Buying Real Estate Options with Bad Credit

Lately I have been approached a lot by people wanting to buy real estate, but can't because of bad credit, bankruptcy, recent foreclosure and so on.  So I thought I would post my thoughts on viable options to purchase a home in this real estate market.

The days of "rent to own" are gone.  Why you ask?  Well, let's think about it.  First, you agree to rent someone's home and pay them more than the rent each month.  The overage is supposed to be held by the owner and applied to your down payment.  Well the bank will view the overage as your down payment and will reduce the loan by the amount you have paid ahead.  For the sake of an example, let's say that your rent payment is $1,000 monthly with you paying an extra $200 to be applied towards the purchase.  Over a two year period, you would have paid $4,800 towards the purchase of the home.  You agreed to purchase the home for $150,000 at the conclusion of the two years.  So now you go to the mortgage company to secure your financing.  Instead of being financed for $150,000, you can only get financing for $145,200.  And on top of everything else, you also have to produce the required down payment of anywhere from 3.5% to 10%.  The better option is this case is just to lease the property for $1,000 monthly.  At the conclusion of the lease term, you obtain financing for $150,000 and only put down the required amount.

Some people think that lease-purchase agreements are the way to go.  These are viable and legal.  However, I don't advise people to do them right now because of the instability in the market.  For sake of example, you agree to purchase a home for $150,000 after a two-year lease period.  You begin the financing process.  The appraisal reveals the value to be $128,000.  Guess from where the difference of $22,000 has to come?  You!  The mortgage company is not going to finance more than the appraised value and the seller is not going to reduce the sales price just because.  There are protective clauses that can be included to protect the buyer, but any astute agent will advise the seller not to agree to them. 

A lease purchase agreement is one where the purchasee price of a property is agreed upon today with the actual sell of the property occurring at a later time.  Since the market is so volatile right now no one knows if the property will appreciate, depreciate or remain level.  If you have been following my posts, then you know that I believe we will experience more depreciation over the last two years.  For the buyer, this means they will have to come out of pocket in order to complete the transaction.  For the seller, this means that they will make a good deal of money in a down market, but most likely they find that they have lost a great deal of time during the lease period only to realize missed opportunities to have sold to other potential buyers.

Clearly, at this time I do not encourage anyone to go "rent-to-own" or lease purchase.  But don't fear there is still a viable option for those with struggling credit: FROR.  It is best for you to enter into a straight lease agreement and include a very important clause, "first right of refusal."  With this clause, the tenant/buyer is protected because the house cannot be sold from under them.  And for the seller, they enter the agreement knowing full well the time the house will be off the market.  It's a win-win for both.

Once the real estate market recovers, lease-purchase agreements will make sense again.  But for now, I advice against these two options.

Just as a footnote I want to give a bit of information about bankruptcy.  Chapter 7 is where the slate is wiped clean.  However, you are required to liquidate assets and creditors are paid off as much as possible from the proceeds.   Chapter 7 remains on your credit report for 10 years.  Chapter 13, on the other hand, is where a payment plan is established.  You are not required ti liquidate your assets and it remains on your report for 7 years.  With either, I have been told by several lenders that you will be able to obtain financing for a home anywhere between 2 and 4 years after filing.  Be aware that a higher down payment may be required as a result of the bankruptcy.

I included this information so there is an understanding of how long any lease should be in order to exercise the FROR option.   For more information, check out my website, http://www.joibostic.com/.

What I'm Thankful For

I use this time of the year to reflect on what I am truly thankful for.  While others are fighting at the stores to get the lastest bargain, I am sitting at home with my son enjoying life.  This year has been the toughest financially I have ever survived.  Real estate has taken a nosedive and my income went with it.  However, through it all we, my family, still have our health, we still have clothes on our backs and shelter over our heads.   But most importantly, I am still able to smile.

I told a good frined of mine not to long ago that I was looking forward to the day when he got his smile back.  That may have appeared rather trite, but it means a lot to me.  I believe that the inner smile can make or break a lot of people.  When you lose your inner smile, you are very close to giving up or you are really at the bottom.

So I have to say that I am most thankful for my inner smile.  Be thankful for the things that are truly yours.  The rest can be replaced.

Happy Holidays!

A Savory Dish to Soothe My Aching Bones

Last week I was suffering with the ailment my son brought home with him.  My body was aching all over.  My head was pounding.  I had chills and could not get warm to save my soul.  However, I still had to be a mother and prepare dinner for my son.  And I guessed while I was up I would go ahead and make something for myself.  from some unknown place within I prepared a raw lasagna.  And it was delicious.  So I am calling it Lasagna filled with Joi.

I made it a bit hot because I was trying to clear out my system.  I would suggest if you don't like your food hot, then go light on the cayenne pepper or omit it altogether.

Lasagna filled with Joi

Noodles:  
Eggplant - sliced thinly lengthwise.  (I had a large eggplant so I only used half of it.  And I used a peeler to slice.)
1/2 cup water
1/4 cup Bragg's Amino Acids
Soak eggplant in water and amino acids for at least an hour.  I did this first so that by the time I prepared everything else, the eggplant was ready.

Cheese Sauce:
1/4 cup Sunflower seeds
Cashews - half a handful
2 tablespoons Lemon juice
2 cloves Garlic
2 heaping tablespoons Tahini
2 tablespoons Olive oil
2 tablespoons Amino acids
Sea salt to taste
Water - start with one tablespoon and add as needed to get the desired consistency

Mix all the ingredients in a food processor.  The above measurements are estimates seeing that I really threw in the amounts that felt right to me.  I think I'm pretty close to what I actually did.  Once satisfied with the taste, place in a bowl.

Tomato Sauce:
1/4 cup Sun-dried tomatoes - soaked for at least fifteen minutes
2 heaping tablespoons Tomato paste
1/2 Onion
1 teaspoon of each - basil, marjoram, tarragon, oregano
Sea salt to taste
Cayenne pepper to taste

Mix all ingredients in food processor and place in bowl.

Other Layer Ingredients:
Chopped spinach (I didn't have fresh so I used frozen allowing it to thaw)
1/2 Zucchini - sliced thinly

Putting it all together - lay the eggplant out on a paper towel so that some of the liquid can be absorbed.  In a storage dish with sides, lay out a layer of eggplant followed by a layer of tomato sauce then a layer of spinach followed by a layer of cheese sauce then a layer of zucchini.  Repeat until you run out ingredients or space in your dish.  Honestly the order of layering doesn't matter.  Just be sure that eggplant is on the bottom.

That's it, you're done.  Slice off a chunk and enjoy.

This is a slice in my tiffin which I brought for my lunch the next day.

My Real Estate Predictions

 Eva Kröcher (Eva K.)

Many experts have stated their predictions of where they see the real estate market going.  These predictions have run the gamut.  Some said that interest rates would increase in the second half of 2010 while others said that housing prices would steadily increase.  And still others predicted that just the opposite would occur.  So as a real estate professional actually practicing in the Atlanta market, I want to offer my predictions. 

1. Foreclosures will increase over the next 12-18 months.  With the increase of foreclosures, the market will be flooded with new listings.

2. Short sales will decrease drastically if not disappear altogether.  Mortgage companies will not find it advantageous to expend the time and effort to process short sales.  It will be more economical for them to simply foreclose on the property and move ahead.  This also means that the mortgage companies are going to lay off most of their short sale negotiators.  I don't like to see people lose their jobs, but many of these "negotiators" were not skilled or trained to conduct this work anyway.

3. Loan modifications will not be considered in cases where the modifications are actually needed.  However, they will be offered and approved for those whose accounts are current and paid on time.

4. Housing values will not increase until the end of 2012.  This is where appraisal reports will start to reflect values closer to, equal to and in many cases exceeding the purchase price in the purchase and sale agreement.

5. We will see what I am calling "false projecting" beginning as early as February 2011.  False projecting is where mortgage companies place foreclosed properties on the market at higher prices than the market can bear.  Ultimately the mortgage companies hope to stabilize the real estate market by increasing the prices.  Even if a buyer comes along and makes a full price offer which in theory should drive the value up, this is all false because the appraised value will still be generated from recent sales activity. 

6. We will see new construction begin again in 2011.  however, we will not see all of the bells and whistles from before.  Builders will build sound housing stock with standard finishes.  Gone are the days of granite countertops, travertine back splashes, stainless steel appliances, hardwood floors, plush carpet, jacuzzi tubs and so on.  Now we will see a lot put into energy efficiency and a focus on making sure that the product is built to last.  In regards to new construction and the appraisal issue Pat Curry wrote a great article, 10 Ways to Beat Low Appraisals. 

This may all sound like doom and gloom.  But it's not.  As I stated in an earlier post, this is absolutely the best time to purchase real estate.  Prices will never be this low again.  What we witnessed a few years ago with high prices, steady appreciation and the easiest financing process is gone.  I don't think we will ever see the real estate market operate like that again.  We are now on the other end of the spectrum with extremely low prices and interest rates.

It will take some time.  Be assured the real estate market will recover and even out.  This will not happen as a result of "false projecting," but as a result of slow and steady increases in sold prices. 

The Complete Guide to Locating, Negotiating, and Buying Real Estate Foreclosures: What Smart Investors Need to Know - Explained Simply

Questions from the Side of Pregnancy

It's funny how messages can be misinterpreted.  Don't you think?

Q: Should I have a baby after 35?

A: No, 35 children is enough.

Q: I'm two months pregnant now. When will my baby move?

A: With any luck, right after he finishes college.

Q: What is the most reliable method to determine a baby's sex?

A: Childbirth.

Q: My wife is five months pregnant and so moody that sometimes she's borderline irrational.

A: So what's your question?

Q: My childbirth instructor says it's not pain I'll feel during labor, but pressure. Is she right?

A: Yes, in the same way that a tornado might be called an air current.

Q: When is the best time to get an epidural?

A: Right after you find out you're pregnant.

Q: Is there any reason I have to be in the delivery room while my wife is in labor?

A: Not unless the word "alimony" means anything to you.

Q: Is there anything I should avoid while recovering from childbirth?

A: Yes, pregnancy.

Q: Do I have to have a baby shower?

A: Not if you change the baby's diaper very quickly.

Q: Our baby was born last week. When will my wife begin to feel and act normal again?

A: When the kids are in college.

Develop Your HealthStyle

Recently I changed my lifestyle in order to live a healthier life.  HealthStyle is a take on healthy lifestyle.  Here I want to explain what a healthstyle is and then give tips and information to guide you to your own healthstyle.  

Healthstyle is a personal set of healthy decisions that suits your personal lifestyle and preferences.  You must develop a new way of living which means that you have to make a permanent change.  in other words, you must develop a new habit.  Please understand that you are not going "on a diet," but rather changing your diet and other healthful habits forever.  These are lifestyle changes which are more than just with food.  Thus, you must consider every facet of your world including the amount of sleep you get, how much exposure to the sun you get and most importantly, how much you laugh each day.  Developing your healthstyle has to be consistent which leads to better health and permanent weight loss. 

Begin today.  Set some goals that you can reach.  Perhaps decide that you are going to get no less seven hours of sleep each night.  Wake up to laughter.  Keep a joke book on your nightstand.  Read a joke at night before retiring and again when you wake up.  Commit to drinking a glass of water first thing in the morning.  These are just some things you can do to improve your healthstyle.  I will post more suggestions each week.

But for now, I want to share a great healthy recipe to get you strated.  I found this recipe for Marinated Collard Greens from Green Spirit.

Marinated Collard Greens

Marinade

¼ cup apple cider vinegar
¼ cup chopped sun-dried tomatoes
¼ cup chopped scallions
1 garlic clove, minced
1 teaspoon red pepper flakes
1 teaspoon sea salt
½ teaspoon black pepper

1 bunch collard greens, washed
2 tablespoons olive oil olive oil
1 teaspoon sea salt

In a large bowl, combine marinade ingredients. Set aside.

Cut hard stem from collard leaves. Take several leaves and roll into a cylinder, the shape of a fat cigar.
Using a knife, cut through the collard cylinder, making strips.
Repeat using all collard green leaves.

Places the collard green strips in a large bowl. Pour olive oil on the strips and sprinkle with sea salt. Massage the oil and salt into the strips until all are well coated.

Transfer the collard strips to the bowl with the apple cider vinegar marinade. Let marinate in the refrigerator for at least 4 hours or overnight.

Makes 4 Servings

Quick Note: I replaced the red pepper flakes with cayenne pepper and added paprika and cumin.

Oh by the way, I am a vegetarian going towards vegan headed to raw foodie.  So all of the recipes provided will not include meat.
Vegan on the Cheap: Great Recipes and Simple Strategies that Save You Time and Money

Welcome to Joiful Thoughts

It's finally here.  Joiful Thoughts will come to you three days a week.  As a professional full-time Associate Broker of real estate, it only makes sense that I include real estate information.  Thus, Mondays will feature real estate related information.  I would appreciate feedback on the information and any topics to which you want me to respond.  Wednesdays will feature health-related information.  Why, you ask.  Because I want to share all of the knowledge I have gained over the years to live a healthier life.  And Fridays will be the day that I will present light-hearted fare: quirky anecdotes, funny stories and motivational words.

I look forward to being able to share useful information with you.  And remember, if you know anyone looking to buy or sell real estate, I'm ready, willing and able to assist them through the process.

Real Estate: Still the Best Investment

With all the bad and negative information in the media these days, many people are leery about pursuing real estate as an investment options.  But I'm here to tell you that real estate is still the best investment.  I tend to be very simple in my thinking.  And of all the investments out there, 401K's, stocks, bonds, t-bills, and so on real estate is the only one with "real" in the name.  And that speaks volumes.

Prices are the lowest they have been in years.  Just to give you an example, I closed a duplex with a remaining tenant in one side for $7,000.  Yes you read that right.  I closed a 3 bedroom, 2 bath home built in 2005 for $15,000.  I have a 3BR/ 2BA home on the market for $15,700.  And I have a 2BR/2BA home on an acre of land under contract for $7,500.  When you can buy real estate for less than a used car, you should really consider making the step.  As of today, there are 1,296 single family, condo, town home and multi-family properties available for under $25,000.

As an added bonus to investors, you have for the first time in my lifetime the best tenant pool.  Why?  It's simple, with all the foreclosures and short sales occurring, these former home owners need a place to live while they repair their credit.  So what makes them part of the best tenant pool is that they know how to care for a home.  They have been used to not calling someone else for repair and maintenance issues.  They have the home owner mentality not that of a career tenant. 

So don't you want to get a great investment while you can???

From the Mouths of Babes

We don't always give credit to what children say, but they sometimes have the wisest advice.  Enjoy these and follow the advice.

"Wear a hat when feeding seagulls." - Rocky, age 9

"Sleep in your clothes so you'll be dressed in the morning." - Stephanie, age 8

"Don't flush the john when your dad's in the shower." - Lamar, age 10

"Never ask for anything that costs more than $5 when your parents are doing taxes." - Carrol, age 9

"Never bug a pregnant mom." - Nicholas, age 11

"Don't ever be too full for dessert." - Kelly, age 10

"When your dad is mad and asks you, 'Do I look stupid?' don't answer him." - Heather, age 16

"Never tell your mom her diet's not working." - Michael, age 14

"Don't pick on your sister when she's holding a baseball bat." - Joel, age 12

"When you get a bad grade in school, show it to your mom when she's on the phone." - Alyesha, age 13

"Never try to baptize a cat." - Laura, age 13

"Never spit when on a roller coaster." - Scott, age 11

"Never do pranks at a police station." - Sam, age 10

"Beware of cafeteria food when it looks like it's moving." - Rob, age 10

"Never tell your little brother that you're not going to do what your mom told you to do." - Hank, age 12

"Remember you're never too old to hold your father's hand." - Molly, age 11

"Listen to your brain. It has lots of information." - Chelsey, age 7

"Stay away from prunes." - Randy, age 9

"Never dare your little brother to paint the family car." - Phillip, age 13

"Forget the cake, go for the icing." - Cynthia, age 8

"Remember the two places you are always welcome - church and Grandma's house." - Joanne, age 11

"When you want something expensive, ask your grandparents." - Matthew, age 12