Question: I live in Colorado and have a home that may be foreclosed because of decreased income from a job change. If my property is foreclosed will I be responsible for paying the difference between what the bank sells the home for and any remaining mortgage balance?
Answer: Potentially yes. As a practical matter, perhaps not.
According to Alisa Hagner with the Berkshire Group in the metro Denver area, lenders "may pursue a deficiency judgment, but usually do not."
"In Colorado," says Hagner, "the public trustee sells the property, the lender is required to bid, if the lender fails to register a bid, the sale is continued for at least one week. After the sale the owner has 75 days to redeem the property by paying all the fees in full."
Given the tremendous financial and credit penalties from a foreclosure it would be wise to seek an alternative. Hagner suggests speaking with the lender about a short sale; in addition perhaps it would be possible to rent the home or get a part-time job until home prices rise and you can sell without a loss.
Question: I was wondering if now is the best time to buy property or should I wait a couple more months to see if prices drop more? I ask this because I'm young and can only afford a $200,000 mortgage. I, like everyone, want to get a great place but still not have to pay the enormous amount that people in today's times think there place is worth. So should I buy now or wait on the market more?
Answer: You have a perfectly good question, but there's no equally-good answer.
To start, not all markets are in decline -- NAR has just reported that 102 metro areas are showing year-to-year price gains -- and 21 actually showed double-digit price increases.
More importantly, what happens in the next few months -- whether a local market rises or falls -- is less significant than what happens during the next five to 10 years, something no one knows. The long-term trend in housing is crucial because you are most likely to hold your property for a number of years.
Perhaps a better approach to your question would be this: Why not consider your housing preferences in the context of what you need and want for the next few years -- and then see what's available. Maybe a property with two to four units would give you some income as well as your own place. Or, maybe you want a home in the path of future growth, something not trendy today but perhaps more desirable in a few years because of local development patterns.
Speak with several local brokers and then find one to assist you as a buyer's agent.
Question: Our daughter is the co-owner of a house and wants to sell, but her partner doesn't want to sell and can't afford to buy her out. What other options does she have? Our daughter's name is the only one on the loan, but they are both on the deed.
Answer: If the property was sold would there be a profit? Does your daughter want to sell or does she want to get out from the payments? Could the property rent for an amount sufficient to cover monthly costs? Could the partner stay and rent out part of the place?
If there's no alternative other then keep or sell, then your daughter can seek a suit for partition. The potential cost for legal fees might cause all owners to re-think their positions and work out something. Please see a local attorney for details.
Question: I'm considering purchasing a condo in the U.S. and I don't know which would be more beneficial for me: To pay in cash or do a mortgage. I definitely don't want to do a 30-year mortgage -- I can do 15 years or preferably much less if it's more advantageous. My goal is to optimize tax deductions.
Answer: Taxes are only a portion of profits and income, thus a bigger tax bill is typically the by-product of greater investment success. Instead of trying to maximize tax write-offs a better strategy is to seek a more successful investment.
On the matter of loan terms, a 15-year loan will have a somewhat lower rate than 30-year financing. However, the shorter loan will also have a higher monthly payment. At least consider a 30-year loan, but one with a right to prepay in whole or in part without penalty at any time. This would allow you to make larger monthly payments if you want to accelerate the loan pay-off -- and only make required payments if you have a need for cash.
If you buy for cash there's no mortgage interest write-off (because there's no mortgage interest). However, if you buy for cash you increase cashflow and don't have to worry about mortgage payments if you have a vacancy.
If you have the money to make an all-cash purchase then the real test should be where you can get the best return on your investment after taxes and other costs.
Question: If monies are escrowed by a lender to pay real estate taxes and they're not paid in a timely manner, resulting in late penalties or tax penalties, who is responsible?
Answer: If the escrow account had adequate funding to pay the bill, the lender is responsible.
Lender escrow accounts are typically allowed to retain enough money to pay taxes and insurance bills as well as the equivalent of two additional monthly escrow payments plus $50.
Given that a home can be foreclosed if local tax bills are not paid, lenders have a strong duty to assure that such payments are made. For details, speak with a local attorney.
Question: We have had our home on the market since mid-July. We've dropped the price once and have many showings (40+) but no bites. Our broker is telling us to drop the price another $25,000 since homes in our price range ($500,000) don't seem to be selling.
We don't have to sell and are considering:
- Taking it off the market completely and putting it back on this Spring.
- Waiting until after Christmas to drop the price or not at all and letting the listing run out.
- Finding another broker.
Our county is getting 13,000 new jobs in 2008 and unemployment is very low. What do you think of our solutions?
Answer: Given that the property has been shown more than 40 times the problem is unlikely to be with the broker.
Since you don't have to sell would it make any sense to rent the property for a year or two? Be careful that you do not lose the residential capital gains exclusion that comes from living in the property for two of the past five years.
I'd stick with your broker -- and also speak with a tax professional.
Question: My daughter wants to buy my house. Is it better for her to get her own financing from a lender or can I be the lender? If I'm the lender, what procedures should I to follow to make the transfer without any problems. What happens to the mortgage lien if I die within few years?
Answer: When you say she wants to buy your house, do you mean you will move? Or, do you mean you will stay at the property but title will be transferred to her?
If the idea is to transfer ownership, then you will need to pay off any existing mortgage on the property. As to financing with a lender or by yourself, there are pros and cons for each choice. If you take back a loan it will be cheaper for your daughter and she will surely qualify. If the sale is financed by a lender then you will get your money and her debt with be outside the family -- not a bad idea given that families sometimes have incendiary moments.
There are substantial tax and estate issues here so you will need to speak with an attorney. As well you will need a will and living will.
If you take back financing you could elect for your estate to forgive all or some of the debt upon your passing. In any case, if you hold the loan then the transaction should be carefully documented because the mortgage is an asset to you and your estate. Also, having everything in writing is important if family dynamics change.
If you want to live in the property but give your daughter title at this time, you need to ask about gift and estate tax issues. You might want to give her the property subject to a life estate for yourself.
Question: I was offered a rent concession of $300 at the time of move-in for passing a credit check. A week after I moved in the assistant manager told me that the apartment needed the $300 back because it was only suppose to be offered to tenants who signed a six-month lease or more. I signed a three-month lease. My question is, can they do that?
Answer: Do you have anything in writing to support the discount? Were you induced to sign the lease because of the $300 credit?
If the credit has been given you could rely on the old principal that possession in 90 percent of the law. Or, you could sit down with the manager and try to determine if there was an error. Maybe it would make sense to split the difference.
Question: Our mortgage clients have been contacting us and are outraged that they are being bombarded with phone calls as a result of "trigger" lists. Several have even changed their phone numbers to stop the calls. We have lost several loans to bait-and-switch companies that have promised the world and then our clients are to embarrassed to come back. What can we do as a lender to stop this?
Answer: When individuals apply for a mortgage, lenders make a credit inquiry. The names of those applicants are then re-sold to other lenders -- thus the application for a mortgage "triggers" inclusion on the list.
The best approach for lenders is to create a disclosure guide for borrowers telling them how "trigger" lists are used. Borrowers can then give such appeals the attention they deserve.
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