The gas company was at a property I visited today and I was chatting with the technician. I discovered that he manages his mother's income properties. He told me how he has been fortunate enough to have long term tenants and he shared his secret for qualifying. It actually makes perfect sense, yet none of the property owners I spoke with have used this technique. As lots of first-time investors are taking advantage of the current market, I think you will find this useful, though you should also seek legal advice and become familiar with your local Apartment Owners' Association.
This gentleman told me that he does not base qualification solely on financial criteria. He stated that everyone has money troubles at one time or another and the current economic climate has hit everyone hard, especially homeowners who find themselves in the realm of foreclosure and bankruptcy. While there are state and federal laws governing discrimination, one should feel from the onset that there will be no problems with the new tenant. His selection follows very simple guidelines and this is as good a way as any to learn more about the person who wants to rent from you.
1. After receiving the completed application from the prospective tenant, he drives to their current home. He sees the neighborhood they are now calling home. He is looking at the pride in ownership, the condition of the home. He wants to see if they keep things neat and clean. If the neighborhood is troublesome and the applicant appears comfortable with that, he may pass on them. If the home is in poor condition, he wonders if it's their fault or the landlord's.
2. He knocks on the door. When the party answers, he discusses their application while he stealthly eyes the interior condition of the home. Even if the home has deferred maintenance no fault of the tenant, the tenant's capacity for neatness or not is undeniable with this technique.
3. In conjunction with the #1, #2, previously completed reference check and financial review, he will either confirm or deny the application then and there.
The advantage to the property owner is that with painless due diligence, he is eye-to-eye with the tenant so there can be no misunderstanding. The advantage to the prospective tenant is the knowledge that the landlord is involved and communicative.
This sounds like a win-win situation. I'd be interested in hearing how you select tenants and if you believe this process would be valuable to you.
Monday, November 2, 2009
Saturday, August 8, 2009
Homeowners should be aware of this scam
This week I had conversations with three homeowners who are past due on their notes and working with the bank to modify. Two of these owners received a knock on the door from someone who "wanted to help".
First, be aware that anyone who knocks on your door without first sending a letter or calling you is suspect. When you receive news about your loan it is ALWAYS mailed to your address of record. The bank supplements these notices with phone calls. If you do not respond, at the least you will receive a written notice posted on your front door.
One owner was visited by a man who stated he represents the private lender on her 2nd trust deed. Though the owner is many months behind on the note, the lender has not made movements to foreclose. Simply, as the 2nd trust deed, this lender is second in line to receive any cash from the sale of property. If there is not enough, tough nuggies. That's why 2nd loans are considered more risky and carry a higher interest rate.
The owner invited the representative into the home, which was right up his alley. He got the chance to evaluate how much money he would gain or lose in the foreclosure based on the condition of the property and weighing it against neighborhood data. He claimed to want to help her modify her loan and at the end of the day - no surprise - recommended that she sell AND he had an agent that would help her. That is when the owner called me. I recommended that she speak with the holder of her FIRST trust deed - on which there is no default - regarding modification before she goes one step further.
In another case, I received a call for a referral to a "hard money" lender - one who will take risks when a borrower has less than stellar credit and at a higher interest rate. With the new Truth in Lending and Predatory Lending laws I'm not certain this would be possible for him, but when I listened further, I recommended that he get an attorney, not a new loan.
It seems that he was working on a modification for his $700K loan. He has written communication dating as recently as July 31 proving that he is not in foreclosure and that the bank is working with him. Yet, he received a knock on the door yesterday from a man claiming to be a real estate agent (he is, I checked, but the license number on his card is incorrect - and not just a misprint) representing the NEW OWNER of his home. He stated that my client's home was sold July 28th and the new owner would be happy to sell it to him for $300K. The agent said he was ready to write an offer and would need a $5K deposit. The client was calling me because he wanted to get a loan for $300K. I asked him first, "You want to buy a house you already own?" And he said "It's a good deal". What I couldn't get him to understand is that if he already owns it, he's paying twice. And #2, why would someone sell a $700K home (okay, maybe it's now worth $500K) for $300K? Are we to believe that the bank foreclosed and sold it for 1/3 of the note's value? It didn't make sense to me.
My client called the mortgage company and they indicated that the home was indeed foreclosed on July 28th. But that's three days before the last letter he received about his loan modification. And the client received no notice of intent to foreclose, notice of default or notice of trustee sale - either in the mail or taped to his door. This is a process that, in California, takes more than 120 days. The situation is highly suspect. Certainly, it is possible for a foreclosure to occur by mistake, I have seen that. But I have also seen these errors reversed.
I think this client is a victim of a scam, on some level. I referred him to a real estate attorney and advised that any further knocks on the door should go unanswered.
When times are hard, the bad guys shift into overdrive to find new ways to deprive you of your stuff. You must be vigilant in questioning anything that doesn't seem right and get help if you need it. This is your home we're talking about...serious business. Be careful out there!
First, be aware that anyone who knocks on your door without first sending a letter or calling you is suspect. When you receive news about your loan it is ALWAYS mailed to your address of record. The bank supplements these notices with phone calls. If you do not respond, at the least you will receive a written notice posted on your front door.
One owner was visited by a man who stated he represents the private lender on her 2nd trust deed. Though the owner is many months behind on the note, the lender has not made movements to foreclose. Simply, as the 2nd trust deed, this lender is second in line to receive any cash from the sale of property. If there is not enough, tough nuggies. That's why 2nd loans are considered more risky and carry a higher interest rate.
The owner invited the representative into the home, which was right up his alley. He got the chance to evaluate how much money he would gain or lose in the foreclosure based on the condition of the property and weighing it against neighborhood data. He claimed to want to help her modify her loan and at the end of the day - no surprise - recommended that she sell AND he had an agent that would help her. That is when the owner called me. I recommended that she speak with the holder of her FIRST trust deed - on which there is no default - regarding modification before she goes one step further.
In another case, I received a call for a referral to a "hard money" lender - one who will take risks when a borrower has less than stellar credit and at a higher interest rate. With the new Truth in Lending and Predatory Lending laws I'm not certain this would be possible for him, but when I listened further, I recommended that he get an attorney, not a new loan.
It seems that he was working on a modification for his $700K loan. He has written communication dating as recently as July 31 proving that he is not in foreclosure and that the bank is working with him. Yet, he received a knock on the door yesterday from a man claiming to be a real estate agent (he is, I checked, but the license number on his card is incorrect - and not just a misprint) representing the NEW OWNER of his home. He stated that my client's home was sold July 28th and the new owner would be happy to sell it to him for $300K. The agent said he was ready to write an offer and would need a $5K deposit. The client was calling me because he wanted to get a loan for $300K. I asked him first, "You want to buy a house you already own?" And he said "It's a good deal". What I couldn't get him to understand is that if he already owns it, he's paying twice. And #2, why would someone sell a $700K home (okay, maybe it's now worth $500K) for $300K? Are we to believe that the bank foreclosed and sold it for 1/3 of the note's value? It didn't make sense to me.
My client called the mortgage company and they indicated that the home was indeed foreclosed on July 28th. But that's three days before the last letter he received about his loan modification. And the client received no notice of intent to foreclose, notice of default or notice of trustee sale - either in the mail or taped to his door. This is a process that, in California, takes more than 120 days. The situation is highly suspect. Certainly, it is possible for a foreclosure to occur by mistake, I have seen that. But I have also seen these errors reversed.
I think this client is a victim of a scam, on some level. I referred him to a real estate attorney and advised that any further knocks on the door should go unanswered.
When times are hard, the bad guys shift into overdrive to find new ways to deprive you of your stuff. You must be vigilant in questioning anything that doesn't seem right and get help if you need it. This is your home we're talking about...serious business. Be careful out there!
Tuesday, June 30, 2009
Loan Modification Could Save Your Home
I've been trying to get a video out but things are crazy...until then, here's the deal with LOAN MODIFICATIONS, a way you may be able to avoid foreclosure.
A homeowner may want to explore loan modification if (a) their mortgage payment has risen to a point where they can no longer afford it and/or (b) the value of their property has depreciated substantially since purchased.
Lenders ARE taking the time and effort to work out a plan with homeowners. Some are postponing trustee sales, some are delaying notices of default. We had a 90-day moratorium on foreclosures to explore the federal bailout plan and currently in California, lenders will have to prove they have attempted a work-out before foreclosing (full details are not known at this time, please consult with your mortgage company and confirm details of this new plan). Yes, lenders are more kind and gentler than when foreclosures went buck wild a few months ago.
How will the modifications take form? There are a few ways and each lender may choose to handle a case differently, but the goal is to reduce the homeowner's monthly payment. Some examples:
(1) A reduction in the face value of the existing mortgage reflecting current market values (i.e. a $400K note could become a $300K note). Lowering the face value - the home's value - lowers the payment.
(2) A reduction in the interest rate you are currently paying. Lowering the interest rate lowers the monthly payment.
(3) An extension of the mortgage - a 30-year term becomes a 40 or even 50 year term. Extending the term of a mortgage lowers the monthly payment.
Loan modification is based on your ability to make the monthly payments according to the method of modification utilized. Basically, you will qualify to buy the home you already own, like you are acquiring a loan for the first time, but credit scores are not typically a consideration. That makes sense, as most homeowners in this situation have missed one or more payments and that's dinged their credit. Simply, you tell your lender how much you can afford to pay and the lender will attempt to create a plan to keep you in your home.
The process is more difficult if your loan is owned by an investor instead of a direct lender. An investor is an individual or team that has purchased a "block" of loans (assets) as an investment. Getting approval of a loan work-out is a more protracted process in this case and navigating through tiers of decision makers may be frustrating and fruitless. There are no clear guidelines.
How does one approach their lender about loan modification? You can do it yourself - I did! But like selling your home yourself, there are ways and then there are WAYS. There are companies who specialize in loan modification. You've probably received email or snail mail from some of them. They charge a percentage of the face value of the loan to contact the lender on your behalf. BUT - AND HERE'S WHERE YOU NEED TO PAY ATTENTION - not all of these companies are approved by the Department of Real Estate, that sets boundaries and rules and affords some level of consumer protection. You only want to work with a Loan Modifier whose actions are sanctioned by the DRE!!!!! Ideally, this will be a real estate law firm. You will pay them a retainer and MAY have a 100% guarantee that if your loan cannot be modified, your money is returned. My experience is that the bank will deal directly with you. I would suggest taking this route. If it blows up, you can always start again with an attorney.
Now, READ THIS and let's be clear! Because if you have doubts or don't understand, you stand to lose everything. DO NOT pay a real estate agent any up-front costs to modify your loan - it is against California Department of Real Estate regulations for real estate agents to collect advances -money in advance of doing the job. DO NOT pay a company to modify your loan without knowing if you will receive your money back if they fail. DO NOT sign any documents, especially deeds, without knowing the ramifications of signing such documents. PLEASE, call me if you have questions or need a personal evaluation of YOUR situation. I'll point you in the right direction.
RELATED INFO: A term that will become increasingly familiar is SAM - Shared Appreciation Mortgage. This means that the lender who tweaks your loan may be entitled to a portion of the equity you gain when the market turns around. Owners who have utilized city or community financing (down payment assistance) probably already have a shared equity mortgage. When you sell, you share your profit (gain) with the institution that has rendered assistance through down payment or loan modification. Check your loan documents for details - it will be spelled out clearly.
The information contained herein is applicable to the State of California and programs may differ in your state. All information deemed reliable. You are encouraged to seek the advice of qualified legal and tax professionals.
A homeowner may want to explore loan modification if (a) their mortgage payment has risen to a point where they can no longer afford it and/or (b) the value of their property has depreciated substantially since purchased.
Lenders ARE taking the time and effort to work out a plan with homeowners. Some are postponing trustee sales, some are delaying notices of default. We had a 90-day moratorium on foreclosures to explore the federal bailout plan and currently in California, lenders will have to prove they have attempted a work-out before foreclosing (full details are not known at this time, please consult with your mortgage company and confirm details of this new plan). Yes, lenders are more kind and gentler than when foreclosures went buck wild a few months ago.
How will the modifications take form? There are a few ways and each lender may choose to handle a case differently, but the goal is to reduce the homeowner's monthly payment. Some examples:
(1) A reduction in the face value of the existing mortgage reflecting current market values (i.e. a $400K note could become a $300K note). Lowering the face value - the home's value - lowers the payment.
(2) A reduction in the interest rate you are currently paying. Lowering the interest rate lowers the monthly payment.
(3) An extension of the mortgage - a 30-year term becomes a 40 or even 50 year term. Extending the term of a mortgage lowers the monthly payment.
Loan modification is based on your ability to make the monthly payments according to the method of modification utilized. Basically, you will qualify to buy the home you already own, like you are acquiring a loan for the first time, but credit scores are not typically a consideration. That makes sense, as most homeowners in this situation have missed one or more payments and that's dinged their credit. Simply, you tell your lender how much you can afford to pay and the lender will attempt to create a plan to keep you in your home.
The process is more difficult if your loan is owned by an investor instead of a direct lender. An investor is an individual or team that has purchased a "block" of loans (assets) as an investment. Getting approval of a loan work-out is a more protracted process in this case and navigating through tiers of decision makers may be frustrating and fruitless. There are no clear guidelines.
How does one approach their lender about loan modification? You can do it yourself - I did! But like selling your home yourself, there are ways and then there are WAYS. There are companies who specialize in loan modification. You've probably received email or snail mail from some of them. They charge a percentage of the face value of the loan to contact the lender on your behalf. BUT - AND HERE'S WHERE YOU NEED TO PAY ATTENTION - not all of these companies are approved by the Department of Real Estate, that sets boundaries and rules and affords some level of consumer protection. You only want to work with a Loan Modifier whose actions are sanctioned by the DRE!!!!! Ideally, this will be a real estate law firm. You will pay them a retainer and MAY have a 100% guarantee that if your loan cannot be modified, your money is returned. My experience is that the bank will deal directly with you. I would suggest taking this route. If it blows up, you can always start again with an attorney.
Now, READ THIS and let's be clear! Because if you have doubts or don't understand, you stand to lose everything. DO NOT pay a real estate agent any up-front costs to modify your loan - it is against California Department of Real Estate regulations for real estate agents to collect advances -money in advance of doing the job. DO NOT pay a company to modify your loan without knowing if you will receive your money back if they fail. DO NOT sign any documents, especially deeds, without knowing the ramifications of signing such documents. PLEASE, call me if you have questions or need a personal evaluation of YOUR situation. I'll point you in the right direction.
RELATED INFO: A term that will become increasingly familiar is SAM - Shared Appreciation Mortgage. This means that the lender who tweaks your loan may be entitled to a portion of the equity you gain when the market turns around. Owners who have utilized city or community financing (down payment assistance) probably already have a shared equity mortgage. When you sell, you share your profit (gain) with the institution that has rendered assistance through down payment or loan modification. Check your loan documents for details - it will be spelled out clearly.
The information contained herein is applicable to the State of California and programs may differ in your state. All information deemed reliable. You are encouraged to seek the advice of qualified legal and tax professionals.
Just call me Lucy...
Boy, did I have a comedy of errors one morning. I was inspecting a foreclosed property for the bank. It was a warm, sunny, dry day in South Los Angeles. And I was in a pretty good mood. Here are the events that unfolded:
All in a day's work. Everyone thinks Realtors make tons of money and drive fancy cars. But they don't see how hard we work and the crazy things we are called upon to do for our clients. I can't tell you how many times I've encountered a dead rat, a cabinet infested with bugs or a not so friendly doggie. My family and friends think I'm a princess. My clients think I'm the cat's pajamas. I think I've got the most fun job on the planet, bruises and all!
- Deadbolt key fits, but won't turn. All other front door locks working. Will try the back door. Is behind iron gate with mesh panel and block wall sides. Deadbolt on gate opens fine, hand over top to raise latch, check. Gate won't move.
- Realize something is holding gate in place at bottom. Can't raise myself over top of fence, I would have though that was easy. I apparently have less upper body strength than I thought. Ripped my latex gloves on the cinder blocks. I'm OK with it, could have been my hands.
- Thought about driving my car up to stand on it…but don't want to damage the car. So, I look around for something else to stand on. I find a huge tire in the front yard – not a junky yard, just a yard with a huge tire in it.
- I lay the tire down, it is not tall enough. I sit it on end and think I can balance myself. I can! I am not high enough to lift myself over without the tire rolling, but I can see there is a lever at the bottom of the gate on the other side. I look around and remember the sprinkler stick leaning against the front of the house. I jump down from the tire. Ouch - my ankle hurts.
- I get the sprinkler thingy and get back on the tire. In doing so, don't know how this happened…my keys are magically lifted out of the pocket of my tight jeans and over the fence. Now I have to get in or I will be marooned in South Central. I check and make sure I at least still have my phone in the other pocket.
- I am sweating like a whore in church. Must…get…in. I use the handle of the sprinkler stick to lift the lever. I tell myself "you go, girl" and at the same time realize my legs are too close together and I am not balanced on the tire…which is now rolling away, leaving me with one sleeve stuck on the iron arrows at the top of the gate…which I am hanging onto for dear life but trying not to move it and drop the lever down again.
- OK, I got a little banged up trying not to rip my shirt, but no blood and no tow truck. And thank God for padded bras. I haven't done the splits since 1969.
All in a day's work. Everyone thinks Realtors make tons of money and drive fancy cars. But they don't see how hard we work and the crazy things we are called upon to do for our clients. I can't tell you how many times I've encountered a dead rat, a cabinet infested with bugs or a not so friendly doggie. My family and friends think I'm a princess. My clients think I'm the cat's pajamas. I think I've got the most fun job on the planet, bruises and all!
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