Tuesday, April 22, 2008

Truth or Consequences

By Joel Persinger
YourRealEstateDude.com

When I was a kid, one of the game shows my parents most liked to watch was called, “Truth or Consequences.” As far as I know, that show has been gone for decades. But, what is still with us is the idea that lies can bring about terrible consequences.

On a daily basis, my staff and I work with homeowners who are in terrible fixes. In most cases they either purchased their homes using risky loans or were not entirely truthful when filling out their loan applications, or both. While it might be considered foolish, there is nothing illegal or immoral about taking out a risky loan. However, telling bald faced lies on a loan application is a crime. It’s called, “Fraud.” Some lies are as simple as indicating that the buyer is going to live in the home, when he is actually going to rent it. Others are more serious, such as the buyer telling the lender he makes more money than he actually does. Regardless of the severity of the lie, it is still a lie and can carry serious consequences when (and I say when, not if) the lender becomes aware of it.

The other notable area in which folks often get themselves into hot water is during the sales of their properties. I was reminded of this yesterday as I talked with a friend from church who had expressed a desire to purchase my car. As he marveled at the car’s excellent condition, I felt it prudent to also point out its faults. People can get excited about cars, particularly a convertible when summer is just around the bend. As evidence of this I could mention the fact that he gleefully put the top up and down several times. But, the moment I mentioned that the air conditioning needed to be charged and that the sound system was on the blink he began to take a much more serious look at the vehicle.

This is precisely the kind of behavioral shift that home sellers want to avoid. They know that home buying is an emotional process and they don’t want to chase a hot buyer away by telling him things about the house that might be bad. I’ve actually had sellers tell me, “It’s not a lie if I just don’t tell them.” Actually, it is a lie. It’s called, “a lie of omission.”

So, to illustrate how important the truth really is, it is an indisputable fact that the real estate and lending markets would not be in the pickle they are in if people had simply told the truth. Here are the facts, like them or not. Some lender’s lied when they neglected to tell their clients about the dangers of risky loans. Some buyers lied when they told lenders that their incomes were greater than they really were. Some sellers lied when they failed to mention that their homes were in worse shape than advertised. And yes, I hate to admit it, but some real estate people lied too. Even the politicians have gotten into the act by telling lies about what happened and who is responsible. Perhaps we all should have watched that old game show a little more often. As you may remember, it was called, “Truth or Consequences.”

Monday, April 14, 2008

A Solid Strategy And Great Tactics Are Vital to Your Success.

By Joel Persinger
YourRealEstateDude.com

I am often asked the “Should I…” questions that are on most people’s lips the moment they run into a real estate professional. Lately the questions have come in the form of, “Should I buy now or wait until later.” In case you have been looking for a real estate agent to ask just that question, I thought I might answer it for you here.

It’s probably a safe bet to say that everyone knows the real estate market is experiencing a serious downturn. The press has been shouting the news of the sad and frightening aspects of the bursting “real estate bubble” for quite a while now. But, they haven’t talked about the good part. This is the part that honest to goodness investors capitalize on. Now, I’m not talking about the folks who call themselves investors because they jumped on the bandwagon when things were so good that it was almost impossible to fall off. I’m talking about real investors, folks who have taken the time to learn the ropes, develop winning strategies for success and tactics with which to implement those strategies along the way.

Real investors, like my grandfather when he was still around and like some of the clients we serve in my office, see great opportunity when everyone else is wringing their hands lamenting disaster. When the press is shouting, “Foreclosures are up, the end is near” investors are thinking, “Foreclosures are up, what a great opportunity!” The difference between the two is nothing more than understanding how things work and having a solid strategy and good, nuts and bolts tactics with which to succeed.

At this point, you’re probably thinking, “That’s all fine for you, Joel. But, how does that help me? I’m not an investor. I just want to buy a home.” The answer comes when you think about association. When I was a kid my mother, looking at the boys I knew from school, would say, “Don’t hang around those boys… they’ll get you into trouble.” By the time I was five years old I had learned that bad character corrupts good morals. Then my grandfather started to teach me one of the most valuable lessons I have ever learned in life. Over and over as I grew up he would tell me, “You don’t have to be smart, just hang around smart people.” And so, I learned that foolish people who do stupid things would bring me to harm and wise people who do smart things could help me succeed.

Following these simple lessons can help you succeed as well. In order to be successful as a buyer or seller in this market, you have to work with people who know what they’re doing. The way you find them, is to look for agents who work with REAL investors. Those agents know the ropes, because real investors won’t work with them if they don’t. Once you find one; be respectful of his time, don’t be afraid to pay him well and put on your thinking cap… you’re on your way to success.

Monday, April 07, 2008

Is a Deed in Lieu of Foreclosure The Best Solution?

By Joel Persinger
YourRealEstateDude.com

With so many folks owing more on their homes than the properties are worth, many have elected to sell their houses in short-sales (sales in which the lender accepts less than what is owed). However, some people are opting for what is called a, “deed in lieu of foreclosure” (signing the property over to the bank to prevent a foreclosure from occurring). But, is this the best solution?

At a recent “broker’s breakfast” hosted by the San Diego Association of Realtors, real estate brokers and managers gathered from around San Diego County. The subject was foreclosures and the attendees heard attorneys representing both the California Association of Realtors and the San Diego Association discuss the problems and issues presented as a result of the large number of foreclosures flooding the market. Among the subjects discussed, was the practice of lenders offering a “Deed in Lieu” as an alternative solution to foreclosure or short-sale.

As a general rule, when homeowners are facing foreclosure they fear three major consequences: damage to their credit rating, the lender chasing them for the difference between what they owe and what their home is worth (the deficiency) and the possibility of having to pay taxes on that difference. The overriding reason why many homeowners elect to sell their homes in short-sales rather than allowing them to be foreclosed upon is in order to minimize the damage in all three of those areas. The question at hand was, “Does a deed in lieu of foreclosure accomplish the same goals?” Unfortunately, the answer is not simple.

The problems with accepting a deed in lieu of foreclosure as your chosen solution can be summed up in a four word quote by one of the attorney’s who was presenting at the morning breakfast. He said, “Deed in lieu? Careful!” While it may be tempting to just give the property back to the lender and wash your hands of the whole mess, the truth is that many lenders won’t let you do that so easily. According to this attorney, some lenders have adopted the practice of offering a deed in lieu of foreclosure while reserving their right to come after you for any deficiency after the home is eventually sold.

This does not mean that a deed in lieu is not the best solution. It simply illustrates the need to check with qualified professionals who have your best interest at heart before agreeing to anything. A short list of those professionals should include an experienced real estate broker, a qualified attorney and a Certified Public Accountant or tax attorney. Most importantly, do not sign anything without fully understanding what it says.