Stop Paying Your Landlord's Mortgage!

Stop Paying Your Landlord's Mortgage!

It's staggering when you think about the cost of living, especially if you're a renter and not a home owner. If you are currently paying $1,000 a month for rented housing, then over the next three years, your property management company will effectively have reaped $36,000 of your hard earned cash! You're paying their mortgage when you could be building equity in your own property.

What if I don't have the money to buy a home right now?

There are many loan programs available that offer low and no down payment options. Some programs permit gift money as a down payment, and often sellers are willing to make a contribution to your purchase if they want to sell the home quickly.

There are many benefits of home ownership to consider, most of all, tax deductions. Let's take a look at how advantageous this can be as a homeowner:

How much is tax deductible?

Tax deductions vary, but the IRS has laid out solid rules. They also have several tax publications full of helpful information worth taking the time to read. Publication 530, Tax Information for First-Time Homeowners, is very thorough, as is Publication 936, Home Mortgage Interest Deduction. For quick reference, you can refer to Tax Topics 50S, Interest Expense, and 504, Home Mortgage Points.

These publications often refer to local and state guidelines, so you may want to consult a CPA to answer all the questions that arise from reading these materials. Here are a few tips you should know up front:

Real Estate taxes are deductible on a primary residence. Real Estate taxes are paid at settlement or closing, or through an escrow account.

Mortgage interest is deductible on a loan to purchase, build or improve your home. Your lender will provide you with a Mortgage Interest Statement (Form 1098) to list the total interest paid during the year. This should include any deductible points paid for that year.

Pre-paid interest is deductible in the year it is paid. At the close of a real estate transaction, borrowers usually pay for the interest on their loan that falls between the closing period and the first of the next month. Mortgage payments are made "in arrears" so when a loan is closed mid-month, there is interest due to the new lender which must be paid in advance.

If you are building a home, the interest on the construction loan is deductible. The construction period cannot exceed 24 months prior to the date that you move in if you claim this as your primary residence.

To get the most current Neighborhood Market Activity report for your area just call 303-731-5537 for a 24hr Free recorded message.

By Lorena Tankersley SFR, CHRE.  Lorena is Listing and Short Sale Specialist with Keller Williams and president of the Women Investment Group (WIG).  You can find her at http://www.womeninvestmentgroup.com/

Loan Modification vs. Short Sale vs. Walk Away- Which is Best?

I have written about short sales and other owner options when avoiding foreclosure in the past. In this article, I will discuss the pros and cons for each of the options to the countless “underwater” homeowners in foreclosure throughout our country. Should you modify your loan with your lender; sell your house as a “short sale” with the lenders approval; or walk away and allow the lender to foreclose? (You may also do a Deed in Lieu of Foreclosure.)

Modify Your Loan

Ideally, you want to stay in your home if you can afford it and it makes financial sense. The big question is, “can you? and “does it?” To begin, you should ask your lender. It’s hard to say how willing your lender will be to modify your loan, until you ask. There is a lot involved in this process as your lender is going to want to completely review your financial picture with tax returns, pay stubs, financial statement, bank statements and a letter explaining your hardship. Most homeowners fall short here and don’t take the time to put this information together, simply giving up. That is not good.

If you have a government backed loan and want to modify your personal residence, you have a better chance of a successful modification falling under the “Making Home Affordable” plan. Conventional, jumbo and subprime loans do not fall under this plan and each lender will have their own terms for modification (some lenders are good and some are horrible). In most good lender situations, the lenders will offer a reduced payment and/or interest rate for a short period of time, until you get back on your feet.

However, if your principal balance greatly exceeds the market value, and you request a reduction of that loan balance as a part of your loan modification, don’t expect to the lender to agree. As much as our politicians and press like to discuss how lenders are writing down loans to help people stay in their homes, I haven’t seen or heard of one write down to date. If you have, please let me know which lender is approving principal write-downs and I will share this in my blog.

The “pro” to a loan modification is you get a reduced mortgage payment. The “con” is that even after the modification, you still not be able to afford the home and it may not make financial sense to stay in the home. If that’s the case, it’s time to make the decision to sell. You can sell voluntarily through a short sale, or you can sell involuntarily through losing the house to foreclosure. Either way, it’s time to cut your losses, downsize and move on.

Short Sale

Through a short sale the lender agrees to accept less than the balance owed on the mortgage at sale. On purchase money loans, the deficiency balance is forgiven, typically. Some of my clients have reported that some mortgage companies are asking borrowers to agree to accept liability for the deficiency balance. Don’t’ assume anything. Make sure you review your original Deed of Trust carefully (get legal and tax advice) and make certain you understand whether the deficiency balance is forgiven.

Currently, short sales are being approved in record numbers and in half the time because lenders do not want to own a distressed property they may have trouble selling later as an REO. Banks would much rather see the homeowner sell the property under a short sale, and lose the deficiency balance, than be forced to take the property through foreclosure, and take on more costs and market risks.

To successfully sell your home under a short sale, you must hire a professional Realtor. This is not the time to do a “for sale by owner.” You must make sure you go into escrow with the right buyer who will hang in there while you wade through the maze of lender requirements. There is a ton of paperwork again (tax returns, pay stubs, financial statement, bank statements and a letter explaining your hardship), calls to postpone your auction (don’t assume the lender will do this automatically), BPOs (brokers price opinion), lender appraisal, buyer contingencies, HUD1 statements, short sale approval letters, clear title and a lot of follow-up calls and emails. Oftentimes the lender will counter your buyers offer, so your buyer must have “wiggle room” in their price, ready to go up if the lender asks. A short sale is not for the weak at heart and takes a lot of tenacity and persistence.

The biggest “pro” to a short sale is the lender approves a significant write-down of the mortgage balance in exchange for cash from a new buyer. The homeowner is in control of the sale, not the bank. You will spare yourself the social stigma of the “foreclosure” word. Your credit is much less impacted than with a foreclosure. A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word “short sale” on your credit report. It may say “paid in full for less than agreed” or “settled for less,” among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.

You may qualify to buy another home with a Fannie Mae-backed mortgage within two years, regardless of whether the home is your primary residence (FHA wait is 3 years). The lender has removed a non-performing asset from its books. And the buyer got a home that was cared for by a willing homeowner through close of escrow (versus a stripped home after foreclosure auction).

Outside of being a pain in the “you know what” (and complete time suck), another important “con” about short sales is the lender is required to file a 1099C if the debt forgiven exceeds $600. This may create a tax liability for the former property owner because it is considered “income.” However, the Mortgage Forgiveness Debt Relief Act of 2007 provides tax relief for some loans forgiven in 2007 through 2012. (See the IRS document “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation.”)

Walk Away – Let the Lender Foreclose

If the lender will not approve your short sale, foreclosure is the last option, although it presents major problems. The only “pro” to losing your house to foreclosure, is that it is the easiest of the three options to underwater homeowners. You stay in the house as long as you can rent free, you don’t have to clean up the house and open your door to buyers. You do nothing, and then move. So, foreclosure is the path of least resistance.

One big “con” to foreclosure is the hit to your credit and future borrowing ability. A number of sources have reported FICO score drops from 200 to 400 points after a foreclosure. Generally this credit score will remain on your credit report as a public record for 7 to 10 years. Best case, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years. If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.

Another big “con” to foreclosure, is the auction tends to bring significantly less money than a normal sale. If the sale brings less than the amount owed on the loan, the remaining balance of the loan is called a deficiency balance.

If the home falls into foreclosure, it is possible to mitigate the negative impact of a deficiency balance by filing bankruptcy. Generally speaking, deficiency balances are treated like any other unsecured debt in bankruptcy, meaning that they can be wiped clear by Chapter 7, and repaid over time through a Chapter 13. Although bankruptcy does not sound like a positive alternative, it may be the best solution if the mortgage lender will not allow the home to be sold through a short sale.

Make sure you consult with an attorney experienced in tax and bankruptcy law to understand all of your options to resolving your mortgage debt.

If you are upside down in your mortgage, and do not see a way out anytime soon, it’s time to take action. Losing your home to foreclosure has serious consequences. Don’t make the wrong decision. Call your lender and either work out a loan modification you can afford, or find a great short sale Realtor and get your house sold (with the lenders approval of course). But it’s time to cut your losses and move onto your fresh start. Loan modifications and short sales are legal, ethical and the right thing to do for you and your family.

I hope this column helps you make the right decision for your situation.

To get the most current Neighborhood Market Activity report for your area just log into Market Snapshot

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By Lorena Tankersley SFR, CHRE.  Lorena is Listing and short sale specialist with Keller Williams and president of the Women Investment Group (WIG).  You can find her at www.WomenInvestmentGroup.com

Smart Onwership - Women investing in real estate

Smart Ownership – Women Investing in Real Estate

“Asset protection” is one of those terms that cause eyes to glaze over and minds to wander.  Think of asset protection as part of a lifelong practice of Smart Ownership.  We real estate Investor devote so much of our time, money, energy and thoughts to building assets that protecting those assets should be at least equally important.  Let’s think of it as a Smart Ownership practice that is proactive, knowledgeable and wise stewardship of our assets in keeping with the people, priorities and principles that we value. 

                Most of us value ease over anxiety; our loved ones or favorite charities over the taxperson, our economic independence over financial dependence on our life partner.  If forced to make choices like those above, almost all of us would select the former.  However, these options are not always available.  A former rapper once chanted, “more money – more problems,” and real estate investing is one of those wealth builders that sometimes seems to come as a combo meal, with a super-sized side of problems.

                Asset protection has unique applications for women real estate investors arising from the unique ways in which investments, life events and lifestyle decisions interact in their lives.  For example, savvy woman, who are also moms, tend to be devoted to building wealth to pass along to their children – a Smart Ownership goal that is helped by estate planning.  Additionally, many savvy women have built greater-than-usual wealth while single, or independently while married.  The ability to protect and direct assets after a marriage or a divorce is also a Smart Ownership undertaking.

                In its purest form, Smart Ownership approach to real estate investing includes activities as diverse as smart pre-purchase investments analysis, values-driven mortgage decision-making, and vision-based exit strategy forecasting.  The started version of your Smart Ownership practice should address and account for at least these issues, which we will call the “Four Ds”: Death, Divorce, Disability, and Disaster.  The Four Ds are scary to some, and at least one of the four is inevitable.  Many of us will face two or three of them.  The ones that aren’t inevitable are largely unavoidable.  We have two choices: to avoid the inevitable and the unavoidable out of fear, or to face them head on.

Please join me on my Blog while we discuss the Four Ds and the good practice of Smart Ownership.

To get the most current Neighborhood Market Activity report for your area just call 303-731-5537 for a 24hr Free recorded message.

By Lorena Tankersley SFR, CHRE.  Lorena is Listing and short sale specialist with Keller Williams and president of the Women Investment Group (WIG).  You can find her at http://www.womeninvestmentgroup.com/

When should you invest in real estate? The best time is now!!

When should you invest in real estate? The best time is now.

How to Invest in any Market

                Today’s market demonstrates that, no matter what the market is doing, you need to follow the basic rules of real estate investing.  Those who ignored common wisdom and failed to do their homework are paying the price.

                What is the common wisdom? It starts with the basics. Here are guidelines to help you get on the right track to sound investment decisions in any market.

GET SMART – There is no substitute for knowledge, even if you work with a real estate investment advisor.  Read, attend seminars and join reputable investment groups.  Make sure the information you get is worthwhile.  Read business journals and newspapers every day.  Go on the internet to find out what’s going on in business and real estate.  There are always changes.

MEAN BUSINESS – Start with the right frame of mind.  That’s true whether you are adding an investment property to your portfolio or evicting a tenant who has failed to pay rent.  You’re here to make money, not to be entertained or extend charity to dead-beats.

MAKE YOUR SUCCESS A TEAM EFFORT -  You may choose a turnkey real estate investment strategy.  It’s is difficult to someone just getting into real estate investing to know the right questions to ask or where to get answers.  Have a team of advisors and professionals to support your questions and answers.  Your Team can help you identify properties, negotiate sales, find lenders, and contractors, lease, stage, sell and manage your properties.

HAVE A GAME PLAN – Know what you are trying to accomplish up front.  Do you want cash flow? Are you investing for retirement? Do you have some other goal in mind? Your goals determine how you evaluate a property.  If it is long-term, hold such as a property for retirement, a property with less built in equity and a small steady increase in value every year for 20 years will work.  If you are looking for cash flow, buy an undervalued property with a larger deposit.   It is important to have an exit strategy.  How long can you afford your fix-and-flip property? If you are using hard money, do you have a plan to refinance?

RUN THE NUMBERS – It doesn’t matter whether your goal is to buy and hold or fix-and-flip – evaluate the numbers before you buy.  Use a serious property analysis software. Load details like the purchase price, rental income, vacancy rate, property taxes, management fees, maintenance cost, hoa fees,  and generate reports that provide an indication of how the property is likely to perform.

CONSIDER THE MARKET – Once you have decided on your goals and have a game plan, frame it all within the context of the market.  If your goal is to fix-and-flip, remember this is hard in a stale market while buy and hold may be the best strategy. 

LOOK AT THE NEIGHBORS -  Before you buy, look at a lot of properties.  Compare it to others in the neighborhood. That’s the only way you can effectively evaluate a property.  It always helps to have “comps”. The MLS is another good indicator of comparable properties offered for sale.  What are asking prices for active and pending homes? How long have comparables home been in the market? Then, drive the neighborhood

BE REALITIC – As you evaluate a property, don’t estimate costs.  Don’t take information at face value and don’t expect everything to work as planned.  In real estate, the best case scenario isn’t the one that usually comes up.  Be realistic about cost and potential problems and be prepare for foreseeable worst-case scenario.

JUST DO IT -  Whatever mistakes you might make investing in real estate, the biggest mistake and most costly mistakes you can make is doing nothing at all.  Figure out your budget, know what you want to do ahead of time and then go do it.  Just buy something!!

To get the most current Neighborhood Market Activity report for your are just call 303-731-5537 for a 24hr Free recorded message

By Lorena Tankersley SFR, CHRE.  Lorena is Listing and short sale specialist with Keller Williams and president of the Women Investment Group (WIG).  You can find her at www.WomenInvestmentGroup.com

Reasons why you Should HIRE a Lead-Safe certified renovation contractor

1. To help prevent learning disabilities
2. To help prevent behavior issues
3. To help prevent diminished motor skills
4. To help prevent lower intelligence
5. To help prevent hearing loss
6. To help prevent brain damage
7. To help prevent memory loss
8. To help prevent headaches

Today, there are over one million kids who have been poisoned by lead from old paint.  Home repairs that create even a small amount of lead dust are enough to poison your child and put your family at risk.  If you live in a home or apartment that was built before 1978, make sure you renovate right with a contractor tha is Lead-Safe Certified in accordance with the new EPA guidelines for any renovation or repair project.  They'll know how to protect your family.

To find a Lead-Safe certified contractor in your area, visit epa.gov/getleadsafe

Special message from The Women Investment Group

5 to Watch: Real Estate Business Trends: REALTOR® Magazine

5 to Watch: Real Estate Business Trends: REALTOR® Magazine

It's 2010. Do you know where your children are?

Our kids are growing up in a very different world from the one you used to know.  Different expectations. Stronger pressures and temptations.  More choice.  Bigger choices.  Great dangers.

And when the pace of change is so fast even the kids have trouble keeping up, what hope is there for the parents?

No mater how much you try to stay up to speed with what your kids are doing, there will always be plenty you don't know.

To help parents prevent, intervene in, and find treatment for drug and alcohol use by their children, there is the Partnership at Drugfree.org.  So even if you don't always know exactly where your children are, at least you'll always know where they're at.  Visit  drugfree.org

Special message from The Women Investment Group -