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Pre-Foreclosure Options-Got A Foreclosure Notice? Try This..

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Sell Your House Fast Before The Foreclosure Date

 

It’s not always your fault, maybe you lost a job, or in the worst case a spouse passes away leaving the family in financial hardship. There are many reasons people end up facing a foreclosure. The Friendlyhousebuyer’s team has helped  families facing foreclosure work through it with positive results. No one has the right to sit in judgment of another person’s misfortune.

When You’re Facing Foreclosure-Time Moves Fast.

It’s like being up to bat with two strikes against you, and it’s the bottom of the ninth ending, and sure enough, what does the bank do, they throw you a curve ball. Just when you think you may have figured out a way to save your home, the bank stops talking to you.

The process doesn’t always work out for the people who need it most, and that’s an unfortunate truth.

But if you don’t pay your mortgage, as challenging as it might be, you will lose your home in a foreclosure.

 Which means your kids may have to change schools, your poor credit will make it harder to find a decent place to relocate, and you still have to deal with collection agency’s who won’t stop calling, and frankly, who act as if you borrowed money from the guy who’s been leaving you threating messages.

Here’s An Inside Look At What You’re Facing? (my editorial)

Remember the financial crisis? The guys on Wall Street who ruined the lives of millions of “regular” people on main street. After housing prices crashed to less than half their values, hedge funds stepped in and started buying single-family homes all across the country. Now they are the biggest owners of single-family houses in the country. What does this mean for you if you lose your home in a foreclosure?

It means you will have a difficult time finding housing because inventories are low, it means you will pay more to rent, and it means you will be just another number to an organization who’s primary purpose is to keep you renting until they decide to sell you their rental properties at outrageous prices down the road.

Why is this important?

I don’t know your situation. However, I do want you to have information that could be helpful to you as you make your decisions moving forward. What do the hedge funds have that most people don’t have? They have access to tons of cash when they need it.

They also have rich friends on Wall Street where they work and live to bail them out if they make a financial mistake.

FriendlyHouseBuyer’s mission to help the people who live on “main street” and who need access to cash when they want to sell their homes. We can even help you start over when you’re ready to buy again.

The Good News! There’s A Pre-Foreclosure Process That Has To Be Followed By Your Lender

Thankfully, banks are required to give you a grace period. Known as the “pre-foreclosure period,” this time extends from your first notice of default to the final day of the sale of your property on the court house steps. During this period, your lender will usually make several attempts to communicate with you to give you an opportunity to explain why you have missed payments. Depending on the circumstances, the bank might let you explore a loan modification program to help you get caught up on your mortgage payments.

The Pre-Foreclosure Period

In Texas, the pre-foreclosure period is one of the shortest in the country and is usually completed in three months.

The pre-foreclosure period gives you a chance to sell your home before the foreclosure date, or find another solution to stop the foreclosure process. We have seen many people file for Chapter 13 bankruptcy during the pre-foreclosure period until they can figure things out.

Selling Your Home As-Is Before Your Foreclosure Date

If you’re struggling to make your mortgage payments, then you probably haven’t been keeping up with the deferred maintenance on your property. Moreover, who can blame you, maintaining a roof over your head is more important than repairing a broken window. However, a house that needs deferred maintenance will have to be sold at a discount to market value, assuming you can get a price that pays off your mortgage balance, you may still walk away with a little extra cash.

Considerations If You Are Working With The Bank

It is very common for people to feel “stuck” after getting a notice of default from the bank. Many homeowners assume foreclosure is a foregone conclusion and that the bank will take their property. In reality, the bank just wants to be repaid their loan balance or have you cure the delinquent payments. If you can figure out an alternative to satisfy your financial obligation, all ends well.

 If you have a traditional, government-backed mortgage (typically any 30-year fixed rate mortgage), you might have to meet special conditions before completing a pre-foreclosure sale with a realtor.

Some of these requirements include:

  • Your home must be owner-occupied, not an investment property and not a home you have already abandon.
  • You must perform all regular property maintenance/repairs until the sale is completed.
  • You must sell the home using a real estate broker.
  • The sale must be closed within 4 to 6 months from the date of approval to participate in the bank’s pre-foreclosure program.

Ways To Sell Your House Before Foreclosure

There are several ways to sell your house before your foreclosure date. The fastest way to sell your house before foreclosure is to price it at a discount to market value (but still enough to pay off the mortgage) to attract cash house buyer’s quickly.

Another option is to sell via short sale, a situation that occurs when you owe more on the mortgage than the home is worth. The word “underwater” during the recession referred to homes that had mortgage balances higher than their appraised values. It’s more appropriate to say the banks were “underwater,” and consumers were “drowning in debt.” Even so, your lender will have to agree to the short sale price, and the price will depend on how much your bank is willing to take in losses.

Benefits To Selling Your Home Before Foreclosure

There are some advantages to selling your home while in pre-foreclosure. The main advantage is that it helps you avoid foreclosure. When you lose your home to foreclosure, it has a devastating impact on your credit score for up to seven years! Selling in pre-foreclosure helps to protect your credit score and improves your ability to get a loan in the future (for a house, car or otherwise).

Another reason to sell in pre-foreclosure is to avoid a “deficiency judgment” – a/k/a the difference between the sales price and the amount you owed. So, in addition to the foreclosure ruining your credit, you might get stuck taking on additional debt.

You’re Not Alone!

If you have questions, or would like to get a “cash contract” offer on your home, call or email us for a confidential review. Just remember your problem is solvable, but you cannot wait until the last minute to start building a team to help you.

Cheers!

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Should You Sell Your Rental Or Hire A Property Manager?

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You're moving out of state – is it worth hiring a property management company?

As a landlord you will have to grapple with a lot of unexpected problems: will tenants pay their rent on time? What steps should you take if they cause damage to your property? What happens if you can’t respond to a tenant’s emergency call in the middle of the night? Being a landlord can be very rewarding financially, but it also requires a significant commitment of your time and resources.

And then, there are the unknowns of life.

Let’s assume you have taken the plunge and now own a rental property. Overall, things are going well. Then your boss tells you that your company is consolidating and you will have to move out of state if you want to keep your job. After thinking it over, you decide to hang onto your rental property as part of your long-term investment strategy.

Managing a rental property can difficult even when it’s only twenty miles away from your primary residence, trying to do it on your own across state lines takes that difficulty level from a three to a six overnight. It might make sense to hire a property management company, but before you do, here’s a list of things to help you understand the business relationship between you and a property manager.

PROPERTY MANAGERS’ RESPONSIBILITIES

A property manager serves as the intermediary between you and your tenants. They are the first point of communication for prospective tenants and residents. They’ll help market and advertise your rental if you need to find new tenants. They’ll manage the entire application process, from screening prospective tenants to getting leases signed and security deposits collected.

Property managers also handle routine maintenance. Some will do the maintenance for you (e.g. mowing the lawn, snow and garbage removal, servicing HVAC units). Some will oversee contracts you have with others to make sure maintenance is properly completed. Whenever a tenant has a problem that needs your attention, the property manager will be the first person they call. The property manager will only come to you when necessary, saving you from the day-to-day minutia.

THE COST OF HIRING A PROPERTY MANAGER

As with so many things, the answer is “it depends”. Property management fees can vary widely depending on the scope of work you need.You may only want to delegate certain tasks and functions to a property manager (e.g. routine maintenance), being hands-on in other areas (e.g. screening tenants and collecting rents). Alternatively, you may want to be hands-off entirely.

Fees also vary by location, the type of property, and the estimated man-hours involved in providing property management services.

Generally speaking, you should plan to spend anywhere from 5% to 10% of gross monthly rents on a property manager, plus expenses. For instance, if you collect $1,800/month in rent, you should expect your property manager to charge anywhere from $90 to $180/month as a baseline fee. Any expenses incurred by the property manager will then be charged back to you as the landlord. Most people set a threshold in advance – say, $500 – that the property manager can spend on routine maintenance and service calls without having to request permission. That way, if a major expense or repair is needed, you can weigh in before the property manager incurs that cost.

Some property managers will offer a discount when the property is unoccupied. This motivates the property manager to find a qualified tenant for your rental property sooner rather than later, so he can increase his monthly fees accordingly. Conversely, some property managers charge a “new tenant placement fee” – similar to the fees charged by rental agents and is typically equivalent to half or one full month’s rent.

All of these fees are negotiable, and again, they depend on your needs as a landlord. If you are moving out of state, you might want a more comprehensive package.

WHEN TO HIRE A PROPERTY MANAGER

Distance

As a general rule of thumb, we recommend hiring a property manager if you live more than 50 miles or 1 hour away from your rental property. This rule is especially true if you own several rental properties (see below).

Number of Units

If you only own one or two units, it might be possible to manage from afar, particularly if you have friends and family nearby who can check on the property for you as needed. However, if you are a long-distance landlord who owns more than a few units, you should really consider hiring a local property manager. The day-to-day responsibilities associated with managing several units and tenants from a distance can be daunting.

Tenant Turnover

We recommend hiring a property manager if you anticipate needing to find new tenants in the near future, or if your property is located in a market that experiences high tenant turnover (e.g. a college town). It is very difficult to show an apartment if you do not live nearby, and most prospective renters will want to see the apartment as soon as possible. Unless you are prepared to travel every weekend to host open houses, you are better off hiring a local property manager to show the apartment.

 

Service Provider Network

Finally, unless you have a strong network of local service providers, we recommend hiring a property manager. You need to be prepared for anything that might come up, and this means having a list of reliable vendors handy at all times. If you are new to being a landlord, or if your rentals have not required many service calls in the past, you may not know whom to call on short notice. Vendors may take advantage of your inexperience, particularly if they know you are an out-of-state landlord in a bind. Property managers can usually deal with most repairs in-house, and they have a robust network of plumbers, carpenters, HVAC professionals, appliance repairmen and others to call on if need be.

Hiring a property management company can be invaluable when dealing with the many issues that will be difficult to handle from a distance.

QUESTIONS TO ASK WHEN HIRING A PROPERTY MANAGER

Not all property managers are created equally. Landlords should thoroughly vet prospective management companies before entering into a contract. Ask a number of questions, including:

  • How long have you been in the property management business?
  • How many properties and what kind of properties do you manage?
  • Where are your offices located, and what territory do you cover?
  • How do you structure your fees?
  • Am I required to sign a long-term contract? Would you consider a month-to-month agreement with 30 days’ notice before canceling?
  • What strategies do you use to market properties to tenants?
  • What does your tenant screening process entail?
  • Do you have any experience managing tenant evictions?
  • Describe your most challenging tenant experience. How did you overcome the problem?
  • Do you manage repairs and maintenance in-house? What services are out-sourced, if any?
  • How do you prefer to communicate with landlords, and how often?

Hundreds of property management companies operate in Texas, so you will have plenty of options from which to choose. Do not be afraid to ask for recommendations. If any of your friends or family own rental property, be sure to ask for their advice. Most would be happy to share their experiences.

Conclusion

Remember, just because you CAN manage your property from a distance doesn’t necessarily mean you SHOULD. Hiring a property manager will relieve you from the day-to-day responsibilities of being a landlord, and will give you peace of mind when owning real estate from a distance. A good property management company is worth its weight in gold and will help preserve the value of your investment.

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Divorce: 7 Solutions When You Want To Keep Your Home

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Getting A Divorce? Should You Buy Your Spouse Out Of Your Home?

Getting divorced is never easy, in fact, it can be heart wrenching, hostile, and become outright adversarial, which makes owning real estate together almost impossible for some divorced couples. One way to divide ownership is to sell the property and split the proceeds evenly. However, there are some reasons you might not want to do this, the most common of which is when you have young children, and the custodial parent intends to keep the kids in the marital home. So an alternative solution is for one spouse to “buy out” the other’s interest in the home.

Is A Buyout Realistic?

Let’s use the following example. Your home is worth $300,000, and you and your spouse still owe $120,000 on the mortgage. This means you have $180,000 worth of equity in the home. If one party wants to keep the house, he/she could “buy out” the other’s share in the home’s equity for $90,000.

You may be thinking, “That is impossible—I can’t come up with $90,000!” Lack of cash liquidity is a common concern among divorcing couples. Typically, if a person does not have the cash on hand to buy out their spouse, they’ll refinance and pull out some of the home’s equity. Using the same example, the buying spouse would refinance the home and take out a new loan equal to $210,000, allowing him/her to pay off the existing loan balance of $120,000 and providing $90,000 in cash to buy out his/her spouse.

Seems simple enough from the outset, right? Well, truth be told, there are several things you should consider before going this route.

7 Valuable Considerations Before You Buy Your Spouse Out In A Divorce

  • Future Appreciation: Depending on the market where you live, the selling spouse may lose out on the home’s future appreciation. Conversely, the buying spouse may end up feeling like the buyout price was too high if the market deteriorates and the home loses some of its value in the future.
  • Potential Financial Stretch: If you were splitting the mortgage payments, it might be a financial stretch for you to now take on the mortgage payments alone. Your cost may be offset if the selling spouse is ordered to pay the buying spouse child support or alimony as part of the divorce agreement. Review all numbers carefully to ensure the buying spouse can realistically afford the monthly mortgage payments.
  • Refinancing Rates: Interest rates continue to rise, so if you are the buying spouse, you should factor that into your calculations to help you determine current and future monthly payments. Interest rates are also affected by your credit score. If you do not have good credit, you may need to find a co-borrower.
  • Loan-to-Value Ratio: Bank regulations have tightened since the recession, and most lenders won’t allow you to refinance unless the new loan is equal to or less than 80% of the home’s value. For instance, if you borrowed $210,000 against a home worth $300,000, the LTV ratio would be 70%. Borrowing less than 80% of the value of your home makes your application stronger, assuming you have good credit, the bank will entice you with a favorable interest rate.What if you have little or no equity in your house? Let’s assume you needed to take out a $260,000 loan to pay off the existing loan balance and to buy out your spouse. This would put you at an 86.6% LTV ratio, which could make it difficult – if not impossible – to refinance. In situations like this, you might consider taking out a smaller loan (say $240,000) and then find an alternative way to pay the remaining amount owed to your spouse through the buyout (e.g. taking $20,000 out of a retirement account to cover the balance).

Einstein was quoted as saying “ Logic will get you from A to B, Imagination will take you everywhere.”

4 Creative Buyout Options  

  • Payment In-Lieu of Cash Buyout: If you cannot refinance or otherwise afford to buy out your spouse directly, you might consider alternatives to a cash The most common solution is to use other marital property or assets of similar value instead of a cash buyout. For instance, you may agree to a lower buyout price in exchange for equity in other marital property (say, a vacation home).
  • You could forego spousal support payments in exchange for a lower purchase price. For example, let’s imagine Mary is our “supported spouse” and is buying Tom out of the house so she can stay there with the kids. Mary agrees to forgo monthly spousal support payments in exchange for Tom selling his share of the house at below market value.
  • Buyout Over Time: There are some cases when both parties agree to the terms of a buyout, but the buyout simply isn’t possible at that time. For example, the couple may have bought their marital home at the height of the market and don’t have equity to split, but neither party can afford the mortgage payments on his/her own. In a situation like this, the couple may decide it’s best for both spouses to keep an interest in the house for a while (until the market improves; until they build additional equity in the home; until the buying spouse can afford the payments on his/her own; ). Instead of one buying out the other right now, they agree to a gradual buyout over time, the terms of which should be clearly spelled out in the divorce agreement.
  • Buyout at a Later Date: Similar to the scenario above, the couple may agree to postpone the buyout to a later date. By way of example: Sally and Michael are getting divorced, and Michael wants to sell the marital home where they live, along with Sally’s 84-year-old mother. Sally argues they cannot sell the home because her mother is too ill to be moved. Michael understands her predicament but wants Sally to buy him out of his share of the house. Sally cannot afford to do so right now, so they agree to postpone the buyout until a date in the future (either when her mother moves into a nursing home or passes away). They will continue to own the home jointly until then.

The Final Steps In The Buyout Process

If, after considering all of your options, you decide that a buyout still makes sense for you, the next step is determining the value of the home. You will need to get an appraisal which may cost $300 to $500 and should resolve any differences of opinion you and your spouse have about a reasonable buyout price.

Then you will want to calculate the value of deferred maintenance if any. For example, if you and your spouse both acknowledge the house desperately needs a new roof, you might agree to lower the purchase price accordingly so the buying spouse can afford to pay for the new roof.

These details are best sorted out through the help of an attorney. We always suggest consulting a lawyer before agreeing to the terms of a buyout. It’s a good idea to speak with a financial advisor to help you understand the tax implications of the buyout.

Determining how to divide marital property is an emotionally draining process when you are getting a divorce. Each couple’s situation is uniquely difficult, but not impossible when one spouse wants to retain ownership of the marital home. We hope that the considerations outlined above help bring clarity to your decision-making process.

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