Wednesday, August 13, 2008

"Repairing Your Credit"

(ALERT #2: This alert is being posted 12/13/08: Well, The Big Three auto companies may be getting a bailout. Don't you wish we, the taxpayers, could get such a "do-over?" You know, erase our credit card debt, etc., and just get a clean slate? But we're not that lucky, so let's get to work on cleaning up that credit score. Why? Because the absolute best buys in real estate are with us NOW... probably through most of 2009. You CAN get a "normal, fixed rate, under 6% "mortgage. Just do what this blog suggests and "Git er done!" (See Alert #1, below) (ALERT #1: This blog entry was made 08/13/08. However, this alert is being posted 09/30/08...the day after the initial "Economic Rescue/Bailout Bill" was defeated in Congress. The six weeks since this was written have wreaked financial havoc on the lending industry. Regardless of your Republican or Democratic loyalties, there is enough blame to go around both camps. It's upsetting and embarrassing to me as an American, yet greed is truly at the heart of the human condition. The backlash will be felt for a while. Moving forward, a strong credit rating will be essential. If yours is broken - suck it up and do whatever it takes - FIX IT NOW!) As Real Estate Brokers and Sales Agents... we often find ourselves in the middle of highly charged, emotional situations. Foreclosures, job loss, unwanted re-locations, divorce, death in the family, neighborhood conflicts, market fluctuations, etc. For most Americans, the sale or purchase of a home is the most significant financial event of their life. And there we are, in the middle, with all eyes on us. I'm convinced that even the most savvy buyers and sellers are hoping we are really strong... really good at this... and willing to take their hand and lead them through the maze to a good decision. I live for those moments - when the customer says: "OK, you're the expert. Help us put together a good plan here." Because the pendulum swings, we are now at a point where credit has tightened considerably and mortgage loans are much harder to come by. The banks are like "deer in the headlights." Hundreds and hundreds of foreclosures and so-called "short sales" in our Palm Coast / Flagler County, FL market alone. We'll send them a "spot-on" CMA full price offer on a short sale - cash - and not hear a peep from them for over a month! No wonder they are afraid to lend it now. They were so used to giving it away! To be able to move fast and to get a great interest rate, you need a good credit score (often called a FICO score)... FICO stands for "Fair Isaac & Co.," a firm that developed the credit scoring system software in the 1980's. So what's a good score? By most standards, a score of 720 or higher is considered "good." A score below 600 is considered "poor." To get a decent look from a mortgage lender today, you need to be at 680 or above. If you are among the lucky ones, 770 or more is an "A+." The better your score... the better the deal you can get on mortgage rates and terms. Why? Because good credit translates to less risk for the lender. OK, so your credit is currently "not so hot." What can you do? Here are a few hints that may get you off in the right direction: (For you single women out there, you know who Suze Orman is... Surely you watch Oprah... so check this link for a little "chick credibility"...
  • Be cautious of "Credit repair" offers. "Just $49.95 a month and we do all the work!?" Be careful. You can often do most of this on your own with a little discipline.
  • You can get a free credit report, once a year, from the three major credit reporting agencies, without dinging your score. They are Equifax, Experian, and Trans Union.
  • In simple terms, your score depends on: Your payment history, The amounts you currently owe, The length of your current credit history, The types of credit you use, and New credit you may have.
  • Pay your bills on time. Late payments are credit killers. If you miss the due date, make every effort to pay before the next billing cycle. This can keep the tardiness from becoming a reportable event. Use your bank's on-line payment system for convenience and super record keeping.
  • Keep credit card and store revolving credit card balances low.
  • If you are "past due" on an account, get current.
  • Don't close unused accounts.
  • Don't open any new accounts.
  • If you are having trouble with payments, call the creditor and make an attempt to work it out. Being pro-active can yield some decent outcomes.
  • If your credit report shows items that you are in disagreement with, write them letters of explanation. Everyone seems to have a story about a divorce or a rogue insurance non-payment, or a totally un-explainable item on their report ("I never even had a Sears charge card!"). Deal with these pesky issues and you'll be rewarded.
  • Create a plan. Write it out. Have a timeline, by which you want these problems solved. Make it a priority and you will eventually enjoy the benefits.

There... Hope this is useful. Call us and we'll help you do this. Then, when you are ready, we'll help you purchase a home!

Monday, August 11, 2008

"Housing Greed and Payback"

My Irish mother, Alice Gertrude (O'Keefe) Haggerty, when I had made a poor choice, used to say: "Ok, Franky, it's time to pay the piper." (My father, Joseph (Praznic) Zedar, was Slovenian... How about that for an ethnic combo?) Well, are we paying the piper, or what?
I remember when things crashed in 1989. I thought real estate was gravy, as my first three years were rewarding... and work was fun. But guess what? Short sales actually sold and so did most well-priced homes. By 1991, we were on the rise again. But not now. We're three years into this. I feel like we've come through a nasty storm and we're now in the eye... and now we have to walk through it again to get back out.
So back to this "poor choice" thing that my mother tried to teach me... Our poor choice, regarding real estate, has a one word answer: GREED. Not horrible greed, just normal, every day, human greed. If you have a biblical worldview (or if you just observe life with a scientific scepticism), it's plain to see that greed is in our basic nature. To wit: Do you have to teach greediness to children? No. We struggle to teach them to share. In his recent Newsweek editorial, "The Homeownership Obsession," Robert Samuelson said it brutally honestly: "The housing market," said he, "became a Casino." Wow.. a Casino... how perfect.
As a nation, we have become greedy over-consumers. It's irrefutable. A few weeks ago, my 21 year old son and I watched a special on rural China. There was a woman who walked with her mule on a two hour trip... twice each day... for dirty water. You can believe that my hot showers have been cut in half since then. That will stick with me.
As a Real Estate Broker, here's what makes me nuts. We show houses all the time and comment "amongst ourselves" about the models, etc. If it doesn't have: 22" tiles, 12' ceilings, granite counters, 42" solid wood cabinets, bathtub-like sinks, exotic cooktops, huge commercial refrigerator, cavernous baths & room-sized closets, 3 zone high seer AC, three car garage, etc., etc., etc... then we have the gall to say it's sub-standard. You know - "a starter home." Can you tell me why a family of three needs a 4,000 square foot McMansion, like in the above picture? Sure burns a lot of energy to heat and cool a place like that.
Well, we are paying a price. We are a country that looks down our noses at renters and throws tax breaks at home owners. We reward those that already have the money and punish those that do not. It's a mess. Many older Americans approaching retirement have little wealth accumulation beyond the investment in their homes. I'm guessing a lot of retirements are currently on hold. Don't get me wrong. I own a home and lean to the right. But there has to be a better way to spread the wealth around.

Why read "Palm Coast Unplugged?"

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