellers at a mortgage modification workshop.  Some insight into what people who can’t sell their homes and are worried about foreclosure.  Here are some of the questions and some of the discussion in short form.  Remember, I am not an attorney and this is not to be taken as legal advice, it is anecdotal information observed by me while being involved with some different properties.  Each lender will handle their loans differently.  The common factor here is that the legal system has particular guidelines. If you need to ask legal questions about foreclosure law, please consult your attorney and accounting professional.

Q. “When the lender forecloses you have to get out right away, right?”

Ans. In Michigan when you miss your payment is 30 days past due you are in default, usually by the time a homeowner has missed 3 payments the bank and the collection department have been in contact(Note, return or answer those calls, they will try to work it out with you and possibly you will come out of it okay, it is better than going to foreclosure). At  90 days the loan is in serious default and the legal system begins to take over. Notice is served on the property by a posting on the property.  In our area it is usually a notice tacked or stapled to the property by a deputy of the local sheriff. The “Sheriff’s sale takes place in 30 to 45 days at the law center or court house, not at the property.  The “buyer” usually the bank, then has to wait for 6 months (in cases where acreage is involved it can be 12 months) to take physical possession of the property, this called the remeption period. It is a time that you could rescue the property by paying it off.

Q.   Can I still live there after the Sherrif sells my house?

Ans. Yes, until the redemption period is up you can live in it.  But if you move out, the lender may be able to accelerate the foreclosure period and take the property back quicker because the property was “abandoned.”

Q.  “I have heard that the bank can take all of my property and even my retirement too, is that true?”

Ans. No.  They can only foreclose on what they have in the mortgage. No more, no less.

Question:  What happens, do I pay  my house payments during the foreclosure?

Ans:  No.  Not unless you and the bank come to some kind of agreement like a mortgage loan modification and you agree to make the payments on time.  Remember they, the lender is in the process of taking it back. The only thing they will accept technically are the total of the fees and costs plus the principle along with accrued interest for payment in full. Recent experience indicates that some lenders will “deal” on some of that and perhaps roll it into the mortgage.

Q. How does a foreclosure affect my credit?

Ans. Well, it is serious.  The lenders I have spoken with tell me it will be about a 400 pt hit on you credit score. Really foreclosure is the last resort.  There are a number of things that can possibly be done before you get to that point.

These are the few of the questions  covered in my workshop.  If you have questions or comments, please feel free to jump in on this and we can talk.

For many years now I have been engaged in what I call “e-mergery.”  As I see it, technology of the internet and that of the normal daily functioning in the office and dealing with all kinds of people, are begining to merge.

Yesterday it seems, we could load half a dozen photos onto the MLS for our listing presentations. And the day before that, it seems, we could maybe have one photo. Then virtual tours, multiple galleries of photo spreads have all become the new standard.

Last week I was in a car dealership looking and testing a car.  The salesman asked, can I get a brochure for you?  When I responded I even surprised myself when I said, “no I can get all I need to know on the internet.” His response was “boy, when I saw the internet start and they were selling cars I thought it was going to be trouble.”  Well buck up cowboy, it is here.

Agents are being challenged to get with it and to stay with it.  Keller Williams Realty, my company and franchise started something about 6 or 7 years ago called E-agent-c, and, with agent financial support and the support of the founders, this has grown and continues to grow into a huge new wave of ways or how we do business on the internet. Our Keller Williams Listing System offers a new platform that is not fed by the local and international mls systems.  But what it does to is to feed out to www.trulia.com, Google Base, Yahoo Real Estate, Homescape, www.zillow.com , AOL Real Estate, www.yuvie.com and www.cyberhomes.com plus being available on our local agent and company pages.

 In addition to that we feed from our local print advertising called Showcase of Homes  into another dozen or so internet home search sites. And then there is www.moveinmichigan.com which is the consumer side of the MLS called Real Comp.

And tonight I just finished tinkering with my homepage at www.parkplace.com to make it even easier and more enjoyable for the home buyers and sellers who visit there to get local real estate information using their “mouse to find a new house” by mousing over the map that can be clicked on to show literally thousands of homes with access to lots of information.

Henry Burke, a fellow I knew many years ago was approaching, I think 72 at the time.  He was an eccentric person with the attitude “when you are green you are growing, when you are ripe you are rotten.”  So this Realtor knows that every morning he’d better get up, get moving, keep learning and keep growing his business or you know what according to Henry, will happen. 

Cheers

Leasing your home because you have not been able to sell it at a price that is suitable for you may be an option.

Leasing, or renting a home, is not without its own set of problems, but in some situations it is ideal. Legal experts on mortgage law will advise that your mortgage may or may not permit you to lease your home. If you are really fussy, and you should be, you can contact your lender and ask them if it is permissible to lease out your home as long as you meet the mortgage obligation on time each month.  Many feel that as long as the payments, taxes, insurance and fees are paid ON TIME each month, they don’t care what you do.  So that is consideration #1, you are responsible to pay the mortgage payment and keep up the taxes and insurance on the property regardless of any rental income. But if you can’t sell, need to move and want to pay the mortgage but can’t support two house payments, leasing one out may be the answer for you.

Your tenant, on the other hand, has no responsibility for these items.  Their only responsibility is to pay you the rent or lease payment that is due to you each month and to maintain the property under the conditions set out at the begining of the lease period. So, for the owner there is risk.

Why Would A Home Owner/Seller Want to Lease to Someone Else?

   Usually it is because they:

• Want to/have to move and can’t sell
• A divorce and/or separation makes it not possible to maintain the payment and the homeowner does not want to ruin their credit and can’t sell.
• The mortgage is more than the house is worth and the seller/owner does not want to lose the home to foreclosure or short-sale.

Probably there are a dozen or more different reasons why someone would want to do a lease.

What Are The Main Differences Between a Lease and A Lease With Option to Buy.

A lease is for a definite period of time.  Commercial leases, for example, are typically for 3 to 5 years or longer. It is a legal and binding contract, in effect, to pay a specific amount over a period of time in total.

Residential Leases are generally for a period of at least one year but can be shorter or longer.  If the lease were for $1200.00 per month, the contract would be for 12×1200.00 or $14,000. A legal contract, if written properly according to strict legal state mandated requirements, the lease would be enforceable in a court of law for collection if the lessee did not pay up. Again, consult a legal opinion before writing or accepting a lease agreement as the one that you will use.  Laws vary from jurisdiction to jurisdiction.

Lease With Option to Buy

The Lease with an Option to Purchase is actually two (2) different agreements. One is for a lease as briefly discussed, and one is for an “Option to Purchase” at a later date for a certain amount of money.  When the Terms for the Option Agreement  or Option to Purchase agreement are agreed upon, then that option to purchase becomes that buyers “lock” on buying the property at a later time. Again, there is a deposit, usually non refundable, given by the potential buyer to the potential seller. That option money may or may not be included as part of the purchase of the property.  The same with the rent during the lease period.  Depending on the negotiation at the begining and if any portion of rents will be a credit towards a purchase or downpayment.  This begins to get into the world of creative financing and will really depend on the end price agreed to and the financial considerations by both lessee and lessor.

Why Would Someone Want To Lease Instead of Just Getting A Mortgage?

With respect to the person seeking to get into a property to live in, they probably have a problem.  It could be a second marriage and there are credit issues to get repaired.  It could be that the potential buyer has been through foreclosure or had a bankruptcy and needs time to get repaired to requalify as a borrower.

The seller/owner always should seek competent Real Estate Legal help and consult with a mortgage and real estate professional or their bank when it comes to reviewing credit reports if they are not sure.  Another thing is to call all of the references and drive by the home that their potential lessee has lived in.  One bold owner/lessor went to talk to the neighbors and asked if these folks lived there and were there any problems.  Public records at the police department can be checked out to see if there were disturbances at the previous address and how many times did they have to go there.

Once you are satisfied, you probably have a good risk and you may want to go forward.

How Does Your Debt To Income Ratio Change?

The simple answer is that the mortgage debt under some scenarios becomes “transparent”.  What I mean is that there is a “balance”. Yes you have a mortgage debt and yes there is a contract for income that covers that debt.  Depending on how you have handled your credit, and what your current income shows, you probably will qualify for a mortgage on another personal residence. As you can see, this can be a complex issue.  If you are risk adverse, this may not be a good solution for you. But if you are careful and make good business decisions, it may be a life saver for your situation.

If you have comments or questions, you can contact billpark@parkplaces.com for more direction on who you might want to talk with in your area.

Log Homes have come a long way from the rustic cabins of the mountains or “up north” be it Canada or some Northern part of Michigan.

With high gas and fuel costs, many Michigan folks are re-thinking the trip to the cottage up north and looking for something closer to home.

One such place is just a few minutes off 1-96 near South Lyon Michigan.  Located on 4.28 treed and rolling acres of virgin land is the log home that is featured here with a virtual tour

and at www.parkplaces.com . 

The impressive thing about this property is that it is reached by paved roads, past the McMansions and tucked away down a short unpaved road. (map)

If you did not suspect that there was a house there you would just pass on by. Suddenly you go through covered wooden and stone bridge and you are transformed into a completly different setting akin to the bridges of Madison County.

Entering the short dirt road, would be “voyers” may decide to not come on down. But we will travel along and across the rustic covered bridge over the creek that borders the one property edge. Before the full folage on the trees and bushes in May you will see the thousands of trilium wild flowers in bloom. It is an awesome sight to see nature’s handiwork in full array.

Inside this home is where the rustic luxuary begins.  To top in all off, a handsome and comfortable screened covered porch and wonderful indoor heated pool?  In Michigan, this makes a lot of sense.

I am finding lots of people whose lives have changed and many are taking advantage of that job shift, buyout or just plan second career with a home based consulting or internet business.

What successful people want is a place that is special. Typically many can work from where ever they like so choice of where to call home is open. 

South Lyon, Lyon Township where this home is located is in Oakland County.  Oakland County has a large population and is quite diverse. A wide range of schools both public and private are within commute range of this property.

(Education Options) .

Lifestyle living for a homebased internet business may involve travel to customers too. In the Metro region of Southeastern Michigan about two thirds of Michigan’s population can be reached from this location within about 60 minutes. For example Ann Arbor and the University of Michigan is about 33 minutes away while Michigan State, Wayne State and University of Michigan Flint, Schoolcraft College to name 4 more are about equally close or closer.

For those seeking a peaceful and tranquill setting amongst a busy life will be well served by this special property.  For more information e-mail billpark@parkplaces.com

Michigan has some world class freshwater fishing. In Michigan you could go fishing  365 days a year for something. 

On the west side of Michigan flowing into Lake Michigan are lots of rivers and streams. One of those great fishing rivers is the Muskegon River.  Literally thousands  of freshwater salmon and steelhead trout go there to spawn.  Getting to know the river is fun and challenging. A couple of weeks ago, on a very cold April day, son Tim and his fishing buddies Brian, sons Zack and Nick fished on this river and reported, yes it was cold but the fishing was pretty good. Here is some evidence of their day.

Picture 1 is Tim with his lunker, about 10 pounds of tasty steelhead.

Grandson  Zack with his catch of the day

Nick whose, fish got away,is really happy just to be out fishing and being able to tell his story about the “monster fish” that got away.

One can imagine the tremendous pressure on lenders and their teams to get shortsales processed and foreclosures handled.  What that means to the borrower that is heading for default and expects relief through a shortsale is that they need to decide very early when there is time.

Speaking as a Realtor in the field we are seeing periods of sometimes 4 to 5 months to get to the point where a workout negotiation really gets traction.  Until then it is a matter of making sure that everything is ready.  Here are a few anecdotal tips:

1. You probably have missed at least one payment and are late on the next one.

2. In order to have a short sale you have to have an offer with a qualified buyer in place so you need to have it ON THE MARKET.

3. You will need your income tax returns for the past 2 years.

4. You will need a hardship letter explaining what your situation is and why you can not afford to pay your mortgage and what has caused you to miss payments.

5. Bank statements, pay stubs are all necessary to have ready too.

6. The home needs to be actively marketed and the price reduced until a buyer steps in who will work with the process.  A buyer that is patient and will wait until the shortsale can be negotiated and closed.

If you are a consumer who knows that you are headed for a foreclosure at some point in the next few months, you should start now. For more information email billpark@parkplaces.com  , be sure to tell me where you live so if you are not in my area I can help you find someone who can help.

A call came in yesterday from a local attorney and good friend who had a client needing help. A quick synopsis led me first to think, “this person is screwed to the wall here” but I did agree to talk to the person and invited the attorney to have the person call me later as I had a busy day in front of me being  it was April Fool’s Day and I had to be on the look out for pranksters! Really, it was a busy Tuesday anyway with 5 deals in the pipeline and two listings to get posted plus all of the other activites going on.

Here is a brief version of this borrowers situation. Actual names and locations are not being used here but similar situatations are out there by the thousands.

After umpteen years of marriage, spouse moved on and took the income with, income that had supported part of the mortgage payment.  Spouse left behind could hardly make the payment on that nasty ARM, adjustable rate mortgage, which had just re-set(interest rate went up raising the payment to nose bleed heights).  Spouse, we will call the ”Remainder Spouse” reports being 90 days behind on the mortgage, the roof leaks and they have animals, horses on acreage that Remainder wants to keep and to keep the house too.  Does not want a foreclosure or bankruptcy either. What to do???

Since Remainder’s call came in late in the day I was on my hands free on the freeway driving home and  having this  conversation from the slow lane.   

Here is part of what I said to Remainder, “Okay, here is what I am hearing, “your spouse has gone, you are by yourself supporting the mortgage, your roof leaked into the master bed room, you have no funds to fix, you have it tarped, you are going to make your December payment this Friday, and you feel hopeless, do I have it right,” I asked. “Yup,” Remainder responded.

HERE IS HOW YOU HAVE TO START

Okay, first of all the Bank has enough foreclosures. They really don’t want to have your house back with the leaky roof, the mold that is forming as we speak but what they do want and do need to get is your mortgage payments because they need to pay their investors.  They get really testy when they don’t get their money.

So what you need to do is to go on a full scale frontal assult to tell your story  in a way that is compelling, respectful and most of all very well presented to the right people in the right way. 

• Have you filed your 2007 taxes, “no.” Okay get that done now.  You are going to need it for your case. 
•  Next, we need your financial picture, that will be a full budget of what you owe, what your real assets are, what your income is and information that will support why you will deserve a mortgage modification if they decide to give it to you. We will need two months of paystubs, two months of bank records on all accounts.
• Finally, a Cliff Notes version of a hardship letter that will also be your appeal of where you are and what this will do for you and how you will be able to make good on your very large high interest rate mortgage.  No more than a page and a half, type written, bullet points, so easy to read and understand it gets the point across to even the busiest of the busy overworked, we want your presentation to be a pleasure to read, to look at and we need to get it to the right people quickly.

Here is what I think your proposal should include:

1. Ask to have the late payments plus 3 more future payments put on the end of the current mortgage.  (You need money to fix the roof)
2. Ask to convert to a fixed rate so that you can stop worrying about another interest increase that will put you back in this situation.

I also recommended that Remainder invest $25.00 to run a credit check with a credit simulator to find what Remainder  needs to do to raise that credit score from the miserable place it is now to some where in the mid 600’s so that in the future Remainder does not have to contend with the bruised credit issues. And besides, Remainder probably will not want to be Remainder Alone forever and who knows the addition of a significant person would be nice and a great credit score makes life so much better too.

Well, I am home, gotta go now, call me tomorrow so we can talk about your plan to get going on this. You do the work, I’ll be your coach.  Remainder said, “this is the first time in 6 or 7 months that anybody has even tried to help me, I feel better already.”  I said, “you are welcome, I know if I can help enough people get what they want, eventually I will get what I want, a great trust relationship that is more than willing  to refer people to me to sell or buy a house.”

Have a good day.

Okay, so you want to buy a home and you are finding that even with a market flooded with good homes at affordable prices you are still on the fence. Or, maybe your move is a short term one and you are concerned about what to do, buy or rent?

First of all Hire A Great Realtor. Realtors do a lot more than find homes for people. A great Realtor can help that Buyer get into really nice homes and help them with the right strategy to make it work for the Buyer.

Available in my Livingston County Michigan Market are two items that make it easier for buyers like maybe you are to get into a home.

Negotiating for help with your closing or mortgage costs!

How about an interest rate buy down? My friend at The Premiere Mortgage Corporation gave me an article the other day about buying down the interest rate. Now this is not like the adjustable rate mortgage that can go crazy with payment hikes. In simple terms it is a predictable rate adjustment spread over 3 years and then it is fixed. Why would a buyer want to do that? It is a way to ease the transition of say going from a rental to a house payment. The additional taxes and insurance that may elevate the cost of a monthly payment as you start a new job, make a move, get a promotion , start a new marriage, what ever the situation it can give you a cushion while you are getting started or re-started.

The way it can work. Again, in very simple terms, the buy down can be done so that it is part of the purchase offer. Asking the seller to pay “points” on the mortgage to “prepay” some of the interest expense that you as the buyer will be paying on the mortgage over the next 3 years. You should always get in writing what this means and seek to understand how it works. If you would like to ask more questions about this please email me and we can  talk about your specifics. 810 534 2005

It is no secret that there are plenty of good deals.  If you “want to sell” and are not really motivated to aggressively price and do the necessary staging and repairs to compete, you may be well advised to “stay home partner.” At least for the foreseeable future.

On the other hand, if you have to sell and there is no question that you have to move because you just can’t stay, then there is good news.

Depending on just where your home is, and the market influencing your home’s selling ability, will determine what kind of strategy you should use.

#1. If you have lots of equity, determine the probablE selling price of homes like yours. And price below this price enough to stand out from the crowd. Usually 2 or 3% will make a statement.  Your Realtor can help you  do this. Get a local one that knows the market very well. It has been my experience the on-line evaluation services are not really in touch with what is going on in your neighborhood. Your local agent can come and see what is going on.  Better yet, have your Realtor take you to some “comps” that are for sale. It helps to know what the competition is doing anyway. Your equity is precious, I know, but it is also the leverage to allow you to move on by giving some of it up if necessary.

2.  The second strategy is if you have used all of your equity or don’t have any but you have some cash aside or can get some.

What this may do is to allow you to accept an offer that does not pay the bill and you have to bring some money to closing. The seller  has to do a cash infusion because there is no equity.  It allows you to sell in an oversupply market at less than what you would in a balanced market where supply is a little less than what the demand is. 

On of the economic principles of equity that may have been violated is that stripping  out the equity to the max has created a lot of the problems in today’s real estate market.  The “frugel” cardinal rule is that equity is not for borrowing if you have less than 20%. Keeping 20% equity will let you sell in nearly any market without damaging your credit among other things. It may be too late to be frugel on this  house, but just remember, keep the mitts off the equity, let it build so there is a cushion.  It is not an ATM. Sorry, I am ranting but it is so true and sometimes we get upset with the truth don’t we.

3.  Desperation.  Impending events that are life changing, there is no equity, your credit is in good standing but you are out of cash and have to move.  No question.  Again, you will need an experienced hands on coach here that you will tell all to.  Realtors are getting pretty good at handing short sales, helping people keep their dignity and getting them out of their home.  The process is called a short sale because the bank agrees to take less than what is owed and allow the expenses of the sale to be taken out also.  You as the seller will get a ding in the credit but will recover much more quickly than if you let it go to foreclosure.  Also, check into recent passage of a bill that would waive the “shadow” income that previously got a w-1099 and charge to you the seller as taxable income.

Consult your CPA on that one, they will have the latest.

If you have questions please feel free to contact me. 

Mortgage Loan Modification Workshop Press Release

Escalating foreclosure numbers are perhaps needless.  Fear and and denial can rob normal and responsible people of their peace of mind and stall them into in-action when they should be proactive and in real action!

On March 6th at my office I will be leading this workshop to encourage friends, clients and others who need help, to get started now.  Waiting and delaying are costly.  Taking action may be as simple as calling your lender and asking for help.  What we will do at the workshop is to give the encouragement and support necessary to take action on March 6th, 7 PM at the Keller Williams Realty Office, 1005 E. Grand River In Brighton, Mi. Reservations are appreciated. A follow up session is planned for March 13 for those that would like to come back, share their experience and also for more help if needed. For more information or help, call Bill Park 810 534 2005