A Great Time To Purchase

How can this be a great time to purchase? After all, we are experiencing a huge real estate slump. Yet that is exactly what I am saying to you. The question is—why do I think that this is the right time to purchase.  If you are in the right position, you can be an opportunist!
The time to purchase any investment is at or near the bottom. Even though there is the possibility that homes in certain parts of the country will continue to go down in value, if you can purchase a home below today’s value now, you will not be hurt by any subsequent decrease. With the oversupply of homes on the market including foreclosures, you can achieve incredible bargains if you have the resources. The key is to purchase real estate that is not “for sale,” but to purchase real estate that is “on sale.”  

What is the key to achieving this goal? Having a system. A system that includes research, help of professionals including a mortgage consultant, real estate providers and even advice from accountants and financial advisers. Sound like a team? The answer is yes—businesses succeed because they have a team working on their behalf and you can implement the same concept. When you have purchasing power in this market and execute the right decisions, you have a competitive advantage over those who are less fortunate.

In addition to achieving bargains, if you currently own a home, you may be reticent to move up because you may not be able to sell your present home. This is a very real and important concern. You will find that the economics are in your favor despite this concern. Why is this so?

Higher priced homes typically fare worse in a down market than moderately priced homes. Let’s say your home has gone down in value by 10%. A higher priced home may have dropped in value by 20%.
 Let’s take a look at these numbers:

•  $500,000 home less 10% equals $450,000
•  $700,000 home less 20% equals $560,000

In other words, you lost $50,000 in value on the first home. But you wound up getting the new home at a discount of $140,000. That is an excellent trade off!

There is another issue here. What if you can’t sell your present home? Even the positive trade off does not work if you have to carry the costs of a second home for the next two or three years. In this case, you may want to consider renting out your present home. There are several advantages to taking this action—

•  From a tax standpoint, you can rent the home for up to three years without losing your exemption from capital gains. This is because the home needs to be a primary residence for only 2 out of the previous five years before you sell it.
• Also from a tax standpoint, any loss you take on renting your present home is tax deductible as long as you do not make more than $100,000, with deduction phasing out at $150,000.  Not only is the loss on the mortgage deductible, but you can deduct depreciation and maintenance.
• If you wait two to three years to sell the home, chances are that you will be selling the home in a better market. That is what smart investors do—purchase in a buyer’s market and sell in a seller’s market.
• Finally, if you continue to rent the property, rents will rise faster than your mortgage payment—eventually causing a positive cash situation. Now you have positive cash-flow while someone else pays the mortgage. This is a great strategy to create retirement income and an asset that will be worth many thousands of dollars or more with no mortgage as you move into your retirement years.

The final issue is—where do you get the down payment for the house if you don’t sell the present home? If you have the cash accumulated—this is not an issue. But if you don’t, if you have g good credit and sufficient equity, you may be able to refinance and take cash-out or obtain a second mortgage to fund the down payment on the new home.

Mike Ervin

Senior Mortgage Banker

California Retail Division

Office: 650-735-5261

Cell: 650-766-8500

Bankrupt Lenders.. No Mortgage Payments?

I am often asked, "What happens if the lender I got my mortgage from goes out of business?" I think a lot of people are concerned that they will somehow lose their home, or that the bank will ask for the loan to be paid back immediately. Neither of those things can happen. Your debt is a valuable asset of the bankrupt lender and it will be sold and transferred to another lender. So all it means is that the firm receiving your payment will change. You see the firm that receives your payment is called the loan servicer, and they may or may not own the actual mortgage itself. Most loans today are serviced by specialized servicing agents who don't own the loans but collect a fee from the owner to process all the payments and other paperwork, like collecting escrows. When a lender buys your mortgage they assume all the terms and conditions of your original loan. By law they cannot change anything other than where you mail the payment. If you ever have questions and you want honest answers, don't hesitate to give me a call.

Mad Client Call?

The other day I got a phone call from a very mad client! Apparently his real estate agent had made a mistake, or at least the client thought he had. So my question is this...do we get referrals from irate past clients? YES! You can actually get the best client referrals from these situations.....

IF YOU DO THE RIGHT THING!

What is the right thing? It's a 3 step process:

1. Say you are sorry. "Mr. Client, I sincerely apologize for what happened."

2. Take responsibility. "Mrs. Client, I accept full responsibility."

That is a critical step. Never pass the buck or try to put the blame on somebody else, even if that other person is at fault. Passing the buck is like putting gas on a big fire!

3. Last, make it right. "Mr. and Mrs. Client, what can I do to make this right?"

I see agents and lenders frequently start throwing money at the problem, when most of the time all the client is looking for is to just be heard. Don't start off by offering solutions, ask them what they want. Once you have gone through the 3 step process, 90% of the time, these guys are your most passionate referral sources!

More Secrets To Raising Your Credit Score..

Did you know that the credit bureau sells your private information every time you apply for a credit card, a cell phone, insurance, or any loan? You don't even need to give them permission to do it, they just do it! Is it any wonder that identity theft is the fastest growing crime in America? You can stop them from doing this. The government forced the credit bureaus to create an opt out site: www.optoutprescreen.com. This tells the credit bureaus to stop selling your information. When you do this, 2 things will happen.. you will notice a 75% decrease in junk mail and your credit score will go up, because they see this as a responsible thing for you to do!

Did you know that paying a collection account can actually reduce your credit score? Sounds backwards, but here's why.. The credit bureaus look at the date of last activity on each account to determine the impact it will have on the overall credit score. When you make a payment on a collection, the scoring system sees that as recent activity. Even though the activity was to do something good, the credit scoring software goes by date of last activity and makes the collection fresh again. Makes no sense to me either, but those are the facts.