On top of the drop in value, my client had to change jobs. Her new job was paying her less than her old job. The reduction in pay coupled with the drop in value of the home put her in a no-win situation. She could not refinance and did qualify for retooling her loan for a lower payment. She was living off credit cards and going through her savings and IRA’s – something had to give.

I suggested to her to do what is called a short sale; this is when you agree to sell the house for a lesser price than what’s owed to the lender. It requires that you put together a package of required documents for review by the mortgage company to prove that you have a true hardship situation and there is a valid reason you can’t repay the loan.

With a Short Sale, the seller can get a FHA loan in two years with continued good credit which differs from a foreclosure where you cannot get a loan for up to 10 years. The banker gets the home sold and off their books with out the costly foreclosure process. The new buyer gets a great deal and the home is owned by a new family. This makes it a good outcome for all parties involved even though it is a bad situation.

If you or someone you know is in the situation of owing more on their home than it is worth, tell them to get in touch. I can advise them if this is the best move for them to make.

-Sharon J. Coleman

The problem was they had a home to sell and knew from all the news that home values had dropped. They weren’t going to be able to stay in their present house so the couple was conflicted with what to do. Was this a good time to do this?

It’s important to remember in a down market that you aren’t the only one losing value on your home: everyone is. This makes for some opportunities when you have to sell your home and move up to a more expensive one.

If your current house drops 20% in value (for example: it was originally $200,000 and now is worth $160,000) this does constitute a $40,000 loss. But, let’s say the more expensive house you want to buy has also lost 20% in value (originally $300,000 and now is $240,000 which is a $60,000 loss). You are actually ahead of the curve with $20,000 dollars in value (the losses subtracted: $60,000-$40,000).

This seemed like a great strategy to them so we were able to start looking. We eventually found the larger home for less money. We sold her home for less, but were still ahead of the curve for when the market recovers.

Moving up in a down market most always makes sense because the percentages work in your favor. While it’s easy to focus on the loss of value in the present, gains can be made when you move up to a new home. The only other criterion is to be able stay in that home for a minimum of 5 years.; you never make out selling a home in less time than that.

My father in law started to have bouts with poor health. As a result, his large lawn and older home became a burden for him and his wife. He was determined to stay in his home regardless. His wife, however, saw what was happening and together we took steps to get them into a maintenance-free home in a community of 55 and up.

Getting into a maintenance-free home with no yard to cut or home to constantly fix was a life saver for my father in-law. The best part was he finally loved it, too. He now tells me that he never realize what a toll all the work had taken on him physically, not to mention financially. He is now a big leader in recruiting his friends to make this difficult change.

From personal experience, trying to help parents or grandparents stay in a home that is too hard for them to upkeep is a heavy burden to levy on family. Try and begin to have conversations with people in their 60s; usually this is the best time to make this sort of move. If you or some one you love is facing this decision, help them see the wisdom of making the move to not only save themselves, but the people that will be caring for them.

-Sharon J. Coleman

This is risky because anything can happen that will trigger a rise in interest rates, such as a local or international event. Loan officers are not in the position to call all their clients who have not locked if something suddenly happens. Trying to hit the bottom of interest rates is like trying to time the stock market – it is very hard to do.

I always recommend to my clients to lock the rate once you are within 60 days of closing or less. You want at least a week leeway in case closing is delayed. This is a win-win situation for the borrower. If rates go up, you win by having an affordable mortgage payment. If they go down, you can either negotiate to get a lower rate or refinance later.

Wouldn’t you rather make your decision to lock now rather than risk being forced to accept a higher rate than you are uncomfortable with? Once you lock you no longer have to worry about what your payment will be. In addition, you can not get final loan approval with out your rate locked. Once you have complete loan approval and a rate locked that you want, you are ready to go forward and move to closing.

- Sharon J. Coleman

This created a problem because the family had to spend additional money towards transportation costs. The family was constantly on the road which led to a more stressful environment and less family time. This directly resulted in everyone having to get up earlier and go to bed later because of time constraints.

We sat down with a map and looked at the triangle: childcare, work, and home. We chose an area that fit well within that triangle to begin to search for a home that would make their life much easier. We found a home that suited their needs and was close to all three things.

Sometimes you cannot avoid life’s unexpected events. It is impossible to plan for everything that life is going to throw at us. But, it is important to keep a five to ten year outlook of what you expect to happen. If you are looking to start a family, keep in mind that while the home you have now can very well suit your needs, it could change with a new child or marriage.

This is one of the most important things to remember. No matter what the situation, always keep in mind that you have to make sure your triangle of work, family and friends, and home is within a reasonable area. This will help keep stress down and allow more free time for you to do the things you enjoy.

-Sharon J. Coleman

He is conscious to a fault. Whatever he tells you is gospel; if he says you will be approved for a loan, it is done. When someone tells me the horror story of friends who at closing needed to come up with more money than they were told, I know they had a bad, unknowledgeable loan officer. That should never happen if you are working with the right people. Mike Layton is that right person.

There is more “Smoke and Mirrors” in mortgage lending than in any part of a real estate transaction. To get your business, some loan officers conveniently leave out taxes or fees to make you think you are getting a better deal. Once they have you locked in, most people stay with that loan agency even when they find out they may not have the deal they thought they had. They feel it is too late to move the loan, and sometimes, it is.

One time, I had a situation where there were five transactions that had to close in order for everyone one to move to the next house. The buyers at the beginning of this domino chain found out at the last minute that the internet lender they had chosen required over $3,500 of undisclosed fees to pay at closing. Unfortunately, we could not wait for them to find new financing, so they had to come up with the money.

Some people prefer to use internet lenders even though many times people from other States do not have knowledge of what is necessary to complete a transaction in Virginia. There are plenty of excellent people here who are local but still available conveniently by phone or email and will give you the 100% attention you deserve.

-Sharon J. Coleman

No problems though: so was my grandmother’s home! She and granddaddy had nailed plywood up to hold in sagging drywall, 20 year old carpet, a floor furnace, no central heat and I could go on. The problem with homes like this is where to begin.

With neglected homes, there is a life time of repairs and upgrades to deal with and the home begins to be a money pit. A balancing act begins of exactly how much time and money should be spent as people try and prepare older homes to be sold.

It is not usually cost effective to bring a dated house up to speed. You cannot spend money on kitchens, baths, electrical, heating etc. and get that money back immediately upon sale. But, you have to get it to a certain point. Painting inside and out and getting the yard/exterior looking well kept is a must. The next least expensive fix is new light fixtures. These few things make a huge difference in how buyers react to a home.

The best way to avoid this is to encourage your parents to start dealing with some issues early on. This is not bad advice for us 50-somethings either. There are certain items that carry sentimental value but most of it can go. I got my parents to start getting rid of some of their stuff by suggesting they could get money for it. My dad especially liked the idea; I told him you might as well earn the money while the things could still sell and you are here to use the money.

In conclusion, we cleared out the personal belongings and made the necessary repairs and improvements to get the home sold. The family did have to put up some money to get things done but they were able to recoup part of it when the property closed. It is best if you are faced with a similar situation to get a Realtor involved up front. This saves you time and money, because you will be directing your efforts on the right things.

-Sharon J. Coleman

The first property had more level ground which made it more appealing. Lots of hills and valleys make it hard to even build the simplest of things – like a swing set. Unfortunately, this house was not attractive to them because the home had separate living and dining rooms and a family room that was not as open to the kitchen.

We discussed how they lived and what their family’s needs were; we talked about the lot and how much time they would actually spend in the yard versus being in the house. After going over their priorities, they decided to go with house that they liked best regardless of the lot.  It had the family room and open kitchen they wanted so they could be with their children and prepare dinner at the same time.

Before you start shopping, make a list of what you need in your next home. Prioritize that list and decide what is non-negotiable and what is flexible. Why are you moving and what amenities are you looking to gain in your next home? Those 2-3 features would likely be on the non-negotiable list. Features like hardwood floors and fencing for pets can be on the flexible list because they can always be added later.

Making this list before hand will cut down on wasted time as you narrow down your search to specifically what you need. You will feel more comfortable with a buying decision that meets the top 3 requirements on your list. While one home will not have everything on your list, if it has most of your requirements you are more likely to be happy with your choice.

-Sharon J. Coleman

I look forward to sharing with all of you.

Cheers,

Sharon J. Coleman