Common Foreclosure Misconceptions:"An attorney told me all I have to do is file Chapter 13 Bankruptcy to stop the foreclosure”
Yes, Chapter 13 temporarily stalls the foreclosure proceedings: however it is only a temporary solution! You will have to endure fees, court appearances, and a bankruptcy on your record, and still have to make your house payments along with compiled arrears and fees. Be sure to ask the attorney these questions.
"The bank has been really helpful and they're helping me solve this. I don't need additional help"
Yes, you need to be talking to the bank, the worst thing you can do is ignore them. However, the bank does not have your best interests in mind, they have their interests in mind. They want to get paid ASAP or they want to take your house. If you don't have someone on your side, you may end up losing your home even faster.
“I can work out an affordable payment plan or forbearance with the bank”
The bank's plan is seldom reasonable and your payments will increase significantly by as much as hundreds or even thousands of dollars.
“The bank won’t kick me out because my husband and I have medical disabilities and 6 kids living in the house”
Unfortunately, the bank only cares about collecting their debt regardless of your situation. Harsh reality is once the house goes to Auction, the sheriff will eventually come and order you and your family to vacate the property.
“I owe too much on my house so if I sold my house with a Realtor® I would have to pay thousands of $$ in commissions and closing costs. I can’t sell my house, it’s not an option, I don’t have the money”
NOT TRUE. In a short Sale, the lender pays all costs and commissions. Working with an experienced Realtor who is a Foreclosure Specialist, and has a working relationship with banks, and is willing to negotiate on your behalf, can overcome these problems. We have been negotiating short sales since 2005 and there is no costs to the seller. Contact us today to learn more at (586) 421-1598.
“The bank said that I can do a DEED in LIEU and not have a foreclosure on my record”
Don’t let the bank fool you. Your credit report and personal record will read “Deed In Lieu”, which is a VOLUNTARY FORECLOSURE (this is just as bad on your credit as a full foreclosure). This only benefits the bank (saves them money)
“It’s too late, I can’t do anything, it’s no use trying”
Nothing is farther from the truth! Until the sheriff kicks you out, there are always options!
We hope this clears up any misconceptions you may have had about the foreclosure process. Don't be depressed, there is plenty of hope and lots of options. We can help you navigate the process so you can start over again. If you have additional questions, feel free to contact me at (586) 421-1598.
Sunday, January 30, 2011
The government-controlled mortgage companies' inventory of foreclosed residential property has quadrupled in three years and now stands at a record $24 billion. The number of properties they own has increased fivefold to nearly 242,000, representing roughly a third of all repossessed homes in the U.S. And the total keeps growing as they take possession of homes faster than they can sell them. In the first nine months of 2010 Fannie and Freddie took in 319,243 foreclosed properties and disposed of 210,105. At the same time, U.S. housing prices have been falling. In the most recent reading, the S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent in November from the previous year, the biggest 12-month decrease since December 2009.
Officials at Fannie and Freddie say they are committed to an approach consistent with their mission as backstops for the housing market. They have been trying to stabilize neighborhoods by selling homes at prices close to market levels and giving preference to buyers who plan to live in the homes rather than investors who might rent them out or try immediately to resell them. Fannie and Freddie are also investing in some properties, spending millions on maintenance to make them competitive with other homes on the market in their neighborhoods. "We don't want a reduced value to initiate a quick sale," says David Wendling, senior director of REO (real estate owned) sales at Freddie Mac. "The focus has always been on supporting neighborhood values."
Of the 74,621 properties Freddie Mac sold in the first nine months of 2010, 67 percent went to buyers who intended to occupy them, according to company data. At Fannie Mae, about 80 percent of sales are to owner-occupants, says company spokeswoman Amy Bonitatibus. "We don't hold anything back that is available to be sold," says Jane Severn, director of REO disposition at Fannie Mae. "We're doing the opposite, pushing our homes out to the market as soon as we can."
Some real estate analysts say the companies will have to find a way to dispose of properties more quickly. The number of homes subject to a foreclosure filing may rise by 20 percent this year, up from a record 2.87 million properties in 2010, RealtyTrac, an Irvine (Calif.) data company, predicts. The market currently can absorb about a million foreclosures a year, the Mortgage Bankers Assn. estimates. Fannie and Freddie themselves estimate in regulatory filings that it will take "a number of years" to bring their foreclosure inventory down to pre-2008 levels.
As their holdings of unsold homes increase, Fannie and Freddie eventually will need to drop prices and turn to investors, analysts predict. "I think they're just (postponing) the inevitable," says Michael Slaughter, a partner at New Providence Capital, a Dallas-based private lender. "If they don't start with a systematic distribution of these properties to investors who have cash today and will buy them at the right price, they're going to end up selling the entire portfolio to Goldman Sachs (NYSE:GS - News) or BlackRock (NYSE:BLK - News) at a tenth of what they can get for them today."
The bottom line: Fannie's and Freddie's strategy of not flooding the market with foreclosed homes may come under pressure as their inventory builds.
Wednesday, January 26, 2011
First, why do we insulate our homes? According to the Department of Energy, "Heating and cooling account for 50 to 70% of the energy used in the average American home. Inadequate insulation and air leakage are leading causes of energy waste in most homes."
So in short, insulation makes your home warm in the winter, cool in the summer, and it keeps more money in your pocket in the process.
But how much insulation you need can be entirely dependent on the climate of the surrounding area. Use this quick zip code guide to figure how much insulation is necessary in your region.
This will help you establish what R-value (the rating system used for insulation) is proper for optimum efficiency in your home. The higher the R-value, the greater the effectiveness of the insulation. By simply picking the right insulation, even if the material itself is not green in nature, you will be saving energy, and thus making a contribution to a healthier environment.
Here a few typical forms of insulation:
Blankets: These come as rolls or batts and are made from flexible mineral fibers, including fiberglass and rock wool. On the positive side, this form of insulation can be bought with a flame-resistant facing. Additionally, it comes in standard sizing, made to fit between wall studs and floor joists. On the other hand, fiberglass and rock wool are known eye, throat, and skin irritants. And fiberglass is made through an energy intensive manufacturing process, and many fiberglass products contain formaldehyde, a possible carcinogen.
You may have found your "just right" fit in the forms above, but there are still greener options now gaining in popularity. These include recycled paper insulation, recycled denim, hemp, and cotton. Be sure to talk to your contractor about what options would be a good, and green, fit for your new home.
Friday, January 21, 2011
19 Ways to Slash Your Utility Bill
Where George Scott sees red, his clients are bleeding green. Scanning the outside of a ranch home in Longmont, Colo., recently, the energy auditor’s infrared camera registered blue and aqua in spots where heated air stayed put. That’s what the homeowner expected. “He thought he’d done everything right,” Scott says, because he had tackled obvious stuff like adding insulation. “But he was baffled by his high gas bills.” When the camera scanned the attic, the viewfinder found orange and red blobs where air gushed by the chimney, 20 recessed lights and two uninsulated hatches. After the inspection, the homeowner plugged those leaks with about $50 in caulk, sheetmetal and spray foam insulation, Scott says. “I estimate his gas use will drop 300 therms, or about $300, this winter.”
But you don’t need an infrared camera to reveal utility-bill-busters that are left after the obvious stuff is done. You need the right point of view. Big energy leaks are often hiding in plain sight, and many of them are easy to fix — you may not even need tools. Here’s how to get started.
ELECTRONICS & APPLIANCES
+ Unplug the beer fridge
That old clunker of a refrigerator in the basement could be costing the equivalent of 10 cases of Bud in wasted energy each year. A refrigerator built in 1993 gobbles twice as much energy as new models. Need more cold brew for a party? Plug in the fridge the night before.
Cost: $0 | Monthly Savings: $12.50 | Payback: Immediate
+ Plug the Power Drain
As much as 75 percent of electricity use by electronics occurs while the devices are off. Big-screen TVs, stereo systems and computer peripherals are some of the worst offenders. Curtail the loss with power strips that kill power when they sense inactivity.
Cost: $115 | Monthly Savings: $3 | Payback: 3 years
+ Give the Sump Pump a Break
A 0.5-hp sump pump can use $30 a month in electricity during wet spring months, estimates Bill McAnally, an adviser to the Iowa Energy Center and an instructor in energy-efficient building. “You’re better off extending downspouts another 5 ft. into the yard to move rainwater away from the basement,” he says.
Cost: $16 | Monthly Savings: $6.25 | Payback: 2.5 months
+ Maximize CFLs
We’ve all heard the advice to switch to CFLs. To get the maximum bang for your CFL buck, install the bulbs for their rated use, which will help them last longer. For example, use bulbs that are designed for down-facing, enclosed receptacles in ceiling lights. Other CFLs are rated for use in fixtures plugged into a timer. Also, for a more rapid return on investment, use CFLs in fixtures that are on for at least 3 hours a day.
Cost: $3.22 per 15-watt CFL | Monthly Savings: $0.57 | Payback: 6 months
+ Seal HVAC DuctsPut away the duct tape. You need a better seal. Between 25 and 40 percent of the hot and cold air entering ducts escapes through joints, seams and gaps — many covered with poorly applied tape. That’s hard-earned money disappearing. Cut your losses by sealing duct joints with mastic, a paint-on putty, and patch holes with aluminum tape. If supply ducts have insulation, peel it back to seal the collars. Pay particular attention to elbows, advises Iowa Energy’s McAnally. “That’s where pressure builds and the air wants out,” he says. And don’t neglect return ducts. Leaks in returns strain your HVAC system and can cause pressure differentials that result in hot summer air or cold winter air being sucked into the house.
Cost: $40 | Monthly Savings: $9.33 | Payback: 4 months
+ Program the Thermostat
Install an Energy Star–qualified programmable thermostat that automatically adjusts heating and cooling temperatures based on a daily heating or cooling schedule.
For every degree you push the thermostat beyond your usual set points, you save an additional 2 percent on utility charges. Some utilities, such as Austin Energy in Texas, provide free thermostats, so inquire before you buy.
Cost: $42 | Monthly Savings: $15 | Payback: 3 months
+ Keep A/C Filters and Coils Clean
A dirty air filter reduces airflow, and a dirty condenser coil retains heat and is less efficient. The two can increase the system’s power consumption by 10 percent or more. Clean the condenser coil every two years and change filters monthly during peak cooling and heating seasons.
Cost: $50 | Monthly Savings: $8.33 | Payback: 6 months
+ Catch a Breeze
Ceiling fans minimize the need for air conditioning in summer, or at least allow you to nudge the thermostat up a few degrees, and they enhance winter comfort.
Cost: $100 | Monthly Savings: $1.33 | Payback: 6.5 years
+ Throttle Back Showers
Showers account for 26 percent of a household’s hot-water use. Installing a low-flow shower head can shrink that flood from 3.5 gal. per minute to 1.5 gal. Cost: $9, for two no-frills, 1.5-gal./minute heads | Monthly Savings: $15 | Payback: 3 weeks
+ Slow the Flow
A faucet aerator can save 400 gal. of hot water a year. Translation: less work for the water heater. If the rated flow on your current aerator is visible, and if it’s above 2.75 gal./minute, then replace it with a more efficient model that emits 1.5 gal./minute or less. If the aerator’s flow rate has been scuffed off or it’s too hard to read, just replace it. The new aerator will likely have lower flow.
Cost: $4.80 for three aerators | Monthly Savings: $0.93 | Payback: 5 months
+ Stop Drips
A slow leak of 10 drips per minute from a hot-water faucet wastes 526 gal. a year, or about the equivalent of emptying and refilling a 40-gal. water heater 13 times. Swapping in a new washer or O-ring is an easy fix, even for a novice DIYer.
Cost: $1 | Monthly Savings: $0.35 | Payback: 3 months
CHIMNEYS, WINDOWS, ATTICS AND BASEMENTS
+ Block the Stairs
The attic may be sealed tight and insulated to R-39, but you've overlooked a gaping, 21-sq.-ft. hole that's hemorrhaging money: the pull-down stairs. You can buy an insulated cover or build your own from rigid polystyrene insulation and multipurpose construction adhesive.
Cost: $120 for a premade tent | Monthly Savings: $4.16 | Payback: 2.5 years
+ Stuff the Chimney
On average, 14 percent of the air leaking in and out of a house flows through the chimney. If you use your fireplace infrequently, seal it with an inflatable draft stopper or make your own with a garbage bag stuffed with fiberglass insulation.
Cost: $50 | Monthly Savings: $2.33 | Payback: 21 months
+ Upgrade Windows
Replacing old, single-pane windows with high-performance, double-glazed, low-e windows seems like a good idea, but at a cost of several hundred dollars each you’ll wait a while for the payoff. Inexpensive storm windows offer quick payback, especially for do-it-yourselfers. In testing performed by the Oak Ridge National Laboratory, exterior storm windows reduced winter heat loss in single-pane windows by 29 percent, whereas double-pane window replacements saved 47 percent.
Cost: $65, for DIY installation of one low-e storm window | Monthly Savings: $2.15 per window | Payback: 2.5 years
+ Blanket the Water Heater
Your hot-water heater is the second biggest energy user in the home after the HVAC. Cut standby energy waste by insulating an older heater. If the casing is warm to the touch, you can save between 4 and 9 percent on water-heating costs by installing an R-10 or greater insulating blanket. Wrapping a gas-fired water heater demands extra care to avoid blocking combustion vents or the flue.
Cost: $30 | Monthly Savings: $1.20 | Payback: 25 months
+ Crack Down on Cracks
“Ten tubes of caulk will do more to reduce a home’s energy waste than replacing every window,” says Steve Luxton, a manager at CMC Energy Services, an energy audit firm in Fort Washington, Pa. Apply paintable silicone caulk around windows and doors. To check for other energy leaks, look where any pipe, vent or electrical cable comes through the siding — dryer vent outlets and hose bibs frequently present trouble spots.
Cost: $70, for 10 tubes | Monthly Savings: $8.42 | Payback: 8.5 months
+ Wrap Pipes
Insulate the first 10 ft. of the hot- and cold-water pipes (heated water can back-flow up the cold pipe) that lead into and out of the hot-water heater and you get double savings. Water arrives 2 to 4 F hotter, allowing you to lower the setting on the water heater, and there’s less wait time and water waste. Insulate the full run of exposed hot-water pipes to increase the savings.
Cost: $8 | Monthly Savings: $0.44 | Payback: 1.5 years
+ Plug Big Gaps
Practice triage by stopping the big energy bleeders — large, obvious breaches in the basement and attic — before caulking cracks or insulating. Prime offenders are gaps at plumbing stacks, furnace flues and stud cavities inside soffits. Plug holes with expanding foam, foil-backed foam board or fiberglass insulation scraps stuffed in a plastic garbage bag to stop air movement. Use heat-resistant caulk and sheetmetal around chimney flues and combustion vents.
Cost: $75 in materials | Monthly Savings: $15 | Payback: 5 months
YEARLY NO-COST ENERGY SLASHERS
+ Wash only full loads in dishwashers and washing machines: Save $51
+ Turn the water heater down to 120 degrees from 140: Save $22
+ Remove room air conditioners during winter: Save $40
+ Use Energy Saver features on dishwashers, dryers, fridges and freezers: Save $21
+ Wash clothes in cold water: Save $33
+ Air-dry clothes during the warmest six months: Save $57
Wednesday, January 19, 2011
Many people aspire to pay off their home as quickly as possible. These folks believe that once they don't have a mortgage, they've hit a financial milestone. However, this is one milestone I believe people shouldn't rush to reach.
The first reason that people should not pay off their mortgage is that it doesn't make financial sense. A few weeks ago, a man called in to my radio show asking if he should pay off his mortgage. He owes $50,000 on his house, so he was considering using half of his $100,000 mutual fund investments to wipe out the mortgage.
Rather than pay off his mortgage, I recommended he keep his money invested. He has a 5 percent interest rate on his mortgage, and the interest he pays can be deducted when he does his tax return. Depending on his tax bracket, his interest cost leaves him with a net mortgage cost of roughly 3.6 percent (or $1,800) per year after taxes. If he keeps the $50,000 invested in the stock market rather than paying off his mortgage and earns the stock market's long-term average return of 10 percent or more, he would have an annual gain of $5,000. Subtract the $1,800 mortgage interest cost from $5,000 earned by staying invested, and he could end up $3,200 ahead. If he continues to invest $3,200 per year over the next five years, he can accumulate $16,000 or more, money he wouldn't have by paying off his mortgage.
The other reason people shouldn't pay off their mortgage is more emotional in nature. Many people believe they'll attain peace of mind when they pay off their mortgage. They might share the Depression-era belief that the government can't take their house away if they pay off their loan. I believe strongly that any peace of mind is outweighed by the potential benefits of keeping the money and investing it. If a person uses investment money to pay off that loan, it may leave that person with much less money when it's really needed in future years. That could be a costly mistake because it may not offer the person the luxury of time to replenish his nest egg.
With mortgage rates on the rise recently, this is not the time to be in a hurry to pay off a mortgage. I'm hopeful that many homeowners were able to benefit in recent years by refinancing their loans as 30-year fixed mortgage rates fell, including a period of time in 2010 when rates were below 4.5 percent. Their interest costs should be very low going forward. I believe mortgage debt is okay to have, because equity in the home is being built as the loan is paid down. For most people, their home will always be a part of their net worth, even if they don't pay off the mortgage. And low-interest mortgages allow them to expand their wealth by investing money they have because they didn't pay off their mortgage.
So, I encourage people to keep their mortgage and instead, enjoy the fruits of investing their extra money. When considering net worth, whether it's increased home equity or a larger investment account, it's still net worth. With investments, they have a chance to grow. With home equity, the interest savings are the only upside.
Adam Bold is the founder of The Mutual Fund Store, which provides fee-only investment advice with locations coast-to-coast. He's also host of The Mutual Fund Show, a call-in radio program broadcast across the country. Bold is author of the book The Bold Truth about Investing (April, 2009). Bold is Chief Investment Officer of The Mutual Fund Research Center, an SEC registered investment adviser which provides mutual fund and asset allocation recommendations and research to stores in The Mutual Fund Store system.
4 Problems that could ruin your Mortgage
Follow these tips to ensure your home purchase goes smoothly.
Tuesday, January 18, 2011
No McMansions for Millennials
Sunday, January 16, 2011
Tips for Writing Winning Purchase Offers in a Seller's Market
Seller's markets exist when there are a lot of buyers competing for a low inventory of active listings. It’s not unusual for a home with all the bells and whistles to draw offers from more than one buyer. When this happens, the home often sells for more than list price. But price isn’t everything to a seller. There are other factors. If you are trying to buy a home in a seller’s market, here are 10 tips to help you write that winning purchase offer and beat out the competition.
1. Submit a Preapproval Letter With Your OfferA lender’s letter that says your credit rating has been examined and you can afford to buy the home carries a lot of weight. It tells the seller that you are serious and qualified. It says you are ready to buy and have already committed to lender. If the seller has a higher offer from a buyer without a preapproval letter, your offer will likely win.
3. Write a Friendly OfferDon’t include demands in your offer that are likely to irritate or anger the seller. If it is customary in your area for the buyer to pay for her own title insurance policy, don’t ask the seller to bear that cost. If most buyers demand possession at 5:00 PM on the day of closing, show that you are different and be generous by giving the seller two or three days to move out.
4. Put Your Best Foot ForwardSimply put, this means write your very best offer. You might get only one chance to make an impression on the seller, so don’t make a low offer hoping the seller will give you a counter offer. If the seller has received multiple offers, the low offers most often are not even considered. They are shoved into the rejected pile. Figure out the top dollar you are willing to pay for the home and offer that price.
5. Put Down a Healthy Earnest Money DepositA larger earnest money deposit shows you are serious and are willing to put your cash on the table. Sellers will feel you are more committed with, say, a 3% deposit than 1%, meaning if a home is listed at $300,000, don’t offer a $500 deposit. The seller could feel you have nothing at risk and could walk away from the transaction at will. A deposit of $5,000, $10,000 or $15,000 says “I am committed to buying this home.”
6. Cash TalksIf you are able to pay “all cash” for a home, say so. Although it’s always “all cash” in the end to the seller, even if the buyer obtains a loan, a transaction that is not dependent on receiving loan approval is more attractive to a seller.
7. Shorten Inspection PeriodsMany standard real estate purchase contracts give the buyer X number of days to perform inspections before the buyer is required to proceed with the transaction. If the default in your purchase contract is 17 days, try shortening that time period to 10. By federal law, unless you specifically waive your right under the Lead Paint Disclosure, you have 10 days to inspect the property for signs of lead paint contamination.
8. Waive Some ContingenciesIf you have spoken to your legal advisor and feel comfortable risking your deposit, you might want to consider waiving contingencies such as those for loans, appraisals or inspections. However, there are risks. If you waive an appraisal contingency and the home appraises below your sales price, you will need to make up that difference in cash. But without some contingencies, your offer will be more than solid than a competitor’s.
10. Offer to Close QuicklyUnless there are extenuating circumstances, many sellers prefer to close within 30 days or fewer. If you can offer a 21-day closing time frame, that might be more important to the seller than an offer for more money and be just the edge you need to beat out the competition.
Saturday, January 15, 2011
Home Inspection Checklist
Did Your Home Inspector Check the Essentials?
Home Inspection Checklist Comparisons
All home inspections are different and can vary dramatically from state to state, as well as across counties and cities. Much depends on the home inspector and which association, if any, to which the home inspector belongs. Because I am most familiar with home inspections conducted in accordance with the standards of practice established by the National Association of Certified Home Inspectors, the following information is based on NACHI guidelines.
Home Inspection Checklist of Items Not InspectedUnderstand that California home inspectors are not licensed, nor are they licensed in many states. However, a home inspector's standard practice typically does not include the following, for which a specific license to inspect and identify is required:
- Radon, Methane, Radiation and Formaldehyde
- Wood-Destroying Organisms
- Mold, Mildew and Fungi
General Home Inspection Checklist Items
- Structural Elements.
Construction of walls, ceilings, floors, roof and foundation.
- Exterior Evaluation.
Wall covering, landscaping, grading, elevation, drainage, driveways, fences, sidewalks, fascia, trim, doors, windows, lights and exterior receptacles.
- Roof and Attic.
Framing, ventilation, type of roof construction, flashing and gutters. It does not include a guarantee of roof condition nor a roof certification.
Identification of pipe materials used for potable, drain, waste and vent pipes. including condition. Toilets, showers, sinks, faucets and traps. It does not include a sewer inspection.
- Systems and Components.
Water heaters, furnaces, air conditioning, duct work, chimney, fireplace and sprinklers.
Main panel, circuit breakers, types of wiring, grounding, exhaust fans, receptacles, ceiling fans and light fixtures.
Dishwasher, range and oven, built-in microwaves, garbage disposal and, yes, even smoke detectors.
Slab, walls, ceiling, vents, entry, firewall, garage door, openers, lights, receptacles, exterior, windows and roof.
Home Inspection Checklist Items Needing ServiceHome inspection reports do not describe the condition of every component if it's in excellent shape, but should note every item that is defective or needing service. The serious problems are:
- Health and safety issues
- Roofs with a short life expectancy
- Furnace / A/C malfunctions
- Foundation deficiencies
- Moisture / drainage issues
Home Inspection Checklist Items Sellers Should FixIf you have a choice, it is smarter to hire your own contractors and supervise repairs. Before issuing a formal request to repair, consider the seller's incentive to hire the cheapest contractor and to replace appliances with the least expensive brands.
Although home inspectors are reluctant to and, in many cases, refuse to disclose repair costs, call a contractor to determine the scope and expense to fix minor problems yourself. No home is perfect. Every home will have issues on a home inspection. Even new homes.
A repair issue that will be be a deal breaker for a first-time home buyer, causing the buyer to cancel the contract, will not faze a home buyer versed in home repair. Talk to your agent, family, friends and call a few contractors to discuss which types of defects are minor. Perhaps a simple solution is available such as replacing a $1.99 receptacle, which can resolve many outlet problems.
Pat yourself on the back, too, for getting a home inspection. Some buyers feel a home inspection is unnecessary, especially if they are buying new construction. If a light switch doesn't work or the air conditioner blows out hot air, those are problems you can see and test. The problems that aren't readily identifiable to you such as code violations, a furnace that leaks carbon monoxide or a failing chimney, are the types of defects a home inspector could identify in a new home. Builders' contractors make mistakes, too.
Wednesday, January 12, 2011
Tuesday, January 11, 2011
FICO Questions Answered: Fair, Isaac CEO Reveals 3 Key Ways to Improve Your ScorePosted Jan 11, 2011 03:59pm EST by Daniel Gross
Many people have questions about the credit scores generated by Fair, Isaac & Co. Today on Tech Ticker, Aaron Task and I figured we'd take our questions straight to the source: Mark Greene, chief executive of Fair, Isaac & Co., creator and proprietor of the FICO score.
"The FICO score is a measure of a consumer's financial health and creditworthiness," Greene says. It's simply a number, ranging from 300 to 850 -- the higher the better. The average FICO score in the U.S. is about 700, and pretty much every bank in the country uses a FICO score when making lending decisions. But while the scores are important, they're not the be all and end all.
"Scores are meant to be one of several things bankers use in doing what we call sound underwriting," Greene says. Lenders should also be taking into account borrowers' background references, their capacity to repay loans, and collateral.
FICO creates the score simply by feeding numbers into its formula: "It's based on pure, statistical evidence, with no judgment or evaluation or emotion." The main factors Fair, Isaac takes into consideration are:
• How much total indebtedness a consumer has
• How long they've had the debt. "Newer relationships are riskier than things you've been paying over a long period of time," Greene says.
• How much available credit is being used: "If you're close to the edge on your credit cards, that's a danger signal."
• The mix of an applicant's credit portfolio -- is it all credit cards (bad) or a mixture of credit cards, a mortgage, and a car loan (better)?
Greene outlines three key ways through which people can improve their scores. First, pay your bills on time. Second, don't get close to the edge: "Don't use more credit than you really need." And third, don't apply for new credit unless you absolutely have to.
It may sound obvious, but the easiest way to avoid a sharp downgrade in your FICO score is to stay current on your mortgage and stay solvent. "One thing people should know is that a foreclosed home or personal bankruptcy is the most severe harm that you can do to your credit score," Greene says. FICO scores can fall by as much as 150 points when borrowers walk away from mortgages or declare bankruptcy; it can take up to seven years to rehabilitate the rating.
Greene helps clear up what may be some misconceptions about the way credit scores are calculated. For example, is it true that every time you apply for a loan it hurts your score?
"It depends on the kind of product you're shopping for," says Greene. With car loans, for example, Fair, Isaac understands that people shop for rates. "If you apply for five different car loans within a couple of days, we understand that you're looking to buy one car at the best rate. And there's no adverse impact on your credit score."
On the other hand, when people apply for five different credit cards in the space of a week, they're usually seeking to open multiple accounts simultaneously. "In those situations we will take a few points off someone's FICO score because we're worried they're sending a signal that they need too much credit."
Is it also true that people who have little or no debt may find themselves with lower credit scores? That can be the case. "Warren Buffett used to say that he didn't have a particularly high credit score," says Greene.
Consumers can obtain their FICO score from the company at myFico.com. (Editor's note: Greene says the report is free in the accompanying video but you must register to receive your FICO score and a payment is required.)
Greene also points to a just-launched website, scoreinfo.org, that helps people understand how credit scores factor in this new era of financial regulation. As of January 2011, you have the right to receive your score any time a lender makes certain kinds of decisions -- e.g., if you're denied credit or given credit on less than the most favorable terms a lender offers.
In the U.S. economy today, people may frequently find that a credit score is being used by companies to make decisions that have nothing to do with credit. Credit scores have become part of the application process for jobs, car insurance, and health insurance. Greene notes that the credit score can be useful in non-lending contexts: "People who are good with their finances frequently turn out to be good drivers." But he reiterates that they were designed for a purely financial use.
Friday, January 7, 2011
For example, for the last ten years, we have been the leader in behavior assessments in the real estate industry. Through working with thousands of Agents and benchmarking their behavioral style, we have discovered patterns in how the different behavior styles can build a business that is effective and comfortable for them.
Not everyone should call FSBOs and expireds as some Trainers profess. In fact, there are a few behavioral styles that the success rate in prospecting to those sources is so dismal that it would be counter-productive. There are other behavioral styles that are so competitive and focused that they struggle to create referral-based relationships even when they go to numerous seminars to learn referral techniques. Some Agents sell more effectively by using facts and figures, while others use emotional connection and emotional techniques.
Being able to build your business around your natural gifts and natural skills that were given to you at birth and that you have spent years perfecting is the mark of a Champion. I once had a client who was frustrated because he didn't generate as many referral leads as his friend whom I also coached. Both of Agents were Champion Agents in their market. It really gnawed at my client, Eddie, that he couldn't generate as many referrals as Fred. When he finally shared that with me, I told him he needed to get over it because he would never get as many referrals as Fred. After he calmed down, I explained that his intensity and focus, based on his behavioral style, was not as relational and people oriented as Fred's. The outcome would be fewer referrals no matter what he did.
Because of his high desire for competition and intensity, I convinced him to try working expireds. Within weeks, he was taking at least six listings a month from working expireds. He started loving his business and was less frustrated. We then put a new Assistant on his team to love on his past clients and sphere and keep in frequent personal contact and ask for referrals. She had the same behavioral style as Fred, and the number of referrals increased by 25% in less than 60 days.
The way to ensure your success is to find your system, strategy, tactics, and lead generation and conversion sources. Too many Agents are looking for an off the rack solution in a tailor fit world. We need to be willing to pause, to evaluate, research, and design the right long-term solution. Anyone can do what he or she finds incongruent with their behavioral style for a short period of time, especially if they are broke. The problem is that it's not sustainable. When we have made enough money or feel comfortable, we stop doing activities we don't want to.
The search for your system and the perfection of that will ensure your success. It still means you need to attend seminars and training, listen to CDs, read books, and participate in coaching. If you work with a coaching company that is focused on helping you uncover your system, rather than forcing you into theirs, you have a higher probability of long-term success once coaching is completed. There is not one system or way to be successful in the real estate sales business.
The second step to ensure your success happens once you have made the best decision on how you are going to generate leads. For example: past clients; sphere of influence; strategic alliances with other professionals like Accountants, Financial Planners, Family Law Attorneys; community involvement; FSBOs; Expireds; REO properties. There are unlimited sources to choose from. Once you have finalized, stick with your decision. A Champion Agent tests the new strategies for a long enough period of time to modify the strategy a few times and test and monitor all of the results. A huge error I see most Agents make is the error of impatience. They change strategies and tactics so quickly that they never get past the steepest part of the learning curve. They are moving from one ice mountain to the next, trying to find the secret path to the top. It isn't there; you have to climb to the top.
Most Agents try a farm for three to four months, don't get any business, and scrap the farm. They will try a new newsletter to their past clients and sphere for three to four months and decide that doesn't work. They will call FSBOs or expireds for a few weeks, not achieve the result level they want, and stop that practice. In order for you to know if something new you are trying works, you have to try it for at least six months. It takes that long to gauge the return on investment. It takes that long to tweak and perfect it. You won't get all the facts to make an informed decision if the strategy works or not before a six month period of time.
Wednesday, January 5, 2011
A Michigan Short Sale Will Be a Great Investment in a Few Years
Some of the home foreclosures and short sales in Michigan are incredible values. The market in Michigan will come back, especially once the auto industry starts to show signs of recovery in 2011. The auto bail out will eventually help, and the State of Michigan has put incentives in place to attract more alternative energy industries to the state. Since Michigan has a huge infrastructure already in place for durable manufacturing, once the wheels start to turn, any investor with properties that were purchased as a short sale or a home foreclosure will appreciate fairly rapidly. Jobs will eventually come back, and a property that was purchased for $40,000 to $70,000 will certainly gain in value once job-related housing demand comes back.
Monday, January 3, 2011
Buying a home now is a no-brainer
(MONEY Magazine) --
Is now the right time to invest in a house?
Trick question. Actually, it's two questions.
Question No. 1: Is now the time to buy?
Question No. 2: Is buying a house a good investment?
The first answer is easy: With a few exceptions, if you have 20% to put down and good credit, now is a great time to buy. That's been the case all year, and I'd argue that we're probably closer to the end than to the beginning of the really great time. Let me explain.
Back in January home prices had dropped 28% from their peak. More important, interest rates were at historical lows. By locking in a mortgage for 15 or 30 years on a value-priced home, you were getting an incredible deal, even if home prices decreased. (I took my advice and bought a New York City apartment.)
By August (the latest numbers available) the median home price had risen 1% over a year ago, but 30-year rates had dropped a half-point to 4.5%. Assuming 20% down and a 30-year mortgage, the total cost of owning a median-priced home is now down $16,000 from a year ago.
Home values may waffle over the coming year, but because Americans take out such large, long mortgages, rates are what really matter. And I am more likely to grow hair than see 30-year mortgage rates drop below 4%. It's far more likely that rates (and the cost of ownership) will rise.
Now for question No. 2: Is a house a good investment?
That's likely, but you'll almost certainly (we all hope) do much better than that in the stock market. The fact is, however, that that's the normal case for housing; the booms that began after World War II and in the late 1990s were the exceptions.
According to urban and environmental planning professor William Lucy of the University of Virginia, this move toward urbanization in American housing is the reversal of a trend that's been in place since 1945. Keep it in mind when making your buying decisions.