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5 Things To Do NOW If You Want to Buy A Home In 2012

As always, the good people over at Trulia.com offer us sound advice about the ever-so-shaky real estate market. Bay Area real estate agent Tara-Nicholle Nelson has this to say for those who are thinking of taking the big leap in 2012:

At this point in December, it can start to feel like the New Year – along with all our hopes, dreams, wishes and expectations for it – are barreling down on us. Personally, I’m a rabid Resolution-setter, and I have a pretty strong track record of making New Year’s changes actually happen – and stick.  But what I know after years of using the New Year as a great excuse to set and meet some goals is that it’s very, very helpful to get a head start, ramping-up to new habits, behaviors and target goals achievements starting in December.

If you’re one of the millions who has an eye on 2012 as the year in which you’ll buy a home (first or not), here are five things you can do now to put yourself on the right path:

1.    Check your credit. Take my word for it: there is no bad surprise worse than a bad credit surprise. Okay, maybe there is one thing worse – a credit surprise you receive while you’re in the midst of trying to buy a home!

Recent studies have revealed that a record high number of real estate transactions are falling out of escrow, and that credit “issues” are a leading cause of these dead deals. Your best chance at catching and correcting score-lowering errors and other derogatory items before they destroy your personal American Dream is to start checking and correcting while you still have time on your side.

2.    Do your research. The more rapidly the real estate market changes, the more it behooves smart buyers to study up before they jump in.  And now’s the time – you can start doing online and in-person research into topics ranging from:

·    Target states, cities and neighborhoods. Whether you’re relocating or simply trying to narrow down the local districts to focus on during your 2012 house hunt, December is a great time to start your online research into decision-driving factors like tax rates, school districts, neighborhood character and even prices in various areas. Resident ratings and reviews sites like Trulia and NabeWise can help you make the neighborhood-lifestyle match.

Once you narrow things down and start speaking to local agents, ask them to brief you on the local market dynamics, including how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search. (And yes, Virginia, there are areas where homes sell for more than asking, even as we speak!)

·    Real estate and mortgage pros. If you don’t already have your pros picked out, now is the time to get on the horn or drop an email or Facebook message to your circle of contacts, asking them for a referral to a broker or agent they love.  Follow up by: checking whether these pros are active in answering questions on Trulia Voices, searching for their name and seeing what sort of feedback on them you can cull from the web, then giving them a ring and launching a conversation about whether you and they might be a good partnership.

·    Short sales and REOs. Distressed property sales are not for the unwary. If you want to target upside down or foreclosed homes, or are planning to house hunt in an area where many of the listings are described as short sales or foreclosures, get educated about what you can expect from a distressed property purchase transaction before you get your heart set on a short sale.

·    What you get for the money. Online house hunting is a powerful tool – especially when it’s cold and wet! But there comes a point in your house hunt where you’ve got to just get out into the actual physical homes you’re seeing online in order to get a strong, accurate sense of what home features, aesthetics and location characteristics correlate with what price points.

·    Mortgage musts. You can read a bunch of articles about mortgages and get yourself pretty far down the path toward qualifying for a home loan, but you can only get a personalized action plan for a smooth road ‘home’ by talking with a local mortgage broker and having them assess your basic financials.  They might say you need to move funds around, pay a bill down or off or produce some sort of documentation from your employer.  And the time to start all that is now.

3.    Fluff up your cash cushion. So, you’ve saved up your 3.5 percent down payment. Perhaps you saved a little extra for closing costs.  Or maybe you’re even one of those uber-aggressive 20-percent-down-ers.  No matter how much you’ve saved, you’ll find that you could use more once you activate your home buying action plan. Mark my words – after closing, you’ll crave extra cash to do some repairs, upgrade a couple of things, buy appliances or even just to hold onto in order to minimize your anxiety about depleting your savings!

So, if homebuying is on your personal 2012 action plan, don’t go hog wild on holiday gifts. Instead, wait until next year and give yourself the gift of a home.

4.    Shed some stuff. Sell it. Donate it. Give it to relatives who’ve always coveted it.  Just get rid of it. If you do it before year’s end, you can kill three birds with one stone: (a) getting some cold hard cash to go toward your savings, (b) getting some tax receipts so you can deduct the value of your donations in January, (c) minimizing money spent on holiday gifts for loved ones and these two bonus birds – clearing the mental clutter that physical clutter creates and prepping for your move in advance.

5.    Sit very, very still. Sometimes, the best way to further our goals is to stop tripping ourselves up.  In that vein, commit right now to refrain from making any major financial moves until you buy your home.  Don’t quit your job to start that personal chef business (yet), don’t pull a bunch of cash out of your savings account (without getting clearance form your mortgage pro first), and don’t start buying cars and boats on credit – even if you do love the idea of putting the red bow on the car you give your wife, like in the commercials.

I assure you, the bow you’ll be able to put on that house or condo will be much bigger, redder and more tax-advantaged!

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Top 3 Real Estate Deal Killers

As always, the good people over at Trulia are on top of what is working – and what is not working in today’s shaky real estate market.

Once upon a time, homebuying was a much less dramatic affair then it is today.  The house hunt was fun, if suspenseful, and then there was another exciting whirlwind of inspections, closing and moving in. Today, though, as soon as buyers get the gumption to jump off the rent vs. buy fence, they find themselves on another edge – the edge of their seats, through the entire escrow process waiting to see what obstacle will emerge next, and whether their transaction will survive it.

Deals get killed all the time, and buyers can’t relax until they have keys actually in hand.  Here are three of the most common real estate deal-killers, and some steps buyers can take to deactivate them.

1.  Appraisal too low. Some buyers incorrectly believe that the best thing that could happen to them is for the property to appraise below the agreed-upon purchase price, expecting that a low appraisal forces the seller to bring the price down.  In fact, so many of today’s sellers are barely breaking even, that a low appraisal is probably the most common deal-killer around. If an appraisal comes in just a tad bit lower than the contract price, usually the seller will come down if they can, or the buyer will kick in a few extra bucks. But when it comes in 5, 10 or even 20 percent low, most sellers can’t – and most buyers won’t .

Low appraisals also seem like the most difficult deal-killer to avoid, as this process is entirely out of both buyer’s and seller’s control. But there are two things buyers can do to minimize the risk.  First, check the comps – i.e., recent comparable homes that have sold in the area – before making an offer; your agent will help you do this. Then, don’t make an offer bizarrely above the average range of the comparables, even if the property has multiple offers, unless you’re prepared to deal with a low appraisal a couple of weeks out.

Also, consider working with a local mortgage broker who also originates loans through its own bank (vs. walking into a large bank’s branch off the street); these lenders have the ability to choose from a smaller pool of appraisers that they know are qualified and knowledgeable about your area.

2.    Property condition dramas. When the market melted down, lenders found themselves with a lot of decrepit homes on their hands. This explains two things: (1) why lenders are more concerned about property condition now than ever, and (2) the raggedy condition of so many of the “distressed’ homes on the market.  Homes that have extensive wood rot, dangerous decks or electrical systems, or peeling paint and missing systems (sinks, stoves and the like) are highly unlikely to pass muster when the appraiser walks through, even if they do qualify as being worth the purchase price.  And while an individual seller might be willing to do some work, many just can’t afford to; short sale and REO sellers simply refuse to make fixes, 9 times out of 10.

Prevention is the best medicine for curing this transaction ailment.  If you are buying a short sale or REO property, be aware that when the selling bank says as-is, it really means as-is.  Ask your mortgage broker and agent to brief you on what sort of shape your lender will require your home to be in, at minimum, and keep that standard in mind during your house hunt.  Your agent can help manage your expectations about which properties will and won’t likely pass muster.

3.    Loan approval takes too long. Every buyer knows they must get preapproved for a mortgage before they start house hunting, but many don’t know that preapproval is just the first in a long list of steps that have to happen before the loan becomes a sure thing.  In fact, it’s common now for buyers to get their loan preapproval many months before they end up in contract, and lots can change in the interim – further extending the time it may take for their loan approval to come in.

It’s common for contracts to include a standard loan contingency period of 17 days, give or take a few.  But the appraisal might take longer than that to come in, or the underwriter might have lots of questions and seemingly random nitpicks about the appraisal, or about you: they want to see your driver’s license, then your marriage license, then your divorce decree, and after that, a letter from your employer agreeing that you’ll be keeping your job even though you’re moving an hour away. It never seems like they ask for everything at once, thus it can take longer than 17 days to obtain all the requested items, turn them in and get the underwriter to sign off on them.

Until you get that green light, it’s foolhardy to remove your loan contingency, as that step renders your earnest money deposit non-refundable, under most contracts.  Many a buyer is forced to either secure an extension from the seller or to let the transaction die, rather than forfeiting their deposit funds.  And again, some sellers understand and will play ball, but bank sellers can be particularly resistant to loan contingency extensions, especially if there are backup offers on the table.

Best practice for buyers to minimize the chances of an overtime loan approval process killing the deal? Be ready: be ready for lots of bizarre documentation requests, be ready to provide things you’ve already been asked for, and be ready to do so quick-like – without pushing back.  The faster you can turn around the things the underwriter wants, the better.

Also, it can be very helpful to work with a mortgage broker and agent that have worked together before and have close communications, so that your agent can stay abreast of any and all loan process glitches and keep the listing agent apprised of the legitimate reasons you may need an extension throughout the contingency period, rather than assuring them everything’s speeding along then having to ask for a last-minute extension.

Source: Trulia

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New Hopes Raised at Marlton Square

CRENSHAW DISTRICT — After several setbacks, residents residing near Marlton Square expressed mixed emotions about the demolition of city-owned properties in the area, saying they are glad to see a step forward but are not convinced that developers or city officials will rebuild in a timely manner, based on past experiences.

“I have lived in this area for over 30 years when this was the Santa Barbara Plaza. This used to be a place that I was proud of. It seems like every year Marlton Square has gone down,” said Tamika Johnson. “If you look, there are a number of vacant properties. They do nothing but bring down our property values and make those who have to walk by or drive by feel hopeless. It’s a shame because if you look at areas like Beverly Hills, the buildings are kept up and the streets are clean. The medians have flowers and grass. When you live somewhere like that you feel good about life and its possibilities. Now look at Marlton Square, you see nothing like what you would find in suburban areas. It does nothing for the [morale] of this community.”

Jeffrey Holmes is delighted “that they are finally tearing down some of these buildings. They look ugly,” he said. “The paint is peeling, the grass and weeds are overgrown. There is nothing pleasant about this place. For years I’ve been looking at these empty buildings.”

Still, he wants to know: What’s next? “They promised for years that they would rebuild this area and nothing has happened for one reason or another,” Holmes added. “I hope they don’t tear down these buildings and leave the [rubble] behind for years until they find someone to come in and do something with it. We deserve better and want better.”

Janet Taylor-Dupri didn’t know how to interpret the demolition, she said, adding that “it seems as though when something is torn down here it takes years for something to replace it. Sometimes we get better than what we had before, and sometimes we don’t. I think that newer, more modern buildings will really help this area and the community. We have all the construction going on with the mall. Why not have something that is just as nice?”

Last Thursday marked the beginning of demolition of city-owned properties in Marlton Square. With Rep. Maxine Waters, Los Angeles City Councilman Bernard Parks and other officials on hand, a group of about two dozen people celebrated as an excavator destroyed one of a number of blighted buildings that have plagued the area.

“The community has watched for nearly two decades, as Marlton fell into despair and became an eyesore, attracting a variety of problems like illegal dumping, arson and vandalism,” Parks said. “Today, we can finally turn the page on the problems of the past [and] begin a new chapter as we clear the way for future development.”

Moving forward with the development of the 20-acre shopping center on Martin Luther King Jr. Boulevard has been a major priority for local elected officials, including former Mayor Tom Bradley, who sought to redevelop the property — then known as Santa Barbara Plaza — as far back as 1984, said Waters. She praised the work of Parks; Christine Essel, CEO of Community Redevelopment Agency of Los Angeles; Kenneth Fearn, Chairman of the Board of Commissioners of the Redevelopment Agency; Douglas Guthrie, General Manager of the Los Angeles Housing Department; Richard Benbow, General Manager of the LA Community Development Department; and the Department of Housing and Urban Development (HUD).

“I know that it took us a while to get here today. I was very disappointed when developer Capitol Vision Equities defaulted on its loan and then stopped work on this development,” Waters said. “The ensuing bankruptcy litigation left the families who live in this community in limbo. And it left Buckingham Place, which would have provided much needed housing for the elderly, incomplete.”

According to city officials, the Buckingham Place Senior Apartments was the only segment of the originally planned mixed-use development project that commenced construction. The anticipated three-building complex with 180 apartment for low-income seniors saw the first of three phases begin, but work halted when at least three companies forced the property into involuntary Chapter 7 bankruptcy after developer Chris Hammond of Capital Vision Equities stopped making payments to the hired construction companies in May 2007.

Currently, the building is over 90 percent complete; appliances, carpeting and cabinets are installed, but work remains to be done to the hallways, stairwells and trash facilities.

The tumultuous history of Marlton Square dates back to 1984 when Bradley sought to turn the shopping center around. Former Los Angeles Laker-turned-real estate entrepreneur Magic Johnson won the negotiation rights in 1996, but after spending five years working through the City of Los Angeles’ planning and entitlement process, lost the battle when the development deal was given to Hammond’s firm. However, the development group was unable to carry out the project and defaulted in 2004.

Adding further delay, Capital Vision’s bank went bankrupt two years later. According to city officials, Las Vegas-based USA Capital had loaned Capital Vision Equities $36 million to acquire approximately 50 parcels of land, but when USA Capital dissolved, it left behind over $962 million in assets and more than 6,000 investors.

Unable to move forward while the properties were tied up in bankruptcy court, Parks said he spent half a decade trying to secure funding so that the Community Redevelopment Agency of Los Angeles (CRA/LA) could purchase most of the remaining buildings.

“If there’s one lesson to take away from the past decade, it’s the importance of attaining site control before undertaking a project of this magnitude,” Parks said. “It was unrealistic to expect a lone developer to negotiate with over 40 property owners and 300 tenants. This clearly demonstrates the important role of CRA/LA in assisting and nurturing private investment in our communities.”

A breakthrough was not reached until late 2010, when a settlement agreement was reached, leaving one owner, Commercial Mortgage Managers, in control of roughly 80 percent of the total property, with nearly 20 percent of the land in the possession of CRA/LA.

Having the CRA/LA involved will speed up redevelopment, Parks said, because the agency will omit the need for a new developer to negotiate with multiple parties and aid the city in determining what will eventually be built on the site. The original vision included commercial retail stores, sit-down restaurants and condominiums.

Source: The Wave


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Charge It!

Credit cards can be tricky but useful when yielded correctly. They can often get one in a financial jam ia misused but they can also help raise your credit score when used strategically. Here are a few tips to help you choose the best credit card for you – and use it wisely:

Check your credit report before applying for a card. Read your credit report for account inquiries, delinquencies, and your credit to debt ratio. These are all factors that can affect a bank’s decision on approving you for a card. Too many inquries and delinquencies tell a bank that you might not be responsible with handling debt. A credit to debt ratio that is too high is a sign that you live outside your means and spend more than you make. However, establishing more credit can also lower your credit to debt ratio. Also, check your credit score, as it is taken into account as well.

Do your research. Visit bank websites and read what they have to offer with their cards. Look closely for the APR or Annual Percentage Rate because this will tell you how much interest will be calculated on any balance you carry. Look for annual fees since many cards carry them, some as much as $450 a year! Look for rewards and point systems. Many cards will give you a percentage of cash back as you spend or point/rewards towards future purchases. But be careful – rewards can tempt you to use your card more. Don’t be fooled and spend more than you can afford! This will only benefit the creditor and mess up your credit, making it difficult for you to establish more in the future.

Read consumer reviews. No information is better than first-hand experience. Visit websites like Daily Markets and Credit Karma to read reviews about credit card strengths and weaknesses. You can also visit forums on sites like Credit Karma and read people’s praises and complaints about their cards.

Don’t apply for credit at the same bank more than once in a month. If you do, chances are that second application won’t get approved but the inquiry will show up on your credit report. After approvals, wait at least six months before applying for more credit or requesting that current limits to be increased.

Be safe. Many credit card companies now offer account protection, such as not holding you responsible for unauthorized charges. Some also charge a small fee to suspend payments in case of job loss or some other unfortunate life event. Take advantage of these offers to keep your credit in good condition and protect yourself.

 

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Money Don’t Matter Tonight, But It Will Tomorrow

I had a brief twitchat the other week with someone about why debt matters in dating. If I were single, debt would be one of those things on my list of “can’t do’s” in dating. Though it might seem shallow, what I do understand as a married person is how much debt can affect a couple’s ability to move forward. Student loans aside (they are so huge, so many people have them, and as such they affect one’s credit a bit differently) the amount of debt a person racks up says one thing about their ability to consume – how they manage their debt says entirely another.

Large amounts of debt essentially cripple one’s buying power and if I am looking to partner with someone and build a life, our ability to make certain purchases are without question. Too much debt means we can’t qualify for a home loan and have limited options in choosing the roof over our heads. Too much debt will affect how high our Annual Percentage Rate (APR) is on items we might choose to finance, such as cars, furniture, or even family vacations. Also, large amounts of debt means lots of bills, which cuts into our ability to save, invest, and eventually retire. Longstanding debt = longstanding work.

I don’t think I’m shallow in this regard – and I’m not alone. Singles in their 30’s and beyond tend to streamline the list of acceptable challenges in a relationship, and rarely do I hear of money not being an issue. I’ve been told if people didn’t approach dating like it was a search for marriage partner then debt wouldn’t carry so much weight. But dating by definition is an assessment of seeing whether or not another person is suited for you as an intimate partner or spouse. So why waste time?

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A Love Still Supreme, But a House in Ruins

There is a ranch house out in the middle of Long Island, just south of the expressway in Dix Hills, where the saxophonist John Coltrane lived, started a family and composed “A Love Supreme” in the spare bedroom. The album is a hymn of praise and thanksgiving by a man who found peace and God after alcohol and heroin. It is the work that helped make Coltrane a jazz immortal.

While it will live on, the house is another story. It has been empty about seven years. The bricks are crumbling. The raccoons have been evicted, but not the termites. Lexan panels cover the windows; a fan blows futilely to keep down the mold. That’s about as far as the restoration goes.

In 2003, a local jazz lover, Steve Fulgoni, helped wrest the house away from developers who coveted its three and a half woodsy acres. Thanks to his efforts, the Town of Huntington preserved the land. A foundation owns the house, which is on the National Register of Historic Places, but the National Trust for Historic Preservation just put it on its most-endangered list.

Mr. Fulgoni, an engineer, is teaching himself to be a historian and preservationist. He dreams of creating a cultural destination like Louis Armstrong’s house in Queens. There is no great enthusiasm in Dix Hills; some neighbors hate the idea of school buses and concerts on the lawn.

Long Island has lots of history, but does not do memory well. Walt Whitman’s birthplace is lost in the shadow of the Walt Whitman Mall. There are very few landmarks of its African-American history, beyond Booker T. Washington’s summer home in Fort Salonga and some cemeteries.

It is easy to share Mr. Fulgoni’s enthusiasm when you see the faded lime-green shag carpet in the practice room, and the living room’s fancy wood paneling. He estimates that he needs about a million dollars to do it. Meanwhile, if there are masons or carpenters who love jazz and could help fix things, he says, he would love the help.

Source: New York Times

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This Ain’t Monopoly Money Pt.1

Two weeks ago I received a tip that one of my favorite websites, Pandora, was going public in the stock market and I decided to jump in early and buy a few shares. I don’t have thousands to invest, but I figured if Pandora could multiply a few of my pennies in the same way LinkedIn did for others when it went public, why not?

Since then my pennies have dwindled down to pesos.

Every day I’ve been glued to the NASDAQ website, watching the stock go up and down, and at one time, plunging down to nearly half the price of what I paid per share. I was mentally kicking my own butt, but then consulted my hubby who is well-versed in these matters. He chuckled at my angst and gave me a few ground rules to live by when it comes to playing the stock market:

Consult with him first. He’s a numbers guy with a history of solid investments. That was a rookie mistake on my part. Next!

Don’t check the price of shares daily. Stocks rise and fall, and unless you get lucky to hit a bulleye on one that goes crazy when it first goes public, don’t expect to make a mint overnight.

Read before you invest. I bought stock as an impulse purchase – not a good move. Had I read infomation on the NASDAQ site, briefed reports fom the U.S. Securites and Exchange Commission, and perused sites like MarketWatch and Bloomberg, I would have made a more well-informed decision about where to place my money.

Don’t be afraid to take risks – it could pay off. Investing in Pandora was a risk because in spite of how many users it has, it isn’t yet a profitable site. There is no charge to its customers to use its services and furthermore, it has competition on the horizon. Nonetheless, my stock went up this week to the highest its been since I purchased it, which is promising. I think I will ride this one out and see where it takes me.

TO BE CONTINUED…

 

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5 Smart Strategies for Navigating the Sale on Real Estate

As always, our friends from Trulia have the “in” on the current trends in real estate. Before you start you summer home shopping process, heed these tips:

Home prices are low, interest rates are low – real estate is basically having a summer clearance sale! But unlike buying a clearance-priced car or computer, making the wrong move in this real estate ‘sale’ can have disastrous effects, from losing your dream home due to a bad bid to ending up with a money pit of a property.

Here are a few money-saving, pitfall-avoiding tips and tricks for buyers who want to do some smart home shopping this summer.

1.  Have a vision in place, before you start your house hunt. Actually, have several visions in place.  Have a financial vision, complete with a clear picture of what your total income and expenses look like, in the  “after homebuying”  view, including what you pay out for your home and related expenses, like HOA dues and homeowners’ insurance.  Have a vision of your life in your new home, including what you want to do, with whom and where you want and need to go – in the work, family and recreation areas of your life.

If you kick off your conversations with your mortgage broker and real estate agent with a clear understanding of the lifestyle you are looking to create, you’ll be much less likely to get derailed. With a clear vision in place and, ideally, on paper, you can clearly communicate your wants, needs, goals and financial boundaries to your professionals, telling them what you can afford, rather than trying to shoehorn your financial plans into one-size-fits-all mortgage guidelines. With a vision, the temptation of an uber-low-priced, but completely inappropriate, home will not lure you into buying the wrong place for your needs. (Nor will an amazing home that is simply out of your personal price range – no matter how great a value it is for the money!)

2.  Don’t let affordability get between you and reality. High affordability doesn’t necessarily mean you can get every single thing you want  – and name your price. The fact is, even people who are spending millions for their homes don’t get everything they want!  I’ve seen buyers insist that they need X number of bedrooms and Y number of bathrooms in move-in condition for a price that is just not going to happen, even in this clearance sale climate, and end up looking and looking, ad infinitum.

If your agent has shown you home after home that is what you want, but has sold for more than you want to spend, and you’re confident that you can find or cut a better deal because the market is down and you just os happen to be a brilliant negotiator (!), you might be at risk of falling into this trap.  There are deals to be had, but if you don’t stay grounded in reality, you’ll end up chasing your tail and missing out on the tax and lifestyle advantages of homeownership.

If you’ve been house hunting for months and months on end, your agent keeps trying to tell you that you should search in a lower price bracket, you have repeatedly gotten overbid or you just can’t seem to find the precise home you seek in the location and price range you seek, at least consider the possibility that you might have an outsized wish list for your budget. Take a step back, revisit your vision, and remind yourself what’s really important.  It’s okay to save some “must-haves” and “deal-breakers” for your next home purchase!

3.   Get a local expert to brief you on the local market, then screen out the noise. Now more than ever, it’s essential to have laser beam focus on the information and strategies that will get you what you want – whether it’s an amazing deal on the home you’ve always wanted or simply success at becoming the owner of your first home at a price you never thought would ever be possible. Otherwise, you’ll end up all over the place, spending your time, money and sanity attending auctions, getting worked up over distressed properties that aren’t yet for sale, trying to negotiate deals with sellers who are in no position to cut them and having your lowball offers on bank-owned properties rejected time after time.

Don’t let a news story about a guy in Minnesota who got a home for $3.27 be the basis for your entire home buying strategy. Instead, ask around and get referrals to a local broker or agent who has a track record of helping the people you know.  Read their answers on Trulia Voices and ask them your own questions to get a sense for whether they might be a good fit for you – if they are, and you trust them, then consult with them on the dynamics of your local market.  The market is down everywhere, relative to 2006.  But some markets – and some neighborhoods within markets – are still seeing multiple offers and home prices which are relatively recession-proof, compared to what you’d expect from the national news.

Once you have a strategy in place, work it – don’t let your acupuncturist or shoe repair guy convince you that your strategy is wrong, that you could get the place for cheaper or that the bank should absolutely do every single repair, or you should walk away from the deal.  Many would-be buyers lose out on great homes because they take negotiating advice from their holistic veterinarian over that being offered by their broker or agent.

4.  Read everything. Good faith estimates. Contracts. Disclosures. Inspection reports.  There is a long, long list of multi-page documents that are very easy to “just sign” when you’re in the heat of the hunt and think you’re on the scent of an amazing deal. I’m not suggesting you ask for a week-long pause button to read every document, either – rather, read them when you get them, ask questions, and keep asking until you understand the documents.

Many buyers this summer will make offers on more than one home before they get into contract on “the one,” and many of those properties will be short sales or foreclosures.  With distressed properties, every contract is different, so it behooves you not to go on autopilot, just skimming the papers as you might otherwise. Also, inspection reports might reveal red flags and condition issues that you’d normally expect to see in the seller’s disclosures.  It’s especially critical, in these situations, to fully understand as much as you can about the property, your loan, and your obligations and due dates under the contracts.

5.  Stop your mental accounting and do the actual math – on paper. In the field of behavioral economics, mental accounting refers to the tendency we humans have of doing math in our heads, separating things like easy money (e.g., the so-called “instant equity” from buying a home for less than it’s supposedly worth) from hard-earned wages and salary, and making spending decisions differently from these different mental accounts.

On the scent of a good deal, and in the heat of the hunt, even the most meticulous homebuyer can go up a few thousand in offer price to beat out other buyers.  No problem, right?  Well, but then when the inspector uncovers a few needed repairs, they make a mental guess as to what they’ll cost, and add that in – again, mentally. Then, when the lender requires a few extra thousand bucks than expected to close, that goes on top, but again, only mentally.  And mental money tends to stretch a bit longer than real money does!

So, you can see how it’s  possible to break the bank when you thought you were in great shape because you scored such a great purchase price for the property itself.

Even if you hate budgets with every iota of your being, buck up on this one project, pull out the calculator or open up a spreadsheet and keep track of every line item. Get actual repair bids during your inspection period, to the extent possible, and get your math mojo on. It’s fine to buy and incur these overages here and there, but keeping track of them is key.  You know what I like to say – surprises are for birthday parties, not for real estate transactions, and not for your bank account, either!

Source: Trulia

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Good Credit

I can’t count the times I’ve had the conversation about opening credit cards in college with friends and the trouble it got us all in before we were 21. For many of us our parents forewarned us of the drama credit card debt would cause us, but our non-existent college budgets made applying for credit a temptation we couldn’t resist. Credit card companies know this, and make it their business to camp out college campuses across the nation to prey on poor college students.

However, not every young person is fortunate enough to be forewarned about the dangers of opening a credit account without the proper knowledge of how it works. Financial illiteracy is typically passed down from one generation to the next, leaving a long trail of bad correct in need of repair.

What I didn’t know then that I understand now it what a process it would be for me to develop good credit after damaging it so badly, and how important good credit is in relation to buying power. Nothing beats cash and a good savings account, but good credit is next to gold when it comes to making certain purchases. Take the following steps with your own credit to master management of it:

Read your credit report. It’s a bad habit to avoid your credit report, especially when you know you’ve ran up credit or have paid bills late. Read your credit report thoroughly especially when you have established bad credit so you can determine how to repair it. Look for misreported account activity, negative information and account alerts to see where you stand. Everyone is given three free reports a year through annualcreditreport.com. a website sponsored by the three credit reporting agencies (Experian, Equifax, and Transunion). You may also purchase your credit score for a mere $8.

Understand your FICO (credit) score. FICO (which stands for Fair Isaac Corporation) and is the number used by lenders to determine your credit worthiness (or the likelihood of you paying your debts). FICO scores range from 300-850 and the lower your score, the greater a risk lenders will consider you. Factors that affect your credit score are: payment history, credit utilization, length of credit history, types of credit used, and recent searches for credit.

Understand the difference between the types of account listed on your credit report. The types of credit accounts that are listed on your credit report are:

Mortgage: A loan given for the purchase of property.

Installment: The type of credit that has a fixed number of payments. Student loans and car payments are examples of installment accounts.

Revolving: The type of credit that does not have a fixed number of payments, as the amount of credit can increase or decrease as funds are borrowed and repaid. Credit cards are an example of revolving credit.

Consumer Finance: Consumer finance refers to alternative financial services that consumers depend on. Payday loans and rent-to-own agreements are examples of consumer finance.

The best debt-to-credit ratio to manage is around 30%. For example, if you are given an $1000 credit limit, and you keep your limit to $300 or less, you will maintain a good credit score. Once you cross the 40% limit, your credit score will start going down. It’s can be tempting to spend more than half of the credit extended to you, but keep in mind that the more you spend, the more challenging it will become to get credit extended to you elsewhere.

Pay more than the minimum required amount towards your debts. Even if you can only afford $5 over the minimum, do it. Paying just the minimum amount on account will have you paying the maximum in interest! Save yourself some time and money and pay as much as you can afford.

Avoid credit consolidation companies. There are many companies that offer to help you bundle your debt into once nice monthly payment. As attractive as it sounds, utilizing one of these companies will leave a negative mark on your credit report. It says to lenders that you aren’t responsible to pay your bills on your own.

Don’t close any accounts. Even after you’ve paid off an account, don’t close it. If possible, use it sparingly when needed. Closed accounts also negatively affect your FICO score.

Pay your bills on time. Your credit report tracks how many days late your payments are from the due date and keeps record of how often this happens. Paying your bills on time will help you raise your FICO score by showcasing a history of you paying your debts as agreed.


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The Pending Death of the Black Middle Class

For a majority of middle class Blacks, it may not matter if President Obama and the politicians on Capitol Hill agree to extend the middle tax cuts. This is because based on the current collapse of the black middle class and the disheartening failure of black children in the classrooms, there may not even be much of a black middle class in America ten years from now.

In America, the middle class typically refers to those who earn an annual income of between $35,000 and $100,000 per year. This segment is then further divided in three smaller subdivisions of upper, middle and lower middle class. Those in the lower middle class segment typically have annual incomes between $35,000 and $50,000. This is the segment of American workers who are “barely making the ends meet.”

According to recently released data by the U.S. Census Bureau the median income for Black families is around $32,000 per year. This means that the median Black family is lower middle class, barely making ends meet. Being lower middle class should be the basic minimum standard for which majority of blacks should be able to attain and maintain. By setting a solid foundation from which their children and future generations can ascend the socioeconomic ladder, a lower middle class family has an opportunity for prosperity in the next generation.

Below is a chart showing the size and the income distribution of the Black middle class relative to other races, based on recently released data from the US Census bureau.

The Black middle class is roughly 38.4 percent of the African American population. Though this just slightly smaller than the middle classes of the other major races, the black middle class is the smallest and earns the least income. Blacks have the lowest percentage of middle class members who earn between $50,000 and $100,000 per year.

Apparently, the collapse of the American economy and particularly, the collapse of the real estate, manufacturing, auto and banking industries have wreaked the most havoc on the Black middle class. The percentage of blacks who earn less than $35,000 per year is growing as the percent of blacks who fit the definition of middle class is on the decline.

Maybe unemployment is to blame. The unemployment rate for blacks is 17.3 percent, which is almost twice the national average.
Among college-educated blacks, the unemployment rate averages close to 7.3 percent as opposed to 5.7 percent, which is the unemployment rate for college-educated adults from other races.

Being unemployed means not being able afford one’s lifestyle or being able to pay all of one’s bills, and thus creates debt. Real estate debt is killing the black middle class. Over the last three years, Blacks have lost more real estate due to foreclosure than any other period in history. The loss of real estate is also a loss of a key foundation for amassing wealth.

Because of the burden of debt and unemployment, many working class blacks have joined the ranks of the working poor, those who live in poverty and/or are homeless.

If this continues, the black middle class will continue to shrink and lose wealth and income. In order to counter these trends two things must be done immediately. First, we must have to look deeper into wage and employment discrimination. Because one has to have been working at one point to even qualify for unemployment benefits, a skyrocketing unemployment rate means that once working class blacks are simply not being rehired. This is simply unacceptable. Equal work for equal pay should not just be a rallying for women it should be a rallying cry for blacks also.

The second thing that must be done is to improve the public educational system so that greater majorities of black children have an equal chance of joining the ranks of the middle class and becoming self-sufficient. However, as you will see in part two (check back tomorrow) in this series on middle class black America. The chance of black children joining the ranks of the middle class over the next 5 to ten years is getting bleaker.

Source: Sickly Cat