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Sharon Johnson Shared This Article “Banks Tempt Underwater Home Owners with Cash — Would You Take It?”

A short sale might be worth more than avoiding a foreclosure on your credit report. For some, it means cold hard cash.

If your lender offered you as much as five figures to move out of your home because you couldn’t make your mortgage payment, would you do it or wait for the lender to foreclose?

The answer would seem to be a resounding “hell, yes.” But many people sit tight.

When Bank of America offered short-sale incentives of $5,000 to $20,000 to 20,000 Florida home owners late last year, only 3,000 home owners expressed an interest in participating.

One reason? Folks can often live rent-free while the foreclosure process winds its way through the red tape.

But, a cash “bonus” paired with a short sale that lets you avoid a foreclosure on your credit history can be a sweet deal.

An incentive payment might be as little as $3,000 via the federal government’s Home Affordable Foreclosure Alternatives program. But private lender programs offer 10 times that much, depending on where you live, which short sale program you use, and which company holds your mortgage, says BusinessWeek.

“Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt, and in some cases providing large cash incentives,” Moody’s Senior Credit Officer Bill Fricke told the magazine.

Of course, incentives have their catches. You have to:

1. Help the bank sell your home. In a short sale, you find someone willing to buy your home for less than what you owe on the mortgage and your lender agrees to take the sale price.

2. Move on without a fight.

3. Probably live in a state where it takes years, rather than months, for the bank to foreclose. In those areas, it’s cheaper for the bank to pay you to do a short sale than to pay the cost of a multi-year-long foreclosure.

If you bank makes an offer and you bite, these four steps will ensure the smoothest possible process:

1. Make sure the lender can’t come after you later to collect any shortfall between what you owe on the mortgage and what you’re selling your home for. Some, but not all, states prohibit that.

2. Talk to an attorney and a tax adviser so you know what will happen financially after the short sale. If you sell now through the end of 2012, the tax rules for short sales say you won’t owe any income tax on $1 million (singles) to $2 million in forgiven mortgage debt (married couples). Those tax rules, part of the Mortgage Forgiveness Debt Relief Act, expire at the end of this year and only apply to your primary residence.

3. Hire a REALTOR® experienced in short sales to handle the transaction. Look for an agent who’s earned the SFR (short sales and foreclosure resource) designation.

4. Figure out where you’re going to move and sign a lease now because your credit score will likely drop if you stop paying your mortgage and short sell your home. A low credit score can make it difficult to get a rental home.

By the way, you can ask your bank if it’s willing to work with you on a short sale, but asking for an incentive too? That’s not how it works. Banks choose you for an incentive program, and how they decide isn’t clear, though they’re less likely to offer cash in states where it only takes a couple of months to foreclose.

So would you take the cash and short sale, or hold out?
By: Dona DeZube Published: February 17, 2012

Sharon Johnson, Realtor


Office: 419-891-0888
Cell: 419-260-1752
Fax: 419 891-1092
VM: 419-897-2700 ext. 240
sharonjohnson@wellesbowen.com

You can find Sharon’s website by clicking here.

Joan Rogge Presents – A Financial Plan for Your Home

Joan Rogge

JOAN ROGGE, REALTOR, WELLES BOWEN TOLEDO OFFICE

Office:419-535-0011 Cell:419-944-3129
Fax:419 535-7571
VM:419-539-2700       ext.125
joanrogge@wellesbowen.com

Visit Joan’s website by clicking here

Article From HouseLogic.com
By: Richard Koreto
Published: August 28, 2009
Your home is probably your biggest investment. To manage it, create a financial plan that takes into account repairs, upgrades, mortgages, insurance, and taxes.
Do you pay each home-related expense as it comes? If so, you’re missing opportunities for upgrades, or much worse, heading into a financial crisis when a slew of surprise maintenance items hit. So take a holistic look at what it costs to operate your house and set up a home financial plan.
Use our home financial plan budget worksheet, and start by writing a list of expenses, such as:
•Mortgage

•Taxes

•Home insurance, including liability

•Repairs and maintenance, such as new furnace, roof, painting

•Voluntary upgrades, such as a swimming pool, a premium range, a new powder room

What will you learn from this home financial plan weekend exercise?
•How much you have to spend

•How much you need to allot in the short- and long-term for necessary maintenance and voluntary improvements

With this new found grip on your home’s expenses, you can create a home financial plan that’ll help you there for years with maximum enjoyment and minimum anxiety.
The mortgage: Pay it–and then some
Yup, you already shell out a lot for your mortgage, but can you pay more? Even a little extra each month can add up to an earlier payoff. Let’s say you have $200,000 in outstanding principal and a 20-year fixed-rate mortgage at 5%. Your monthly payment is $1,319.91. But if you can manage to pay another $100 a month, you’ll save $14,887 in interest.

Run the numbers (http://realestate-calc.com/Mortgage_Calculators/Mortgage_Calculator_Input_Add_Payment.asp) yourself for your home financial plan.

Advantages of an early payoff, says Alan D. Kahn, a financial planner in Syosset, N.Y.:
•Less debt means more money to spend later.

•It feels darn good to own your house outright as soon as possible.

•Minimal tax loss. Toward the tail end of the life of a loan most of your payment goes to the principal, not the interest, so you’re getting only a small tax break anyway.

Of course, if you’re still saving for retirement, put the 100 bucks elsewhere:
•A retirement plan

•An account for the inevitable home repairs

•An account for discretionary improvements, which can raise your home’s value

Insurance: Protect your property
Your vegetable garden is pointless without a fence to keep out rabbits; likewise, your home financial plan will come to nothing without an insurance “fence”:

Homeowner’s insurance. Basic coverage (http://www.houselogic.com/articles/homeowners-insurance-are-you-over-or-underinsured/) for your home and everything in it. The average cost is $636 per year but this varies widely by state.
Liability coverage. Protects you from a lawsuit if someone gets hurt on your property, for example. Your best bet: An umbrella policy (http://www.houselogic.com/articles/umbrella-insurance-and-homeowner-liability/). For about $300 a year you can by a typical $1 million policy.
Various disaster insurance policies. Optional policies (http://www.houselogic.com/articles/insuring-against-natural-disasters/) cover flood, earthquake, and hurricane damage. As part of your home financial plan, you have to research to see what disaster coverage, if any, you need in your area, and what your standard policy already covers. For $540 a year you can buy flood insurance, for example.
Don’t under- or overbuy insurance
For your basic policy, get homeowners insurance with full replacement coverage (http://www.houselogic.com/articles/homeowners-insurance-time-for-annual-check-up/) in case your house burns to the ground.

That sounds simple, but heads up on calculation. Remember that you own a house as well as the land on which it sits. So even though you bought your home for $300,000, it may cost only $100,000 to rebuild it. Your policy limits should reflect this. This difference will vary widely by region.

Another heads up: Don’t make the common and potentially disastrous mistake of thinking that because your home has fallen in value you need less insurance. If you bought a $1.2 million townhouse in Florida during the boom, it’s true it now may only sell for $600,000. But the replacement cost of the townhouse hasn’t changed much, so you can’t improve your home financial plan by cutting insurance costs that way.

Other ways to cut your insurance budget:
•If you make structural improvements, such as adding storm shutters, your insurer may give you a break.

•If you belong to certain groups, such as AARP or veterans’ organizations, your premiums may be lower.

Repairs and renovations: By choice or necessity
You own a home, so you’ll be spending money on everything from a new faucet to-surprise!-a new roof. Freddie Mac and other authorities say as part of your home financial plan, you should be prepared to spend 1% to 3% of the market value of the home annually on maintenance. To be extra-prudent, open a savings account and make regular payments until your account reaches 1% to 3% of your home’s current value.

To help you budget:

Start with the inspection report you received when you bought the house. Did the inspector indicate that you would need a new roof in five years? A new furnace in 10?

Keep a log of your major appliances’ age so you can estimate when they’ll need replacing. Some estimated life spans:
•Roof: 20-25 years

•Heating systems: 15-20 years

•Range/ovens: 11-15 years

•Water heaters: 8- 13 years

Then get estimates on what replacements will cost and start saving.

Consider ongoing non-emergency maintenance, too. Do you live in New England? Price a snow blower and get bids from plow services.

Resist the siren call of the home equity loan (http://www.houselogic.com/articles/a-guide-to-equity-loan-options/) to take care of everything. That just defeats your efforts to pay off the mortgage early.

Separate out what you want from what you need. A $50,000 kitchen remodel is nice, but you’ll recoup only 76% of the project cost your home’s resale, according to Remodeling magazine (http://www.remodeling.hw.net/2009/costvsvalue/national.aspx).

If you can afford to redo, go for it. Just don’t confuse your necessary repairs (new oil furnace-about $4,000) with your discretionary upgrades (Viking range-$6,000 and up).
Taxes: (Almost) no way around them
Even if your lender handles your property taxes from an escrow account, you need to budget for them in your home financial plan. They creep up almost every year, it seems. Take responsibility for tracking the changes in your area: Look over past tax bills to get a sense of how quickly they’ve risen in the past.

Or if your lender handles escrow and you haven’t saved your bills, ask for an accounting. The median annual property tax payment is $2,198, but that hides the enormous range in medians from state to state:
•New Jersey: $6,320

•New York: $3,622

•California: $2,829

•Alabama: $383

•Louisiana: $188

You can generally deduct property taxes on your federal return. A tax pro can tell you how much of a tax break you’ll get, to help you fine tune your home financial plan.

You may be able to reduce your tax burden by getting a reassessment. Do your homework first: Are comparable houses taxed less than yours? Ask the local assessor what formula is used to set tax rates. You can challenge the assessed value (http://www.houselogic.com/articles/appeal-your-property-tax-bill/) and get yourself a rollback.

If you’re in a special group, you might get some help from state or local programs. Check around to see what’s available in your area. New York State, for example, has its Star Program (http://www.orps.state.ny.us/star/index.cfm) for giving senior citizens some relief from school-related property taxes.

Richard J. Koreto is a managing editor of finance, taxes, and insurance at HouseLogic. He has been editor of several professional financial magazines and is the author of “Run It Like a Business,” a practice management book for financial planners. He and his wife own a pre-Civil War house in Rockland County, N.Y.

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