My New Blog

Every time I read the paper or listen to the news, I get mad.  Really mad.  In the last 30 days, the New York Times published the following headlines: 

“Plunging Housing Markets . . . Down Again”

“Home Prices Suffer Record Monthly Drop”

“Bank Closures at All Time High in 2008”

“Credit Crisis Waves Roll On”

“Growing Market in Foreclosures”

“Foreclosure Rates Show No Sign of Slowing”

“States Unemployment Funds Run Low”

And the bad news goes on and on, causing panic and fear until we become our own worst self-fulfilling prophecy. Here’s my beef.  It's media hype.  No it's worse than media hype.  It's a vast media distortion, used to sensationalize and sell the news.  It's not the first time the media has done this, but now it has hit close to home.  Close to your home, close to your client's home and your livelihood.  The result is that the American home-buyer is naively buying the lie and hesitating to buy that home they need.  In fact, interest rates are at an all time historical low. The Congress and the President are working on an economic stimulus package.

Even some experienced sales professionals started believing this news.

Why? Because, like me and everyone else who reads the papers, watches it on the TV and hears it on the radio, we think that just because the mainstream media says it, then, by golly, it's gotta be true.  Pundits know that if they repeat anything long enough, people believe it. 

Well I’ve got a few surprising facts here that I can share with us:

“Bank Closures at an All Time High in 2008”. Hogwash!

• In 1989 there were 1,004 bank closures.

• In 2008 there were 30 bank closures

• On average there are 94 bank closures per year

“Foreclosure Rates Show No Sign of Slowing”. Baloney!

• During the Great Depression Foreclosure Rates were 50%

• Nationally today our Foreclosure Rates are 3% (1.4% in Utah)

 “States Unemployment Funds Run Low”. Ridiculous!

• During the Great Depression Unemployment ran at 25%

• Nationally today our Unemployment is 7.2%

We as educated consumers, need to think for ourselves. As a reader of this blog, I urge you to join me in confronting the main stream media in your own locations.  Spread this information in your social networking circle. Think about being a home owner if it makes sense to you.   It's the real truth.  It's not hype. 

I say let’s fight back and not let the one industry that is at the heart of the American Dream -- the Real Estate Industry –be seen in a doom and gloom fashion, and bring this whole mess, this nation and the world back from chaos. People need housing. This is a fact. Businesses need space to conduct business. This is fact. The one best weapon that you have at your disposal is the truth! 

Are times right now bad? Yes. Do we have a shaky market? Yes.  But FDR's famous statement applies:  "The only thing we need to fear is fear itself."  It's time to start looking at our glass as 93% full rather than 7% empty. We need to look at putting 15-20% down payment and say what’s wrong with that? That's been a standard in real estate for years - a safe standard.  We need to look at qualifying procedures and make sure that we are selling homes to people who can afford them.  We need to make sure that Wall Street Executives don't get million dollar compensation packages, while laying off hundreds of workers. We need to make sure that banks look at real-estate as a long term steady revenue stream of mortgage interest income, and not like risk based lending like credit cards, and start taking the long term view and not the short term, make a quick buck view.

We are the grass roots of the economy, and we can make a difference. We can take it back. I tell our buyers and sellers the truth about what is going on and stop the panic. If there is insanity going on it is in the pundits that look for all the bad news to make sensationalism sell their message.

My message is as it should be: "America is good. America is strong. America is proud!"

An Opportunity of a Lifetime

Warren Buffet says, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." While Mr. Buffet was writing about buying stocks, the same can be said for housing today.

Housing issues have permeated the economy both locally and nationally. This week, one index that tracks housing prices, S&P/Case-Shiller Home Price Indices, indicated home values fell the most since 1968, declining 18.5% in December from the year before.

Looked at from a different perspective, this means home prices have fallen to levels not seen in six to twelve years, depending on individual markets. Following the Case-Schiller report was the report from the National Association of Realtors (NAR) recently. The NAR reported that home prices for the month of January fell by 14.8%.

The bright spot though in contrast was that the number of homes sold in December increased. Home buyers from coast-to-coast have been buying distressed properties at the rate of 45% of total sales.

Recognizing that now is the time to buy, everyone – from those looking to purchase their first home to seasoned real estate investors – is buying homes today. Bruce Norris, the head of an investment group in Southern California, expects to buy at least 100 homes this year as, "This is the buying opportunity of our lifetime."

Fundamentals Point to Strength

The basic fundamentals of the housing market point to higher prices ahead. Almost half of the properties being sold today are existing homes that are either owned by banks or homes on which banks are accepting short sales, allowing them to be sold for less than what is owed.

New homes or homes under construction are near all-time lows. The country's demographics point to more potential buyers coming into the housing market than projected inventory in coming years. This all points to higher prices on the horizon as demand will be greater than supply. This is supported by the fact that the inventory of unsold homes fell 2.7% in January.

Why Buy Now?

Three very important reasons to buy now are:

• Interest rates are near all time lows;

• Home prices have declined to levels not seen in years; and

• Qualified first-time home buyers are now eligible for up to an $8,000 tax credit.

• Lower Prices Don't Always Equate to Lower Payments

One final point to consider. Even if you believe that home prices will continue to decline, it's very difficult to believe that interest rates will remain at these low levels.

Did you know that even if home prices were to decline 10% but also during that time, interest rates available for home loans were to increase by 1.00%, your monthly principal and interest payment would actually be higher? It's true.

So, if you are thinking of buying or the end of your lease is near, get busy and get in the game. To quote Mr. Buffet again, "If you wait for the robins, spring will be over."

Call me and we can discuss the best options for you today.

“Why Real Estate?... Why NOW?"

by Anthony J. Russo

Alright - first let me say that I am going to paraphrase (heavily) from an article I read in my Rosetta Stone of marketing - Dan Kennedy's No-BS Marketing Letter, so please don't write in with your Joe Biden plagiarism jokes (Charlie H. & Brian C. - you know who you are:)

Walt Disney started the company that became Disney as we know it today just as the Great Depression was beginning - AFTER a previous bankruptcy. W. Clement Stone built his giant Combined Insurance Companies of America out of the Depression. Bill Gates and Paul Allen began Microsoft's march toward world domination in a recession. Jeff Bezos launched Amazon - at first named something no one could spell correctly - in a recession. The list is long of successful companies birthed in sour times and remarkably poor timing.

Timing definitely matters. The difference between salad and garbage is timing. The market is often ripe for a particular thing after some have tried bringing it forward too early, and before some arrived too late. It is also true that there are times when it is easier to do a thing than at other times. Last year, in an example that means something for our business, merger and acquisition activity was at a five year low and both capital and financing for deals was held in tight fists. However the giant Imbev/Anhauser-Busch deal did get done, and at breakneck speed, from start to finish in just 90-days... with the M&A attorneys sleeping on couches at the office and working seven day a week. Could the timing have been better if the deal came together a year or tow earlier? Maybe. But the players weren't ready.

You see - I believe the entrepreneurs mentioned at the beginning of this article knew something no one else did and they weren't going to wait for fortuitous timing to pursue their dreams. In what must have been an unconscious decision, I believe their success was magnified by launching in a downturn because they were well positioned to benefit once the economy began to grow.

So where am I going with all this? Randy and I have made a career out of taking our business - residential real estate - and adapting strategies that yield maximum results, no matter what "cycle" or "phase" the real estate market is in.

What does that mean, you ask? Simply this - we make our own timing... we do not allow the vagaries of the "market" dictate our success. And we have created a business that is designed to educate others on how to score in a "market" other so-called experts are afraid of.

We will tell anyone who will listen that we are in the best market any of us will see in our lifetimes. Now, this sounds counterintuitive to the average "investor" who looks out there and sees prices plummeting, no buyers and blood in the streets.

But the Poulson?Russo highly-trained real estate assassins say yeehah! Buying opportunities have never been more plentiful, and we are ready to snap them up. We are going to unleash a flurry of real estate activity into the teeth of this recession that will make the wannabe's eyes water. We are going to build LARGE portfolios of properties acquired with NO money and HUGE discounts and we will ride the inflation tsunami those knuckleheads in Washington are building by printing all the money they need to pay for their multi-trillion dollar spending sprees.

Ya' see... Randy and I 'aint scared of no recession! We are loaded for bear and we intend to make lemonade from the everyone else's lemons.

We want you to join us... come on in - the water's fine.

[EDITOR'S NOTE: This article addresses just a portion of what Randy & Anthony will be showing everyone who attends one of their FREE Full-Day Events apply in their businesses. REGISTER NOW before these events are sold-out (they are over 105% booked as of the writing of this, but we are increasing the size of the original venues - don't miss out on learning more!]

© 2009 Poulson•Russo LLC

WANT TO USE THIS ARTICLE IN YOUR EZINE OR WEB SITE? You can, as long as you include this complete blurb with it: Real estate entrepreneurs Randy Poulson & Anthony Russo publish the award-winning 'Real Estate Wealth Report' weekly e-zine that is sent to 25,000+ real estate entrepreneurs. If you're ready to jump-start your life, make more money, and have more fun in making real estate your personal path to prosperity, get your FREE tips now at www.poulsonrusso.com.

IS BUYING THE AMERICAN DREAM A GOOD INVESTMENT IN TODAY'S MARKET?

Yesterday The Hudson County MLS (HCMLS) issued it's productivity reports for 2008.  The results are extremely interesting.  If in 2002 a consumer decided not to buy a home or condo with his $250,000 savings this is what he would have after 6 years.

$250,000 invested in 2002:

Bank Savings.....approximately $305,000 in 2008

Stock Market.......no change after 6 years or less???

The volume of sales in 2002 and 2008 in both the HCMLS and NJTAXRECORDS.COM have about the same amount of sales in both data bases. The following is the average sale prices for both.

HCMLS
2002 $257,000
2008 $395,000

NJTAXRECORDS.COM
2002 $216,000
2008 $392,000

If this consumer purchased a home in 2002 how much would the consumer be worth today?

Think about it: it gives you a place to live, a tax shelter for your income, and something you will eventually owe free and clear when you retire.  The majority of people's wealth is in the real estate holdings that they own.  Please contact me today and let's discuss how today's lower prices and outstanding low interest rates make the reality of home ownership still very affordable and very possible.

Do You Believe The Dire Media-Predictions?

There will always be cynics and skeptics who will tell you that the real estate market is going to crash - these kind of people have always been around…

Meanwhile, the successful investors are still "in the game" buying and holding onto their properties as they continue appreciating in value.

Here's an example of how (for years) the media has criticized real estate investing…

Dire Media-Predictions:

In spite of all of these so called "predictions", people continue to build wealth with investment properties and save a lot of money on their taxes each year…

If you want to succeed, find someone who is already doing it and model them. You don't need to re-invent the wheel because the wealth-building system that I follow is a proven, tried and true investment-property strategy that WORKS!

The Benefits Of Investing In Real Estate

Interest rates are historically low.  An economic stimulus package is around the corner.  Prices have dropped in some cases.  More people are returning to renting vs buying because of tighteting credit standards, which helps you as an investor.  With all of the mixed-media messages surrounding us these days, it's confusing for people to know where to invest their money (be it stocks, bonds, a 401K or real estate).

In my experience there's no better way to save a bundle on your taxes (while simultaneously building your wealth) than through investing in real estate…

Here's why…

· Huge Tax Benefits - Properties typically appreciate while the IRS allows you to write your properties off as depreciating.

(This one benefit alone allows me to write off thousands every year!)

· Using "Good Debt" to Build Wealth - "Good Debt" is debt that makes you money where as "bad debt" does not, it just makes your further in debt… The benefit of "good debt" is LEVERAGE because you don't need to have a lot of money to get started - you can start with the equity from your home.

· A Balanced Investment Portfolio - You've heard the expression, "don't put all your eggs in one basket", well the same applies to investing. By investing in real estate (in addition to other investments such as your IRA, 401K, stocks and bonds) you will have a stronger and more stable investment portfolio…

· A Personal Retirement Plan - Can we even count on Social Security as a retirement option any more? When managed correctly, investment properties are a very good potential source of passive income for when you retire.

· Deferment of Capital Gains Tax - When you sell an investment property, if you made more money than you bought it for, that's called your "Capital Gains" and Uncle Sam will tax you on that gain. However, the government allows you to transfer that gain into another "like kind" property by using a 1031 tax exchange. This allows you to bypass taxation by deferring the financial gain into your next investment.

· Instant Equity - It's possible to find investment properties that are $5k, $10k, $15k (or more) below market value. When an investor buys properties like this, he or she can instantly use the equity from this for additional buying leverage.

· Long Term Growth - My method for real estate investing is about buying and holding properties for the future because I know that their value will almost invariably continue to increase!

Don't Listen To Anyone That Tells You -
You Can't Succeed By Investing In Real Estate!

Maybe you've seen the late-night TV infomercials on "How to Get Rich Quick by Investing in Real Estate" and thought to yourself, "Is this stuff for real?". In my opinion, most of these campaigns are just designed to sell you a bunch of expensive information - rather than real world investment properties. 

The key to winning at the "game of real estate investing" is to surround yourself with positive, forward-thinking people who are already doing it themselves. People who will support your vision for building wealth - and "coach you" to succeed.

You and I have a responsibility to prepare for our retirement by making our money work for us - and buying investment property is one of the most effective, long-term, tried and true ways to do this (provided you make wise investment decisions and manage them properly).

My job is helping regular people (just like you) - to successfully find, purchase, and maintain high-quality, "wealth-building" investment properties - making sure that we carefully evaluate your financial needs first, so that the next investment you make - makes sense for you!

Which Is a Better Investment: a Single Family Home or Multifamily Building

Question:  Should I be investing in single-family or multifamily properties in the future?

Answer:  The answer really depends on your goals and it would be different depending on which point in the market cycle we're in. It also depends on what type of investor you are. 

What is your goal?  Is it cash flow: appreciation: a combination of the two?  Then of course, what type of investor are you? Short term speculator or long term passive income investor?  

Assess your financial requirements and goals. Do you need a steady stream of income from your rental or do you plan on selling it for a profit in a couple of years? If it's the latter, look for lower priced property that you can fix up as you rent it out. The goal of rental property ownership, is to eventually own it free and clear, and use the rental income to live on, while having your tenants pay off your mortgage for you. On the other hand, for the major portion of your lifetime, you are living on the margin between mortgage payments and fixed expenses and rents received. If you worry about the rents and how you are barely breaking even, then this is not the business for you. Real estate is about very slow but steady appreciated values. This is where the big money is in EQUITY.

Consider multifamily homes vs a string of owning a string of single family homes or condos. The advantage of owning single family homes is their greater liquidity when it comes time to resell. The dis-advantage, is that you typically can’t get enough rental income to cover mortgage payments and all debt service. In addition, with a Single Family Residence, you are either fully rented, or fully empty. This is not the case with a multifamily property. Consider being a resident landlord by purchasing a multiunit property and living in one apartment. In many cases, the income from the other unit(s) will cover your mortgage payment, allowing you to effectively live for free. Being on-site has other advantages, including ensuring that the property is well-maintained.

When the market was rapidly appreciating or even if it was appreciating at a steady pace then single family homes may be a better investment. 

In such a scenario you're giving up cash flow completely and often adding to the property on a monthly basis because in an appreciation market you will rarely get any sort of cash flow: people are buying homes and the home rental market is usually not as good.  You hope to make your money by realizing the gain in appreciation.  For example, let's say you acquired a property with a $2,500 per month expense in mortgage payment, property taxes and water and sewer bill, but your rental income is only $1,700 per month. You obviously are covering the $-800.00 per month income from your salary. This translates into $9,600 per year in negative cash flow. However, in a seller's market, where properties are appreciating very quickly, in a 2 year's time, you might be able to sell the property at a $60,000 profit compared to your initial purchase price. You don't mind the $19,200 loss you had for 2 years, because your net profit, is $60,000-$19,200 is: $40,800, not bad for 2 years “work”. In addition, if you have a high enough tax bracket that you can afford an $800 per month loss, it actually works in your favor, to shield some of your income from a tax perspective.

While this can work, I don't recommend this approach, and an investor has to be on top of the market trends because a change in the cycle can quickly diminish the return or make a home more difficult to sell. The above situation is actually one that we call “speculation” vs “investment”. It assumes a market that is increasing and is a risky way to invest in real estate. The difference between “speculation” and “investment” is that investment doesn't rely upon market appreciation to build equity. A true real estate investor will seek out a property with some built-in “up-front” equity, because for example, they are buying from a distressed seller, and then rent the property out at above break-even cash flow. Another example is the property that requires repair after purchase and the “equity” is realized as the property is brought back in line with market conditions and can be sold to a conventional family looking for a home. Having a property with positive before tax cash flow is the key to a “safe” investment, combined with some built-in equity.

Too many books and real estate courses focus on the techniques of getting a property with “zero down”. They are so focused on the “art of the deal” that they forget to focus on whether it is a good deal to begin with!! That is to say, does the property cash flow well? Does the property have any built-in equity? Can the property cash flow if a 20% down-payment was present and conventional bank financing was used? Can the property be easily rented out to tenants because it is close to schools, public transportation and other needed services, or is the property in a more distant location, requiring the tenants to own a car to get to needed goods or services? More properties can be bought soundly and safely with 20% down , and traditional bank financing than looking for the ultimate “needle in a haystack” rule of zero down, or seller based financing.

In a stale market, like we are in, now an investor can purchase a home, lease it and realize a small cash flow but you're still hoping for some king of appreciation to realize a solid return.

Small multifamily properties follow different market rules and serve a different purpose but any building up to 4 units does take on some of the characteristics of a single family home. 

Small multifamily properties, in general, do not change hands as often as homes because there is a smaller pool of buyers for them and they are usually purchased for long term cash flow rather then short term price speculation. In general, because they are still considered residential properties and not commercial properties, they are easier to get financing for, as compared to commercial properties (5 units and up) and fall under different lending guidelines than commercial properties. Typically, a commercial property is subject to what is called the “Income Approach”. And in addition what is called “Debt Service Ratio”, whereby, typically, for every $1 dollar in mortgage payments, there needs to be $1.20 in net operating income.   On the other hand, a multi-family residential property is subject to a comparables based approach of similar home sales in the area.

When choosing to become an investor, is your goal to be a landlord,a re-habber, or a tax shelter “asset assembler”. You need to understand what is your overall goal in real estate investment, immediate cash flow, to slowly start replacing your income from your job, via ownership of several cash flow properties over time, tax sheltering benefits of real estate ownership to shield income and own an appreciating asset, or realizing lump sums of cash via rehabbing a property?

In buying an investment property, keep in mind that you are buying for income relative to price, but also, you need to remember that differences in neighborhoods, needed amount of repairs, and ease of management are also variables one must consider. Some properties, although they cash flow better, are in more difficult lower income neighborhoods and therefore, cash flow better, because of income relative to price, but may be more management intensive in rent collection and tenant management. Yet other properties, are offering less cash flow, but require no up front work, are in more middle income areas, and attract a different audience of potential tenants. They may or may not be easier to manage, but they might be easier to resell because of as a general statement, properties that are centrally located, or in more desirable neighborhoods generally sell faster and better than properties in more marginal neighborhoods. Yet again, we go back to the question of equity build-up vs maximum cash flow. The property in the lower economic areas are less expensive, and therefore offer better income. However, they may appreciate slower than a property in a different area. So given, let's say, a 10 year hold period before resale, which property will appreciate faster? Generally speaking, if both properties are about the same, in terms of overall condition, and gross rental income and fixed operating expenses, the properties in the better locations appreciate slightly faster than those that are not as desirable.

So, whether you are buying a 1 unit or 2 unit building and your goal is the appreciation, as opposed to the cash flow, or whether you are buying a 3 or 4 unit multifamily property for cash flow, the real question always comes down to some compromise between buying for appreciation and equity growth vs cash flow. Generally speaking, you need to decide what is right for you.

Where a single family home and multifamily property up to 4 units are similar is in financing.  Financing for both is in general similar or was similar.  In both cases a buyer can receive conventional residential financing with very similar interest rates.

But to get to the point.  If your goal is to create a stream of passive income then your more likely to achieve such a goal with a multifamily property then a house.  A multi-family's purpose as an investment is cash flow and not appreciation.  Of course appreciation is expected but it often depends on the rental rates because this is a business: as the business generates more revenue the value grows and vice-versa.

In the current market more people are renting because financing is difficult to obtain in it will be even more difficult in the next few years as the financing markets readjust.  Multifamily property prices have corrected as well.  they are down from the speculative heights. 

What is it that your are after in real estate: if it's cash flow then you're more likely to get it with a multifamily property. 

Other things to consider:

A single family home and multifamily are still different beasts.  In a fourplex you have more people to deal with, 4 kitchen vs. 1, at least double the amount of bathrooms and 4 boilers, 4 hot water heaters, more pipes and just more of everything so the risk increases.  Management is different as well.  A multifamily property is truly a business, much more so then a single family home.  

There is no easy answer to the question first posed.  It can only be answered through a thorough discussion of your goals and tolerances.  One of the better solutions is to have both types of properties. 

Call us if you would like to discuss your options.  We have direct and indirect experience with both types of investments over 10 years and we'll be glad to share what we learned.   I have helped people just like you to become real estate investors.

Alexander D. Gonta, Realtor Sales Associate Phone: Cell: 201-988-3282 AlexGonta@gmail.com Exit On The Hudson Realty 808 Broadway Bayonne, NJ 07002 Office: 201-437-0411 Fax: 201-437-9978

Sunday , October 12th, 2008

How to Avoid Mortgage Fraud

Here's a Very Informative Video of how to avoid being scammed if you're in pre-Foreclosure:

Click to View

Here's a Link to Freddie Mac and some great tips:

http://freddiemac.com/avoidfraud/

Here's some good advice for the home owner in trouble.

1. Don't sign documents you don't understand, especially a quick claim deed.

2. Hire an attorney to look at any documents you sign.

3.  Don't move out of your home.

4.  Don't ignore the letters of your lender and phone calls. Try to work with your lender if possible.

5. Do realistically assess your situation and recognize that you need to take corrective action.

6.  Contact a HUD-approved housing counseling agency. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

7.  Call Alex.  If you need help, I'm an expert in "short Sales", in those cases where the value of the home has dropped and is below the mortgage pay off. I can legitimately help you and guide you through this tough time.  Working together, we can market the home aggressively on your behalf. 

Avoid the scam artists and contact experienced,knowledgeable, real professionals that care doing the right thing for you.  I will give you my honest opinion. 

Alexander D. Gonta, Realtor Sales Associate Phone: Cell: 201-988-3282 AlexGonta@gmail.com

Exit On The Hudson Realty 808 Broadway Bayonne, NJ 07002 Office: 201-437-0411 Fax: 201-437-9978

Information Page for distressed seller

This site is not intended to act as a replacement for the advice of a competent legal professional. This is general information for the reader to familiarize themselves with all of their options. You should seek the advise of a legal professional and follow all their legal guidance.

This site is generally targeted toward the traditional buyer and seller, and not the distressed seller. However, if you are facing foreclosure and a “lis-pendis” allow me to work hard for you to sell your home quickly for you and market it aggressively and rapidly. We need to get the property sold rapidly. Do not wait until the last minute. Allow me to help you.

Step1: Do not ignore the letters of your lender and ignore the phone calls. Ignoring them will not make the problem go away.

Step2: Find out if you are in a mortgage state, or a deed-of-trust state. This is critical to know.

Step3: Gather all your lender's information of all parties that have liends on the property. The major lien is the first mortgage, which is in a "first position", and any other junior liens, such as home equity loan, mechanics liens , and so forth, and these are called "subordinate" liens, and are in second, third and so forth positions. The first lien is the most secure. The property taxes will likely be paid by your mortgage lender, because the lender does not want a tax lien to over-ride the first lien, the mortgage to the bank.

Step4: Find out when is your right of redemption period, after the sale at auction, or before. Find out the time frame you have for the right of redemption. Call me at 201-988-3282 and I maybe able to help. Contact a HUD-approved housing counseling agency. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

Step5: Act quickly and decisively. Let me help you sell your house and save some of your equity. Do not procrastinate until the last minute, as the problem will not go away if a judicial foreclosure is in progress.

Here are some thoughts for the distressed home owner

7 Options To Stop Foreclosure...

1. Forbearance

Forbearance is an agreement between the lender and the borrower that reinstates the delinquent loan through the payment of a lump sum or a schedule of payments over a period of time. If a borrower is behind in his or her payment, (because of a lapse of employment, and now has income coming in again) the lender may allow the borrower to pay the money back through installment payments over six months. The lender may decide, on the other hand, to allow the borrower to pay a reduced monthly payment until the borrower has an opportunity to get back on his or her feet and pay any remaining arrearages in one lump sum.

The forbearance may be an oral agreement or written contract between the lender and the borrower. Generally these agreements will not exceed more than 12 months.

2. Loan Modification

A loan modification is a change in any of the terms of the original note. This includes decreasing the interest rate, re-amortizing the remaining balance, extending the term of the loan, or other options at the lender's discretion to assist the borrower through a temporary set back.

Generally a lender will consider a loan modification when foreclosure is eminent and the borrower's income has been decreased or unable to make the mortgage payments, but will be able to keep the loan current after the loan modification.

3. Mortgage Refinancing

Mortgage refinancing is an option where the existing lender (or a new lender) would allow the borrower to refinance his or her existing mortgage, wrap in any late payments and fees, and cash out part of his or her equity in the home to allow the borrower to regain control of a debilitating financial situation.

Refinances are generally open to borrowers that face a temporary set back in their financial situation, have shown outstanding credit history in the past, and can prove that he or she can support the new mortgage payment.

4. Second Mortgage, Line of Credit

The existing lender (or a new lender) may offer a second loan or junior lien (often called a "hard money loan") to a borrower in order to make up any back payments, late fees and other charges necessary to reinstate the loan. The borrower, in return, will be required to make an additional mortgage payment to cover the principal and interest payments on the second loan. Hard Money loan fees are typically 5-10 times the average loan fees for an "A Credit" borrower. Plus interest rates often rival credit cards.

Use caution before you choose a "Hard Money Loan", as if you cannot make payments on your current loan(s), how can you on a new more costly loan?

5. Sale of the Home

If the owner has been unable to work with the existing lenders, or find new lenders to complete a loan transaction in a TIMELY MANNER, it is time to get serious about selling. The sooner the owner starts preparing their home for sale (and listing it for sale with a Realtor) the better the chances are that the owner will get a fair market offer to purchase their home.

However, most owners will wait for "their pending new/refinance loans" and by the time they find out they cannot get financing, there is not enough time to "conventionally" sell the house with a Realtor.

The longer they wait, the more likely they will need to sell their house to an investor who offers "a quick closing, all cash transaction", and will pay significantly less than fair market value for the property. In addition, typically the owner does not have the money to repair the home and get top market value, and will have to "discount" their sales price for any deferred repairs.

However selling the home to an investor quickly, in "as is" condition allows the owner to salvage his or her credit, pay off the loans, and retain any remaining equity in the home.

In certain cases, the lender may allow the borrower to sell the home when the proceeds from the sale are not sufficient to pay off the existing loan. This is known as a short sale. A borrower should check with his or her lender to discuss this option. Furthermore, the borrower may have to pay taxes on any loss the lender writes off from the short sale. A borrower should consult his or her tax professional before agreeing to a short sale.

6. Deed-in-Lieu of Foreclosure (DIL)

A deed-in-lieu of foreclosure is a voluntary conveyance of title to the lender. Generally this is a last ditch effort by the borrower to avoid the negative consequences of foreclosure. In return for the voluntary conveyance to the lender, the borrower is often released of any personal responsibility for the mortgage.

In order to qualify for a DIL, most lenders state that there must NOT be a second mortgage or junior liens on the property. Properties with values in excess of the amount owed against the home (to include normal closing costs) should consider selling the property before voluntarily conveying the home to the lender.

7. Bankruptcy Filing

Bankruptcy is a way for people who owe more money than they can pay right now, ("debtors"), to either work out a plan to repay the money over time in a chapter 11, chapter 12, or chapter 13 cases, or wipe out ("discharge") most of their bills in a chapter 7 case. While either the debtor is working out a plan or the trustee is gathering the available assets to sell, the Bankruptcy Code provides that creditors must stop all collection efforts against the debtor. When the bankruptcy petition is stamped "Relief Ordered" upon filing, you are immediately protected from your creditors.

What chapter you choose to file under, what bills can be eliminated, how long payments can be stretched out, and what possessions you can keep, and the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure control other details. These are federal laws, which means they apply all over the United States. The Code and Rules are found in Title 11 of the United States Code.

Think carefully before you choose Bankruptcy, as it will have serious financial implications to your life for the next 10 years!

The bankruptcy petition, schedules and plan are public documents and are available to the general public for viewing. Credit reporting agencies regularly collect information from the petitions filed and reports the information on their credit reporting services. Bankruptcies normally will remain on your credit report for up to ten (10) years and will be taken into consideration by any person reviewing a credit report for the purpose of extending credit in the future. The decision whether to grant you credit in the future is strictly up to the creditor and varies from creditor to creditor depending on the type of credit requested. There is no law, which prevents anyone from extending credit to you immediately after the filing of a bankruptcy nor are creditors required to extend you credit.

The best way for you to obtain credit in the future is to generate an adequate and regular income and pay all of your financial obligations in a timely and responsible manner. Many creditors will not deal with you in the future unless you have already established credit with someone else and demonstrate that you are a reliable debtor. In general it is recommended that, after the filing of a bankruptcy, one needs to learn to live within his/her income and not request credit, which is not absolutely necessary.

Many owners, who file bankruptcy and then later realize that they cannot keep their home and must sell it, find it impossible to find a place to rent. Oftentimes after a bankruptcy filing and a foreclosure, getting a landlord to accept you, as a tenant, is an almost impossible task.

Let me help you if you find yourself in a situation of a distressed seller. You will not get top dollar for your property, but we can save some of your equity and try to pay off all liens and junior liens. Under no circumstance stop paying property taxes in the meantime.