When the Dream Home Turns into a Nightmare

By Teresa Mihelic, Real Estate Broker          

                                                                                                                     

Now that you have your dream home, what do you do when you find that you owe more on your mortgage than the home is worth?  While it may not make you feel better, know that you are not alone.  It unfortunately has become all too common.  So, what should you do?

First of all, don’t panic.  There are options.  They aren’t convenient, and they will hurt but you CAN get out from under it with some gut wrenching decisions and much perseverance.

If Possible – Hang on to it!!!

Take a look at your overall financial picture.  If you don’t have to sell your home, DON’T.  Hang on to it and wait out the economy.  The “guru’s” all seem to think 3-5 years for recovery and depending on how upside down you are, you may be able to ride out the storm.  Tighten your budget so that the ride doesn’t bankrupt you.  And if you can afford to, just one extra payment per year can take years off your overall loan.  If you have an adjustable rate mortgage, making extra principal payments can reduce your mortgage payment too. 

Modify the Loan

Talk to your current lender about a Loan Modification.  This is the hard part.  They aren’t easy to get, they are a lot of work, and take some time to complete, so be ready for it.  But they do get approved and can significantly improve your budget.  But don’t get lulled into easy street.  Even though you can get the payment reduced temporarily, continue to put away as much money as you can so you are ready when the modification ends.  And even if you do get a long term modification, continue to budget for the long term so you can get back on your feet even if the economy doesn’t.  DO NOT, under any circumstances, pay someone to do a modification for you.  These are scams out to steal your money.  They don’t work no matter how great they sound.  Remember when your Mom said, “if it sounds too good to be true, it probably is”?  Live by that.  She was right! 

Short Sale

If you have to sell, this is where a “short sale” comes into play.  You’ve heard people talk about it.  It’s when you sell your home for less than what you owe on the mortgage.  It can have serious tax and credit ramifications so be sure to talk to your accountant before engaging in one.  The “forgiven debt” (the amount the lender forgives on the loan balance) in some cases can be taxable income, or you may be exempt depending on your situation.  Your accountant can guide you on that.  Now for the credit problems; a short sale will have a serious negative effect on your credit for at least 2 years under current lending guidelines.  Yes, it’s easier on your credit than a foreclosure, but it still hurts.  A lot.  So just know that you may end up paying higher interest rates on car loans, credit cards (you shouldn’t be carrying a balance anyway), and you’ll probably have to rent for a while, while you rebuild your credit.  But it gives you that clean slate to start over.  If you decide to choose this route, be sure you hire a real estate agent who has extensive experience doing short sales or you may end up in foreclosure anyway.  It’s a difficult and time consuming process so you need someone on your side who knows what they are doing.

Last Resort

Your absolute last resort is foreclosure.  This will ruin your credit for a least 7 years and will have wide spread consequences for future purchases for just about everything you need to finance.  You will likely also end up paying higher rents and higher deposits to compensate the landlord for taking on what is considered a “high risk” tenant.  Some people have a lot of difficulty with the stigma attached to foreclosure.  I’ve seen many marriages fall apart over this so this would be a good time to consult a counselor or your clergyman for guidance on coping with the disappointment and hardship.

The goal here is to get back on your feet as quickly as you can so it doesn’t snowball into something larger than life.  Be proactive.  Know your options.  And know when to cut bait when all else fails.  And be sure to have your support system in place while you go through this so you stay strong, united, and confident to put things back together. 

Buy & Sell - Tips To Saving Thousands on Everyday Items

by Daryl Cesal

Ebay – a.k.a the “Online Garage Sale”

If you need it, eBay has it and more than likely the product is brand new and could be listed up to 75% off.  This is not for all items, sometimes the discount isn’t that great so the best thing to do is to go to ebay.com and search for the item.  The way eBay works, is a private seller uses eBay’s website and lists their item.  If it is listed in an auction, you can view the item and see how much it is going for and when the time ends.  To forecast how much you think the item is going to go for, search for the item, click on the drop down menu on the right that says “best match” and select “time ending soonest”.  If you are lucky, you will see a bunch of the items you want and will be able to gauge on how much it is going to sell for.   Make sure you look at the listing carefully and see all of the details, i.e… shipping price, checking  the sellers feedback rating, etc….

Craigslist – “Your best classified advertising service”

 Probably the best way to buy anything used period.  Craigslist a free classified advertising service for ANYONE to use!  It is so simple to list anything on this site it makes you wonder how craigslist.com makes any money (because there is no advertising on this site).  The seller lists their item and the website works just like any classified ad you ever saw in the newspaper.   It is so amazingly simple and very profitable to the buyer and seller.   When searching, make sure you type in the item, click search then click “title only” in the upper right hand corner.  If you do not do this, it will pull up all listings.  I recently read a story on-line how craigslist is completely decimating the want ad market, and it makes sense.  You list at home for free and for the buyer their product is just a click away.  They allow you to include up to 4 pictures, once again all for free.   If you need anything from furniture to a blender, it is on this site and is very local/close to your home and the best part—NEGOTIABLE!  Once you start on this site, it is addictive and you will almost feel guilty going to the store to buy anything except for food items.  Example on craigslist--- kitchen table with chairs, paid over $400, sell for $100, moving.  You then contact the customer and offer them $50 and go from there.  If successful, you just saved over 75% for making a phone call.  Same goes with selling.  If you have to sell an item, upload the pictures with your digital camera or cell phone, post the listing and voila!  Let the sales commence… Important--- watch out for scams as craigslist is known for a lot of them.  If it looks too good to be true (very cheap car, someone asking you to call them even though you left your # on the listing, schemes about being out of country and needing daycare service, etc…) it is too good to be true.  Use your best judgment on all of these and let the savings commence! 

Garage Sales – “The Saturday Morning Assault”

There are so many opportunities at garage sales it is not even funny.  Most people have a garage sale to get rid of junk, unwanted items, things to clear out the house and make some quick cash.  This is another huge opportunity to make money.  Buying and selling from garage sales is not that uncommon nowadays as you can buy an item for cheap (always offer them ½ their asking price) and sell on craigslist or eBay for 500% more.  Example, I bought a set of golf clubs from a garage sale for 7.50 last week.  Took the clubs and turned over $100 profit from selling on eBay and craigslist.  All it cost me was the ebay fees (listing fee and 5% of the sale price) and gas to either drop off the item at the individual’s house or at the post office.  I recommend when getting started to have someone positioned at your personal computer and if you think it is a good deal, have them look it up on eBay or craigslist and make sure the item has bids (make sure you select “time ending soonest”).  If so, offer them half price and away you go!  Oh BTW—as I was typing this, I received a call from a buyer for something I bought at a garage sale for $3 and he’ll be at my house this afternoon to buy it for $25.  It works, it works, it works!!!!  Remember, every garage sale does not have treasures; you just have to look hard and find that “diamond in the rough”.   Keys to a successful deal at a garage sale, establish rapport with the seller upon arrival, find the item and deal away… tons of fun too!!!!

Coupons -  “2 for 1”

Do you like to go out to eat at Outback, Chilis, and other name brand restaurants?  First always go during happy hour, drinks are half price and you do not have to wait in line.  But, if this is a special occasion and you have to go out at 7PM on a Friday night no biggie.  Go to the website of the restaurant you plan on eating at and see if they have any deals for free appetizers or an anniversary dinner.  They will require you to sign up for an email newsletter and voila, you’ll receive a coupon for buy one get one free on the meals or a free appetizer… Ebay also has major fast food restaurant coupons that are for sale… search away!!!!