The Wall Street Journal article (Fri. Feb. 26, 2010) by Brett Arends makes a strong and logical case for homeowners who have lost equity in their homes to guiltlessly walk away. The numbers are staggering -- a quarter of all American families with mortgages! (See article below or at http://bit.ly/dnRnZj)
Offering tax breaks to those who have little or no income does not stimulate the economy. The fact that more than $42,000 per man, woman and child in the U.S. was given to the banks in bailout, without any mandate for them to loan it back, was one of the greatest financial mistakes of all time and has (and will continue to) bring down our economy.
Can you imagine what the financial landscape might look like now just two different choices been made at key junctures? 1. If the US response to the tragedy of the World Trade Centers had been humanitarian aid and not military invasion and occupation; which would have avoided the financial crisis we are in (see how much the US taxpayer has spent: http://www.costofwar.com/). 2. If, say, $100,000 per mortgage was paid down (much less than all the nonsense of bailout and ineffective programs) and recalibrated at 4% for the balance of time on the loan, making the banks solvent, keeping people in their homes, and truly stimulating the economy. Imagine the pride and confidence Americans would have in themselves and the benevolence and reason of our government. But that didn't happen.
The blind optimism of some of my colleagues is staggering. It reminds me of the many citizens and tourists in Sri Lanka who watched in awe as the ocean quickly receeded from the shoreline. They did not make the connection that if it goes out in force like that, it will come back in force, subsuming everything in its path. The difference between that analogy and the financial crisis is that a tsunami is caused by natural forces, the shifting of tectonic plates, with no ill intent. While the banking industry, controlled by a group of mega-wealthy individuals called The Federal Reserve, has been manipulated by human policies, driven by greed.
Such overthrow of fundamental economic principles can easily be traced to the early 1980s and, with deregulation and the free-for-all "free market" (which even its guru, Fed boss Alan Greenspan, has admitted wasn't such a good idea), and we saw the crisis reach a peak and collapse in Oct. 2008, like an over-inflated balloon exploding.
To think this the world as we knew it is coming back is simply wishful, magical thinking that ignores the policies that are in place now, making it more profitable and less risky for banks to foreclose because they will be reimbused by taxpayer money for any shortfall. There is no motivation on their part to work with people and keep them in their homes.
The only sane, rational and self-preserving response for those whose property is worth less than what they are paying, or whose hardship (medical bills, job loss, etc.) is making it impossible to meet financial obligations, is to preserve whatever capital they have and walk away. It is the only non-violent means of revolution, and I cannot help but think that Thomas Jefferson would approve:
From the Declaration of Independence: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
By BRETT ARENDS
Millions of Americans are now deeply underwater on their mortgage. If you're among them, you need to stop living in a dream world and give serious thought to walking away from the debt.
No, you shouldn't feel bad about it, and you shouldn't feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family's finances first.
How widespread is this? More than 11 million families are in "negative equity"—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That's a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That's true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.
Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so?
It's time for some tough talk.
Stop trying to chase your lost equity. That money is gone. Don't think like the gambler who blows more and more cash trying to win back his losses. That's how a lot of people turn a small loss into a big one.
And do the math. Even if you hope the real estate market is near the bottom—it's possible, but by no means certain—it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even.
Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.
If you are reluctant to give up on "your" home, realize that it isn't "yours." If you are in negative equity, it's the bank's home. You're just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow.
Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think.
In "non-recourse" states, the mortgage lender may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss. According to a survey last year by the Federal Reserve Bank of Richmond, such states include negative-equity hot spots California and Arizona. Even in "recourse" states, lenders may have limited ability to come after you. Often they'd have to jump a lot of legal hurdles, and it's just not worth it for them. They're swamped with cases anyway.
"In my experience, right now they're not really going after anyone," says Richard Nemeth, a bankruptcy attorney in Cleveland. "They just don't have the resources."
If you've taken smart steps to protect your money, you may be safer still. For example, money held in a 401(k), Individual Retirement Account or pension plan is sheltered from creditors.
Sure, a strategic foreclosure may hurt your credit score. But if you're in financial difficulties, it's probably already suffered. And your credit score is not the only thing in life that matters.
Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it's wrong to abandon their obligations. They don't want to be a deadbeat.
Your instincts, while honorable, are leading you astray.
The economy is fundamentally amoral.
Sometimes I think middle-class Americans are the only people who haven't worked this out yet. They're operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns.
Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it?
They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they've gotten away with it. And if they thought your loan was "risk free," how come they were charging you so much more than the interest on Treasury bonds?
If you're only a small amount underwater on your mortgage, it's probably the case that you're going to be better off staying put. But if you are deeply underwater, it's a different matter.
Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn't have to give back one cent of that money when the companies went into bankruptcy.
Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They're not shy about protecting themselves if things go wrong. You shouldn't be either.
Write to Brett Arends at brett.arends@wsj.com
Saturday, February 27, 2010
Friday, February 26, 2010
7 Ways to Make Your House More Salable
If you're serious about selling your home and want to give it the best advantage in the marketplace...or if you're thinking of remodeling with an eye for future value (and who wouldn't?), here are 7 ideas worth considering.
1. A Pleasant Entry
This is the first impression, like the front door and porch, take into consideration sprucing up and defining the space where a prospective buyer first enters your home. A small table with a vase or sculpture, a coat rack or wall mirror with shelf can define even a home that does not have a formal or delineated entryway.
2. Hardwood Floors
Most buyers prefer hard surfaces to carpet as they are easy to clean, don't gather dust and can be enhanced with area rugs. (If you have ever seen a carpet underlayment filled with dirt, even a year after installation, you know why wall-to-wall carpet is gross!) Tile that is timeless (like saltillo or travertine) and in good condition is also a plus. Pergo, or other laminates, are also superior to carpet and less expensive. However, the plastic quality of the surface is not like the richness of real wood flooring and is best suited for secondary spaces like offices or play rooms)
3. Beautiful Bathrooms
Dated bathrooms (unless they're truly vintage) are a turn off. Fixtures don't need to be expensive to look attractive. Continuity of color and style gives any room a pleasing finished look, especially a bathroom. Get rid of the old brown-stained vanities, the formica or faux-marble countertops, the uncomfortable small tub and fiberglass shower surround, the cheesy light fixtures and faucets. Use tile or real stone, choose fixtures (lights, sinks, mirrors, towel racks) that match the style of the cabinets (traditional, modern, etc.). Walls can be painted with a semi gloss or venetian plaster. (See post on Decorating with Paint). Match soft goods (shower curtain and towels). Dimmers on lights, as in any room, can create atmosphere. Voila! A remodeled beautiful space to entice and enjoy.
4. Kitchens
Countertops make the biggest impression. Most people want solid surfaces, not tile with grout lines or formica. Slab granite (pricey) is particularly popular but there are imitations and substitutes in soapstone and Corian composite surfaces. Butcher block, a less expensive alternative can give more of a rustic feel. If you're buying new appliances, stainless steel is the most popular, followed by black. Be sure to ask about rebates for Energy Star appliances and discounts for everything you buy (even if just free delivery and hauling away old appliances). Declutter and organize your cabinets and pantry.
5. Closets
Closet organizers bring order to chaos. Get matching hangars, sort hanging clothes in some logical order (all shirts together, pants together, by color, etc.). Organization creates a sense of calm. Home buyers may not notice this consciously, but it registers as positive feelings about your space.
6. Lighting
Lighting, like organization of stuff, can be a subtle and often overlooked aspect of preparing a home for sale. There are 3 types of lighting of which to be aware and balance in every room: ambient, decorative and task. Balanced natural light is best for daytime, but many homes have too much or too little and, in any case, evening lighting is ultimately what concerns most people. Every room should have an overhead light or lamp that can be switched from the doorway. Replacing an overhead fixture for style is an easy option. Auto lights for closets or touch-sensitive under-counter lights can solve some task lighting problems, using batteries, without requiring an electrician.
7. Landscaping
In the Southwest, where water conservation is always in style, tidy rock gardens, colorful bushes and perennials, well-installed hardscape (flagstone, brick, stamped concrete), stone walls, a water feature can give definition to otherwise chaotic or bland spaces. In other parts of the country, a small lawn and defined flower and tree areas are attractive. As in all remodeling or changes in a home, consider ease of maintenance, cost, resource and energy efficiency.
If you are considering listing your home for sale, call us for a free consultation in the Santa Fe, NM area - (505) 995-0195 - or for referrals to excellent brokers wherever you live.
Paraphrased from HGTV article: http://www.frontdoor.com/Sell/10-Things-That-Make-Buyers-Bite/64/p1
1. A Pleasant Entry
This is the first impression, like the front door and porch, take into consideration sprucing up and defining the space where a prospective buyer first enters your home. A small table with a vase or sculpture, a coat rack or wall mirror with shelf can define even a home that does not have a formal or delineated entryway.
2. Hardwood Floors
Most buyers prefer hard surfaces to carpet as they are easy to clean, don't gather dust and can be enhanced with area rugs. (If you have ever seen a carpet underlayment filled with dirt, even a year after installation, you know why wall-to-wall carpet is gross!) Tile that is timeless (like saltillo or travertine) and in good condition is also a plus. Pergo, or other laminates, are also superior to carpet and less expensive. However, the plastic quality of the surface is not like the richness of real wood flooring and is best suited for secondary spaces like offices or play rooms)
3. Beautiful Bathrooms
Dated bathrooms (unless they're truly vintage) are a turn off. Fixtures don't need to be expensive to look attractive. Continuity of color and style gives any room a pleasing finished look, especially a bathroom. Get rid of the old brown-stained vanities, the formica or faux-marble countertops, the uncomfortable small tub and fiberglass shower surround, the cheesy light fixtures and faucets. Use tile or real stone, choose fixtures (lights, sinks, mirrors, towel racks) that match the style of the cabinets (traditional, modern, etc.). Walls can be painted with a semi gloss or venetian plaster. (See post on Decorating with Paint). Match soft goods (shower curtain and towels). Dimmers on lights, as in any room, can create atmosphere. Voila! A remodeled beautiful space to entice and enjoy.
4. Kitchens
Countertops make the biggest impression. Most people want solid surfaces, not tile with grout lines or formica. Slab granite (pricey) is particularly popular but there are imitations and substitutes in soapstone and Corian composite surfaces. Butcher block, a less expensive alternative can give more of a rustic feel. If you're buying new appliances, stainless steel is the most popular, followed by black. Be sure to ask about rebates for Energy Star appliances and discounts for everything you buy (even if just free delivery and hauling away old appliances). Declutter and organize your cabinets and pantry.
5. Closets
Closet organizers bring order to chaos. Get matching hangars, sort hanging clothes in some logical order (all shirts together, pants together, by color, etc.). Organization creates a sense of calm. Home buyers may not notice this consciously, but it registers as positive feelings about your space.
6. Lighting
Lighting, like organization of stuff, can be a subtle and often overlooked aspect of preparing a home for sale. There are 3 types of lighting of which to be aware and balance in every room: ambient, decorative and task. Balanced natural light is best for daytime, but many homes have too much or too little and, in any case, evening lighting is ultimately what concerns most people. Every room should have an overhead light or lamp that can be switched from the doorway. Replacing an overhead fixture for style is an easy option. Auto lights for closets or touch-sensitive under-counter lights can solve some task lighting problems, using batteries, without requiring an electrician.
7. Landscaping
In the Southwest, where water conservation is always in style, tidy rock gardens, colorful bushes and perennials, well-installed hardscape (flagstone, brick, stamped concrete), stone walls, a water feature can give definition to otherwise chaotic or bland spaces. In other parts of the country, a small lawn and defined flower and tree areas are attractive. As in all remodeling or changes in a home, consider ease of maintenance, cost, resource and energy efficiency.
If you are considering listing your home for sale, call us for a free consultation in the Santa Fe, NM area - (505) 995-0195 - or for referrals to excellent brokers wherever you live.
Paraphrased from HGTV article: http://www.frontdoor.com/Sell/10-Things-That-Make-Buyers-Bite/64/p1
Sunday, February 7, 2010
Change Your Decor with Paint
Paint is perhaps the easiest and least expensive way that can change the entire look and feel of a room. I suggest low-VOC paints which gas-off minimally, as the toxicity of cheap paints can be damaging to your health. Also, more expensive paints tend to give better coverage, cutting down on your labor time.
Another fool-proof type of paint I highly recommend is Venetian Plaster, which gives an elegant look and covers inconsistencies in drywall. Pre-mixed in a variety of colors, the best I’ve found is Behr (Home Depot) for about $30/gallon. You apply two coats with a pallet knife in broad strokes and then, after dry, burnish with the pallet knife flat against the wall. It takes some "elbow grease" but the effect is stunning.
From a decorator standpoint, consider an accent wall — one wall of a room painted in a different, often bold, color. The key to a great paint job is preparation.
While the temptation is to get out the paint and brushes or rollers and start in, don’t skimp on time and attention to taping off all areas not to painted, removing fixtures and wall plates and covering floors and furnishings. This will save a lot of time and aggravation on clean-up and make the painting process easier and more fun.
Another fool-proof type of paint I highly recommend is Venetian Plaster, which gives an elegant look and covers inconsistencies in drywall. Pre-mixed in a variety of colors, the best I’ve found is Behr (Home Depot) for about $30/gallon. You apply two coats with a pallet knife in broad strokes and then, after dry, burnish with the pallet knife flat against the wall. It takes some "elbow grease" but the effect is stunning.
From a decorator standpoint, consider an accent wall — one wall of a room painted in a different, often bold, color. The key to a great paint job is preparation.
While the temptation is to get out the paint and brushes or rollers and start in, don’t skimp on time and attention to taping off all areas not to painted, removing fixtures and wall plates and covering floors and furnishings. This will save a lot of time and aggravation on clean-up and make the painting process easier and more fun.
Tuesday, February 2, 2010
Fannie to Offer Closing Cost Aid on Foreclosures
For help on any home purchasing issues, please contact me and/or visit our new and improved website: www.GreenRoadsRealty.com
Daily Real Estate News | January 29, 2010 | Fannie Mae, the largest provider of residential home funding in the United States, announced Friday that it would pay the closing costs on purchases of foreclosed homes in its inventory.
The government-controlled company said buyers of qualified properties will get up to 3.5 percent in closing costs, or an equivalent amount for the purchase of new appliances.
The goal of Fannie is to clear out the nearly 50,000 properties it has in inventory— listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes.
"Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover," said Terry Edwards, executive vice president for credit portfolio management, in a statement.
Source: Reuters News, Al Yoon (01/28//2010)
Daily Real Estate News | January 29, 2010 | Fannie Mae, the largest provider of residential home funding in the United States, announced Friday that it would pay the closing costs on purchases of foreclosed homes in its inventory.
The government-controlled company said buyers of qualified properties will get up to 3.5 percent in closing costs, or an equivalent amount for the purchase of new appliances.
The goal of Fannie is to clear out the nearly 50,000 properties it has in inventory— listed on HomePath.com, the Web site created by Fannie Mae last year to sell the growing number of foreclosed homes.
"Attracting qualified buyers to the market and reducing inventory of vacant homes is critical to stabilizing neighborhoods and helping the market recover," said Terry Edwards, executive vice president for credit portfolio management, in a statement.
Source: Reuters News, Al Yoon (01/28//2010)
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