Question: Is it possible to get out of paying escrow for taxes and insurance through my lender so I can make these payments myself? If so, how?
Answer: You could ask your lender to change the terms of the mortgage, but that's likely to make for a very unhappy lender. Odds are, it won't happen. Here's why: When the lender collects property taxes and insurance it knows that such bills will be paid. That means less risk for the lender, possibly one of the reasons you are not paying a higher rate for the loan.
The lender wants to assure that taxes are paid because unpaid property taxes are a lien against the property that must be paid off before any mortgage claims. The lender also wants to pay for insurance so that the property has adequate fire, theft and liability coverage -- an important matter since the property is security for the loan.
I used to believe that it made sense for borrowers to pay their own taxes and insurance so they could capture interest by making regular payments into a savings account and then paying bills when they were due. Now, however, with property taxes and insurance costs soaring it may not be so easy to accumulate needed dollars. For this reason, I now believe that most households benefit from letting the lender collect such funds gradually.
Question: I'm a landlord who has a prospective renter with handicaps. He'd need a ramp put in to access the doors to the home. Am I being discriminatory if I turn him down? I can't afford to put in the ramps.
Answer: HUD and the Department of Justice have just issued new guidance regarding the Fair Housing Act. It essentially re-states what the law has always been: As a landlord marketing to the general public your property must be equally available to all and you must permit tenants with disabilities to make modifications to the property at their expense.
As to your question, turning down tenants because they have disabilities is discriminatory. For specifics, please go to: http://www.usdoj.gov/fairhousing .
Question: Was there really a real estate bubble -- or did things just start cycling the other way?
Answer: For a number of years home prices have increased at a faster pace than either income or inflation. Homes would have been unaffordable for many prospective borrowers and sales and prices would have naturally slowed had lenders not eased underwriting standards starting around 2002. The result was that with looser underwriting standards a given level of income could support a larger mortgage -- or at least that was the theory.
Whether what we now have is a "bubble" or something new in the business cycle is unknown. However, names can't hide the reality that millions of people are now suffering as a result of toxic loans and the failure to regulate them.
Question: We're a married couple in our late 50's who live in Scottsdale. Home prices have skyrocketed since we bought 20 years ago. Do you think it would be wise for us to sell now and move into something smaller for retirement?
Answer: It's not uncommon for individuals to move to smaller properties on a single floor as they get older. The logic is that as children move out less space is needed and as we age stairs become a barrier for many senior citizens.
Whether such a move makes sense in your particular case depends on your financial and physical circumstances as well as your personal preferences. The best approach is to look at properties now on the market to see if any reflect the type of accommodations you would prefer to have in the future. Local real estate brokers can suggest properties of interest.
Question: Can I become a homebuyer even if I have bad credit, and don't have much for a down-payment?
Answer: You can always find a loan with sky-high rates and woeful terms that will allow you to buy a home. But that same mortgage will ultimately and inevitably make your financial situation worse and perhaps lead to foreclosure and bankruptcy.
The better alternative is start saving and to make a practice of paying every bill on time and in full. That way your credit rating will improve and you'll be able to borrow money at a lower cost and get a better house.
Question: What are HUD homes -- and are they a good deal?
Answer: Large numbers of mortgages are insured each year under the FHA program operated by HUD. When owners cannot make their payments, the homes are offered for sale at auction. If the bids are insufficient to sell, then the properties wind-up being owned by HUD.
HUD homes are sometimes a good buy and sometimes not. Whether a HUD home is worth purchasing depends on its price, condition, location and financing. You also have to consider if it's the right house for you in terms of your interests and the alternative properties you could otherwise buy for the same dollars.
Question: While I'm aware that its not possible to predict when home prices will be at their lowest, I also believe there are trends that can be followed to make an educated prediction. Have we hit rock bottom in price of homes in California? If not, what timeframe are you predicting that home prices will be at its lowest?
Answer: Economists, stock analysts, federal bank regulators and lenders were paid a lot of money to anticipate such trends. It should be clear that most were wildly oblivious to such matters as mortgage rates, derivatives, home demand, and foreclosure rates.
Your question makes a great deal of sense but the answer is no longer a real estate matter. We are now bailing out investors on Wall Street, those who hold mortgage-backed securities and derivative contracts. It is unclear whether these efforts -- which include government loans worth hundreds of billions of dollars -- will be successful.
We have done little to reduce the federal deficit or the balance-of-payments problem. Thus it is not that the price of gasoline is rising it is that the value of the dollar is declining. We have no meaningful energy independence policy while the drive to use more ethanol has resulted in higher food prices -- and little if any environmental improvement.
The practical answer to your question is that as long as large numbers of foreclosures are present in local real estate inventories then local home prices will not rise. Given the number of toxic loans which remain outstanding, it's unlikely that we have reached bottom.
Question: I'm new in the property business and I was just wondering about the price that is displayed next to the properties in the foreclosure listings (estimated loan balance): Is that the price that I pay the lender to buy the property or am I totally wrong?
Answer: Existing loan balances reflect current debt for a property facing foreclosure. The lender would be elated if bidding for the property equaled or topped the existing debt because then the loan could be paid off. However, in some markets bidders will not offer enough to pay off the borrower's debt. In such circumstances the lender is likely to bid the loan balance, not get a taker and then take back the title. Such property then becomes a "REO" -- real estate owned by the lender.
Thus, the price you pay for a foreclosure will depend on local market conditions. In some areas foreclosed homes will sell at full value -- and in the frenzy of bidding perhaps even more. Alternatively, there are local areas where a huge number of foreclosures are on the market and thus there's a major "foreclosure discount" in play -- you'll pay less for a home.
However, the real issue is this: If you can buy a home at discount, then what? Will the property make sense for you as a residence? As a rental? As a property to fix up? In addition to a low price, think ahead regarding how you want to use the property -- and whether such plans are reasonable.
If you have an interest in foreclosures it would be wise to speak with brokers, lenders and investors who have experience in the local marketplace.
Question: I sold land that my company owned and now have a capital gain. Can I sell my home to the company for the same amount and thereby eliminate the capital gain to the company?
Answer: Selling your home to your company, in addition to raising questions of self-dealing and setting off transfer and other taxes, will not solve your capital gains issue.
The property sold by the company is one transaction. If you sold your home to the company that would be a second transaction. The tax rules are different for investment property and for property used as a prime residence. Most likely there would be no capital gains tax on the sale of your prime residence if the profit was less than $500,000 (if married) or $250,000 (if single). However, the profit on the sale of land by your company would remain a taxable event. The loss on the sale of a prime residence is not deductible, thus it could not offset any profit from the sale of another property.
Before going further with this, please speak with a tax professional and get a copy of such IRS publications as Publication 523 , Selling Your Home; Publication 527 , Residential Rental Property; Publication 535 , Business Expenses; and Publication 587 , Business Use of Your Home.
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