I want to share a little advice that I think is one of the most important things in the Real Estate and credit game. As I have said in previous posts, credit is the most important thing when it comes to Real Estate finance. One of the biggest mistakes I see people making is with "Co-signing". What Co-signing entails is you signing for a loan, mortgage, auto, or other, with someone else, using your credit as a supplement to the primary borrower. The word co-signer doesn't really play in the Real Estate game, but is very common with Auto finance. When you co-sign, what you are basically saying is that I will vouch for this person, and that you will get all payments ontime and in full. What this does is put this liability on your credit report. This can be good because it builds your credit but can really hurt you if things go bad.
What can happen? (and does)
You co-sign for your brother or sister so they can buy a car. Brother or sister makes the payments for a while, but then has some issues and can't keep up the payment. (what payments come first, food and rent, or car payment? You know the answer) Brother and sister keeps missing payments, maybe gets caught up from time to time, but overall, doesn't keep a regular payment history.
How does this effect you?
Dearly.....You now have your perfect history, tarnished by their history for the entire term of this loan. This is a huge problem. With Real Estate finance, the difference between a clean credit history and a score of "720" is a huge difference from a "600". You are talking hundreds of dollars per month.
How do you avoid the issues that can arise with co-signing?
The obvious way, is just say "NO" like the old drug public service announcements. Another way, is to make the payments yourself. Arrange for you to pay the payment, and make sure that there is no risk. Have your brother, sister, aunt, whoever, make payments directly to you, and then your only risk is that you don't get the money from your sister, aunt, cousin. Should that happen, you now have put your financial situation at risk, not having the extra cash, and you can force them to sell the car for not paying.
Make good credit decisions, if you don't, it WILL cost you.
Wednesday, April 4, 2007
Interesting little scenario, what do you think?
I wanted to share a little story I heard yesterday from one of my Bank Reps that not only frightened me, but angered me a little. If anyone has any insight I would love a contribution.
So, I am talking with my rep about what they are saying, what is new on their end, and they told me a story about a friend of their's that bought a new construction house about 2 years ago that they financed with a 2 year fixed through the Builders finance broker. The friend bought this new beautiful house for X dollars, which though it is a lot of money, has been the norm for such a nice area, great schools, great employment....everything. So, the builders in this community built a lot of homes in this area, and continues to build. The builders have built soooo much that that have overbuilt the area, and are forced to slash prices to clear their inventory. The people that bought this house 2 years ago are now $120,000 upside down on their property. That is about 15% behind.
This type of scenario makes me wonder, what is going to keep this from happening in the future, who really is to blame, can this be prevented.
Here are some of the causes and their potential blame:
Builders- they are a business, sometimes corporate, forced to perform for their shareholders, can you blame them for needing to create a profit? Should they have to perform ethical and look out for the people that have previously trusted them and bought at a set price?
City Planning Departments- They have given builders the ability to keep building houses They too are required to perform, should they be held liable for overbuilding and putting people at risk?
Buyers - Should they be blamed for buying a property at market levels 2 years ago, and being $120,000 behind, and should they be forced to repay that additional $120,000 or should they just let the home go into foreclosure when their current home mortgage doubles upon their first mortgages adjustment?
Lenders - They have allowed this person to get a 2 year fixed, and assumed the liability that the value when they funded the loan, might not be there 2 years later. Should lenders be required to make decisions for people, even though they already disclose the terms of the loans in the signing documents? Should lenders require 100% financing be accompanied by a fixed rate first mortgage, ensuring that there would never be a "Payment Shock" (when you payment increases as a result of a mortgage going adjustable) issue.
I am not trying to stir up peoples emotions, or get people fired up, I am merely trying to see if there is a proper way to handle this type of situation if you were in it. Is there a way to prevent this? Who really is to blame in these cases? Is it necessary to cast blame, or do we just learn from it and move on?
So, I am talking with my rep about what they are saying, what is new on their end, and they told me a story about a friend of their's that bought a new construction house about 2 years ago that they financed with a 2 year fixed through the Builders finance broker. The friend bought this new beautiful house for X dollars, which though it is a lot of money, has been the norm for such a nice area, great schools, great employment....everything. So, the builders in this community built a lot of homes in this area, and continues to build. The builders have built soooo much that that have overbuilt the area, and are forced to slash prices to clear their inventory. The people that bought this house 2 years ago are now $120,000 upside down on their property. That is about 15% behind.
This type of scenario makes me wonder, what is going to keep this from happening in the future, who really is to blame, can this be prevented.
Here are some of the causes and their potential blame:
Builders- they are a business, sometimes corporate, forced to perform for their shareholders, can you blame them for needing to create a profit? Should they have to perform ethical and look out for the people that have previously trusted them and bought at a set price?
City Planning Departments- They have given builders the ability to keep building houses They too are required to perform, should they be held liable for overbuilding and putting people at risk?
Buyers - Should they be blamed for buying a property at market levels 2 years ago, and being $120,000 behind, and should they be forced to repay that additional $120,000 or should they just let the home go into foreclosure when their current home mortgage doubles upon their first mortgages adjustment?
Lenders - They have allowed this person to get a 2 year fixed, and assumed the liability that the value when they funded the loan, might not be there 2 years later. Should lenders be required to make decisions for people, even though they already disclose the terms of the loans in the signing documents? Should lenders require 100% financing be accompanied by a fixed rate first mortgage, ensuring that there would never be a "Payment Shock" (when you payment increases as a result of a mortgage going adjustable) issue.
I am not trying to stir up peoples emotions, or get people fired up, I am merely trying to see if there is a proper way to handle this type of situation if you were in it. Is there a way to prevent this? Who really is to blame in these cases? Is it necessary to cast blame, or do we just learn from it and move on?
Possible Blog Posts by Specialization
There have been blog posts on Property Doctors with ideas of what you can post. I thought I would take that a little further and give some more ideas for each type of job. Hopefully this will inspire you to entertain me with some of your experiences or advice.
Real Estate Agents-Horror Stories, Perfect situations, Great Clients and what they do for you, What you are seeing in your market (remember there are investors all over this site, you can be an agent for them in your area if deals come along)
Investors- What do you look for in a property? How do you finance usually if you do? Everyone wants to be an investor, give us your insight.
Painters- Tell me a little about paint. What are the advantages or disadvantages to water based vs. oil based. What are some of the tools that make your life easier? What are the typical costs per room?
Tilers- What are the differences between tiles? What are some tips if people are doing it on their own? How long does it take for a job? What tools are necessary for your job?
Tech People - I have seen articles and books on SEO and topics like that. What are the realities of SEO and how else can I get my website noticed and improve traffic overall?
Motivational Speakers - Motivate and Inspire me!!!!!
Title and Escrow - What is the difference in cost between companies, what are the typical costs? What do some companies do that others don't? Are there horror stories?
Cleaning Services - Why hire someone to clean my house when I can do it myself? How much does it cost to clean a 1000 square foot house 1 per week? What do you clean, how does it work?
Stagers - What are the key points to avoid when staging your house? How much do your services usually run, and what is the return upon sale usually? How long does it take to stage a home?
Contractors - What is a typical kitchen remodel? If I had $20,000 to spend, where could I see the most improvement? How long does a kitchen remodel usually take? How do I rip out a wall, and be sure that I am not screwing up?
Photographers - Inspire me with your pictures, maybe I can show you some of mine! Photographers have it easy, just let us see your work, you don't even have to write!!
My point with this my friends is, we can all blog. I am lucky to be in an industry where I have constant things to write about, but I want you all to see that you have that ability too. I want to hear about your business. I may know a little, but I want to know all about it.
I have a challenge to each of you, if you email me at jvetter@mercurylending.com, and if I can't come up with 5 things for you to write about, I will send you a $5 Starbucks gift card. How does that sound?
Real Estate Agents-Horror Stories, Perfect situations, Great Clients and what they do for you, What you are seeing in your market (remember there are investors all over this site, you can be an agent for them in your area if deals come along)
Investors- What do you look for in a property? How do you finance usually if you do? Everyone wants to be an investor, give us your insight.
Painters- Tell me a little about paint. What are the advantages or disadvantages to water based vs. oil based. What are some of the tools that make your life easier? What are the typical costs per room?
Tilers- What are the differences between tiles? What are some tips if people are doing it on their own? How long does it take for a job? What tools are necessary for your job?
Tech People - I have seen articles and books on SEO and topics like that. What are the realities of SEO and how else can I get my website noticed and improve traffic overall?
Motivational Speakers - Motivate and Inspire me!!!!!
Title and Escrow - What is the difference in cost between companies, what are the typical costs? What do some companies do that others don't? Are there horror stories?
Cleaning Services - Why hire someone to clean my house when I can do it myself? How much does it cost to clean a 1000 square foot house 1 per week? What do you clean, how does it work?
Stagers - What are the key points to avoid when staging your house? How much do your services usually run, and what is the return upon sale usually? How long does it take to stage a home?
Contractors - What is a typical kitchen remodel? If I had $20,000 to spend, where could I see the most improvement? How long does a kitchen remodel usually take? How do I rip out a wall, and be sure that I am not screwing up?
Photographers - Inspire me with your pictures, maybe I can show you some of mine! Photographers have it easy, just let us see your work, you don't even have to write!!
My point with this my friends is, we can all blog. I am lucky to be in an industry where I have constant things to write about, but I want you all to see that you have that ability too. I want to hear about your business. I may know a little, but I want to know all about it.
I have a challenge to each of you, if you email me at jvetter@mercurylending.com, and if I can't come up with 5 things for you to write about, I will send you a $5 Starbucks gift card. How does that sound?
Consumer Confidence Struggles
Today one of the major factors in the interest rate game came back worse than expected. That factor is Consumer Confidence. Analysts feel that this hesitancy is a result of higher gas prices and the madness that is happening all over all financial markets. This is the first we have seen actual consequences since the exposure of Subprime Mortgage woes. People are very very nervous about where we are going with these issues, and aren't spending as a result. Kind of like a recession type mentality, where everyone stays home, conserves, and takes a more reserved lifestyle. This isn't a good sign for the immediate financial spending. This can hurt the economy. The normal effect on the mortgage rates would be to see a decrease in rates to try to stimulate some action, however, the Fed released a statement that they are still concerned with inflation. So for the day, so far rates are slightly up, even with consumer confidence lacking at this time.
You can read more at www.cnnmoney.com
You can read more at www.cnnmoney.com
New Home Sales Slump
Well according to builders, we are seeing a housing slump, the worst since August 2000. This really isn't a good sign for the economy, though, from experience, next week or maybe even tomorrow we might see something showing that the economy is doing well! Darn media! (Look at me just spreading the media's word ;))
Here is the article:
http://money.cnn.com/2007/03/26/news/economy/new_home_sales/index.htm?postversion=2007032612
I think the moral of the story with news like this is that we really aren't in a strong or thriving position, maybe news like this hint that we could be closer to a recession, but the reality is our economy has so many factors that dictate it's health, the housing slump, if that is what you want to call it, has an effect, not THE effect.
I was working yesterday (Sunday) at an open house for a real estate agent I work with, and there was great traffic through the 1 bedroom condo. I think this activity shows that there are people out there still looking to buy. The real estate market isn't dead or crumbling, we just aren't seeing the growth of the last few years. That isn't necessarily a bad thing, the market will correct itself, you just need to position yourself to survive or thrive throught it.
Here is the article:
http://money.cnn.com/2007/03/26/news/economy/new_home_sales/index.htm?postversion=2007032612
I think the moral of the story with news like this is that we really aren't in a strong or thriving position, maybe news like this hint that we could be closer to a recession, but the reality is our economy has so many factors that dictate it's health, the housing slump, if that is what you want to call it, has an effect, not THE effect.
I was working yesterday (Sunday) at an open house for a real estate agent I work with, and there was great traffic through the 1 bedroom condo. I think this activity shows that there are people out there still looking to buy. The real estate market isn't dead or crumbling, we just aren't seeing the growth of the last few years. That isn't necessarily a bad thing, the market will correct itself, you just need to position yourself to survive or thrive throught it.
What makes a person successful?
think this word gets thrown around a lot, and sometimes "success" doesn't stick. Is that really success?
Possible reasons a person is successful:
Lots of Money
People desire them
Consistent results and support
Respect of their peers
I think success has a few different characteristics of each. But really, I think what a person feels success truly is depends completely on the person. I think a person is successful when they do have some money. Though I don't feel money has a very huger bearing on it because the money isn't what dictates your success, it is only the result of your success. If you start being unsuccessful, then the money goes away, if you continue your success, the money keeps coming. Money doesn't make you successful.
If people desire you, I think your success is there, however that success may have a limited tenure. If many people want you, will that last? I think again, part of this aspect of success is the result of something else.
The final two points, I think are the heart of what makes people successful. In order to do what you do well, whatever your profession or trade, you need to consistently produce results, be there to support your clients or customers, and have their respect. That is success. If you want to be in your business for the long haul, you have to look out for your client, the money, or fame, comes later, with time. This translates to Real Estate through a long lasting relationship and network of people that trust your opinion, and when they need advice or help, there is only one person they think of...you. In order to be a successful professional in real estate, you must be available. Everyone needs a vacation, but if you aren't available out of your vacation time for a couple days without some sort of response, or acknowledgement of contact, then people will head for the hills. You also must be consistent. Working hard, giving solid advice, and performing in a crunch will earn respect, and help you in your quest for success. You also must make tough decisions for your client. If you client comes to you and wants to buy the $700,000 house on the hill, when you know they can only afford $400,000, then make the right call, and explain the realities of that house, regardless of what that does to your commission.
What is the moral of the story? Do the right thing, and be consistent. This will put you on the road to success, and the money and "fame" will follow.
Am I successful? Not yet, but I do what it takes everyday to get me there someday.
Are you successful? .....Please respond--
Possible reasons a person is successful:
Lots of Money
People desire them
Consistent results and support
Respect of their peers
I think success has a few different characteristics of each. But really, I think what a person feels success truly is depends completely on the person. I think a person is successful when they do have some money. Though I don't feel money has a very huger bearing on it because the money isn't what dictates your success, it is only the result of your success. If you start being unsuccessful, then the money goes away, if you continue your success, the money keeps coming. Money doesn't make you successful.
If people desire you, I think your success is there, however that success may have a limited tenure. If many people want you, will that last? I think again, part of this aspect of success is the result of something else.
The final two points, I think are the heart of what makes people successful. In order to do what you do well, whatever your profession or trade, you need to consistently produce results, be there to support your clients or customers, and have their respect. That is success. If you want to be in your business for the long haul, you have to look out for your client, the money, or fame, comes later, with time. This translates to Real Estate through a long lasting relationship and network of people that trust your opinion, and when they need advice or help, there is only one person they think of...you. In order to be a successful professional in real estate, you must be available. Everyone needs a vacation, but if you aren't available out of your vacation time for a couple days without some sort of response, or acknowledgement of contact, then people will head for the hills. You also must be consistent. Working hard, giving solid advice, and performing in a crunch will earn respect, and help you in your quest for success. You also must make tough decisions for your client. If you client comes to you and wants to buy the $700,000 house on the hill, when you know they can only afford $400,000, then make the right call, and explain the realities of that house, regardless of what that does to your commission.
What is the moral of the story? Do the right thing, and be consistent. This will put you on the road to success, and the money and "fame" will follow.
Am I successful? Not yet, but I do what it takes everyday to get me there someday.
Are you successful? .....Please respond--
Express Yourself
Over the last month I have made it a real goal of mine to get out in front of people, make people understand what I am about, express myself... I came to the conclusion that writing in www.propertydoctors.com blog section would be a great start. It is my very own public journal about one of my real passions, the real estate business. I think the major benefit I have seen is the way I feel about what I am doing. It is great to get feedback, and know that I am connecting with someone, in whatever way that might be. I am thinking even more out of the box since starting this communication.
What I am noticing however, is that the feedback I am getting, is from a few people. I know we all don't want to comment on every blog we see, but I encourage everyone to step outside of their comfort zone, come out on the edge, test the waters, and jump in!
The benefits of expressing yourself go beyond personal fulfillment; there is a network of professionals in your same field. Expressing yourself will help get readers to look at your feelings. Finding someone that has the same goals or morals, is much more likely.
So come on people, start blogging, or commenting, or at the very least applauding, those people you feel are on the right track. The more feedback and response, the better it will be for everyone!
What I am noticing however, is that the feedback I am getting, is from a few people. I know we all don't want to comment on every blog we see, but I encourage everyone to step outside of their comfort zone, come out on the edge, test the waters, and jump in!
The benefits of expressing yourself go beyond personal fulfillment; there is a network of professionals in your same field. Expressing yourself will help get readers to look at your feelings. Finding someone that has the same goals or morals, is much more likely.
So come on people, start blogging, or commenting, or at the very least applauding, those people you feel are on the right track. The more feedback and response, the better it will be for everyone!
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