Tuesday, October 23, 2007

Home Buying Tip of the Day - Dealing with Buyer's Remorse

When you were out looking for your first (or next) home and in hot pursuit of the "American Dream" it was exciting looking for just the right home with the right view and in the perfect neighborhood.

Then came the fun stuff, looking at houses knowing that any one could be your new home. You walk through a few of them imagining each as your own with your belonging and touch. Some were to small, others not in the right neighborhood but finally you find your dream home.

You sign the contract and anxiously await the answer. Terms are eventually worked out and you have just bought yourself a new home for you and your family.

Later that evening you take your family out to dinner to celebrate a new home and new life.


Maybe tomorrow or the day after you start worrying. You wonder if you made the right decision, you wonder if the house that was a little cheaper would have been better, maybe you worry about making the payments and how it will affect your lifestyle, you ask yourself over and over is the house to big? Is it to small? Did I do the right thing?

Don't worry, you are not alone. It is not unusual for buyers to start worrying after the house is put under contract. It is understandable that these feelings creep up once the contract is signed. After all, purchasing a home is most likely the most expensive investment you will ever make and it is only normal to wonder if it is the right home, the right neighborhood and whether or not you will be happy there for the long term.

So how do I get over it or know if my concerns are valid? The best way to deal with buyer's remorse is to plan for it in advance. Before ever going to look at a house take a piece of paper and put a line down the middle. On one side write every advantage you can think of about owning your own home as well as everything you require in a new home. On the other side write all the disadvantages you can come up with as well as what the house must not have.

Put your list away and go looking for your home. Once you put a home under contract and the feeling of regret or doubt starts creeping up on you take your list out and review it. Since the list was wrote while you were in a more rational state of mind you can take comfort in knowing you are making the right decision. It probably won't eliminate the feeling altogether but it will help put things into perspective.

Now stop worrying and enjoy your new home!

Sunday, October 21, 2007

Why Buy Instead of Rent?

Buying a home is the biggest investment most people will ever make. So why should someone purchase a home instead of renting?
  • Pride of Ownership
Pride of Ownership tends to be the number one reason people purchase a home. It provides a sense of stability and security that typically doesn't come with renting and it is an investment in the future if you intend to stay there for an extended period of time.
  • Equity Buildup
An argument can be made that if you are renting you're throwing money away each and every month. When you own your own home each payment is providing an investment in your future. If home prices are climbing you build equity through appreciation and each payment reduces the principle on the loan.
  • Mortgage Interest Deductions
The tax system we have in place favors homeowners. The first half of your mortgage is interest heavy, meaning more of your payment is made up of interest than principle. Homeowners are allowed to deduct the interest on their income tax return
  • Property Tax Deductions
Property taxes are fully deductible on a homeowners income tax return as well as long as the home is your primary residence or vacation home.

There can be a number of other reasons why someone would want to own their own home instead of continuing to rent. Those outlined above come up time and time again.

Traditionally the only way someone could obtain those benefits is if they obtained a mortgage requiring great credit, a large down payment and a steady job for 2-3 years previously as well as continuing. Fortunately for the millions who are not able to obtain traditional financing yet there is a way to acquire all the benefits of homeownership without obtaining a new loan. Please see this post for information regarding how to do so via the Equity Holding Trust Transfer.

If you are in position to qualify for a new home loan than it is definitely something worth considering if you do not yet own your own home.

DOJ going after National Association of Realtors for Antitrust

I personally love Realtors. OK, maybe I don't "love" them but they do a lot of the work I don't want to when it comes to finding a particular property and they can be worth their weight in gold. There are a few I couldn't live without and, unfortunately, a lot I hope to never hear from again. I have to agree that the traditional fee for services is in need of a serious revamping.

Dealing with Realtors daily I know first hand why they are considered probably the most dishonest profession out there today which is unfortunate because there are a lot of outstanding and dedicated Realtors who take their job and clients needs seriously. In a field such as this it is often true that one bad apple ruins the whole bunch. With the low barrier of entry there seems to be to many bad apples and not enough good. While this antitrust suit isn't strictly about the incompetence of to many Realtor's, NAR has to realize that raising the standards for entry into the field would only benefit everyone.

I will let you form your own opinion on the subject. You can read about the antitrust complaint here (pdf document) and head over to the Competition and Real Estate antitrust division of the DOJ website.

Friday, October 19, 2007

Housing Prices Continue To Slump

According to RealEstateJournal.com housing prices are falling faster than any point during the last 16 years and there is no end in sight.

For buyers that should be a good thing. Prices always come back and getting into a home at the bottom is the ideal situation. If you plan on staying in the home for any length of time than getting in now, or soon, is a great opportunity. Prices may be continuing to fall but most analysts and experts are pointing to a recovery, or at least leveling off, to begin in 08.

If you, as a buyer looking to purchase a home in an area were you plan on living for the next 5-10 years than the short term down does not need to be an issue for you. Prices have already fallen considerably and will be leveling off soon. Once we get there prices will start going up again. The real estate market has these ups and downs constantly and while more and more people are not buying homes, prices are continuing to sag this is an excellent chance to get the home of your dreams at a great price before the market picks back up and buyers come out in force trying to grab all the great deals on beautiful homes. This process inevitably pushes home prices up and by then you could be paying 20%+ more for a home than you can right now.

For sellers this is obviously a very bad situation to be trying to sell your home in. There is pushing around a year's worth of inventory on the market in many areas around the country and it looks like, at least in the near term, it is only going to get worse. That leaves sellers in a bad position that only want to sell conventionally.

What options do sellers have to sell a home quickly in this market? Well there are a few things one can do to sell their home quickly. It really depends on the situation the seller is in and what they are willing to do. The two options I would choose from if I was a seller in this market would be:
  • Seller Finance all or a portion of the sale.
  • Drastically reduce price to encourage a quick sale.
Of course the first may not be for everyone. If the seller is willing to wait for all, or a portion, of the sales price with a balloon due in 1-5 years than it is possible to get your entire asking price or more. The other option is going to require the seller to undercut the market and price his/her home much cheaper than the competition for similar homes. Going this route the seller will end up with much less.

Tuesday, October 16, 2007

FHASecure Initiative - Not impressed.....

First, I know that a lot of people are in trouble and a lot more on the verge. All you have to do is look around at the abundance of foreclosures across the nation. A lot of Mortgage Brokers got rich by making loans that NEVER should have been made in the first place. I could share hundreds of stories I have ran across personally that were down right fraudulent and behalf of the application from either the buyer's or loan officer's behalf and sometimes both.

Some "highlights" of the FHASecure Initiative follow (from National Association of Realtors site):
  • The mortgage being refinanced must be a non-FHA ARM that has reset.

  • The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments, i.e., the homeowner’s mortgage payment history during the 6 months prior to the reset showed no instances of making mortgage payments outside the month due.

  • If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.

  • Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.

  • Mortgagees must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage.

Now I do think it is great that something is being done to head off anymore potential problems and to attempt to at least slow the default rate. The thing that bothers me is that I have heard it briefly mentioned on news broadcasts, radio and here and there as I am browsing the internet and almost every single reference, especially the media other than online, are talking about it as a means to help all those who are already in trouble. This does NOTHING of the sort. It simply gives those who haven't been late for 6 months and not yet in need of help some help. Kind of like when a bank won't lend you money when you need it but when you no longer do they will throw it at you.

I am curious as to how others feel about this program and even more curious as to how many borrowers will actually take advantage of it?

Monday, October 15, 2007

The Equity Holding Trust™ Transfer System - In Detail

The Title-Holding Land Trust that underpins the Equity Holding Trust Transfer System (often referred to as the "Illinois Land Trust", a "land trust", or a "nominee trust") is accepted in form, substance and enforceability, throughout the U.S. This too-often overlooked real estate ownership vehicle is slowly but surely gaining recognition as arguably the best possible means of real property ownership and asset protection.

The land trust within itself is considered unique in that a property's legal and equitable title(s) are vested in the trustee, rather than in the owner of record. However, the land trust's beneficiaries remain fully in control of the property and over the actions of the appointed trustee. As a result of this beneficiary-directed, third-party trusteeship, any property so held is effectively hidden from public view, and thereby shielded against legal actions by lawyers and creditors.

As a matter of fact...when there are multiple (unrelated) beneficiaries in a title-holding land trust, its corpus (the property) becomes virtually impervious to tax liens, creditor judgments, lawsuits, bankruptcy actions and charging orders. In short, the message is that creditors, even including the IRS, cannot reach a property in a land trust wherein there are no familial or business relationships among co-beneficiaries.

In our opinion, the land-trust-based transfer system, the NEHTrust, supplants the need for various risky, and often even illicit, seller-carry financing schemes that abound today. The Equity holding Trust Transfer System by North American Realty Services, Inc. is a meticulously structured, straight forward process of documentation incorporating, with the land trust: 1) an Assignment of Beneficiary interest, 2) a Beneficiary Agreement (analogous to a partnership agreement) and 3) an Occupancy Agreement (i.e., a tenancy agreement whereby a co-beneficiary 'leases' from the trust, versus holding a title interest in the property), and 4) an optional Power of Attorney sometimes given to the party most actively involved in management of the property and direction of the trustee.

When combined, these documents effectively afford any would-be buyer all the benefits of homeownership, including income tax deductions...without the necessity of a transfer of title ownership (the deed). The EHT system protects the property (settlor, investor, and/or resident beneficiaries) from untoward personal or legal actions by or against any party.

In that the land trust converts one's ownership of realty to ownership of personalty (i.e., an interest in the trust, versus in the property), and since personalty is not deemed subject to partition by judgment creditors, unrelated parties holding their property in this manners needn't fear their property becoming the subject of: a creditor judgment, lien or charging order. Neither could the property be the subject of a tax lien, any party's bankruptcy, marital dissolution or probate...a most comforting feeling when 'carrying' a mortgage for someone else.

Overall, the EHT gives a relinquishing party - who is willing to keep its existing financing in place - a quick, easy and safe method of disposing of the property and its direct obligation, while simultaneously providing the acquiring party/ies with virtually 100% of all the benefits of ownership.

A list of the acquiring party's (the "buyer's") many benefits includes full mortgage interest and property tax deductions, as well as virtually all other incidents of real estate ownership (e.g., appreciation, loan principal reduction, ect.). An EHT buyer needn't qualify for a new loan or make a standard "down payment", since all qualification rules and parameters are solely those of the relinquishing party (the "seller").

In so much as a property vested in a land trust has not been "sold", but has instead merely been (from any inquiring party's point of view) vested in an inter vivos (living) trust and leased to a successor beneficiary of the same trust...there is no overt breach of the lender's due-on-sale (alienation) admonitions. As well, the EHT very effectively provides any would-be "seller" an excellent means of avoiding immediate capital gains taxation, and/or the unpleasantness of seller-carry schemes; an untimely or under-market sale; an Offer and Compromise (short-sale); foreclosure; or...being forced to deal with tenants toilets and trash (maintenance costs) and negative cash flow.

Currently either authorized, or allowed under land usage regulations, in all states, the merits of the land trust are only diminished in two states - Louisiana and Tennessee. This is due to those states' non-acceptance of the Uniform Doctrine of Equitable Conversion, which doctrine prevails in all other jurisdictions. This is to say that, in those states, a beneficiary interest in a land trust is seen as ownership of realty versus personalty, despite an owner's relinquishment of the property's full legal and equitable ownership benefits to another, while still retaining full control and management. However, even in Tennessee and Louisiana, the privacy and ease of transfer benefits do remain intact.

In states where no specific relevant land trust legislation exists (i.e., where there is no "Land Trust Act" per se), the land trust is supported by a reliance on legal precedents established locally and in other states. This is to say that a court's finding in, say Minnesota, would have to rely largely upon precedent case-findings in other states where land trusts are specifically authorized by precedent or statute, as in: Alabama, Florida, Georgia, Hawaii, Illinois, Indiana, North Dakota, Ohio and Virginia.

A prime motivation for forming a simple land trust (i.e., one beneficiary only, and without the additional documents that compromise the EHT) are the benefits of privacy and anonymity of ownership. In other words, when a property's title is vested in a land trust trustee, a very effective and protective legal shield is formed, making it virtually impossible for any inquiring party to determine who the trust's beneficiaries are. This is due to the fact that the trust agreement is never placed into the public record. In fact, the deed transferring ownership to the trustee is all that is ever recorded. The trust itself never becomes a matter of public record. Furthermore, following the recording of the deed, the land trust trustee is specifically prohibited from releasing any information to any inquiring party under any circumstances (absent a court order). Information regarding the trust's management and/or the identities of its beneficiaries, including local, state and federal governments, remains wholly private.

More on the Due-On-Sale Clause:

The FDIRA (Federal Depository Institutions Regulation Act; or "Garn-St. Germain Law" of 1982; 12 USC 1701-j-3) limits the justification for foreclosure relative to a lender's due-on-sale clause (re. an "unauthorized title transfer") under certain circumstances, one of which is vesting of a mortgage property into an inter vivos trust (such as a land trust). As a result of that federal law, mortgagors (borrowers/property owners) cannot be prohibited from placing their real estate into a revocable, living [land] trust. Neither can they, following establishment of the trust, be prevented from leasing the property to whomever they might choose (so long as the lease is for less than 3 years and does not relate to an option to purchase). To wit: when a lessee (the tenant) in such a trust property is also given a remainder interest (i.e., becoming a successor beneficiary or remainder agent) in the same trust, that party becomes fully entitled [under IRC 163(h)4(D)] to virtually the same incidents and benefits of homeownership that he/she would have, had they financed the purchase of the property in any other manner.

It is for all of these reasons, and more, that the NARS Equity Holding Trust Transfer System emerges as a superior and most logical and protective means of conveying the benefits of real estate ownership when a seller would choose to leave the current underlying financing in place to assist an acquiring party.

Seller-Carry Financing in General

Before reviewing the NARS Equity Holding Trust™ transfer system (NEHTrust™), let's take a look at some older, time-worn seller-financing concepts and their many pitfalls and downsides.

Straight Lease - A rental for a specific period of time. No benefits other than use and occupancy. Always at the landlords whims and mercy. Far more costly than owning due to absence of income tax deductions and equity build-up

Lease Option (L/O)
- A unilateral agreement to buy at some future time, under pre-arrangedd terms if the tenant has the money and credit wherewithal to do so at the exercise date.

So what's wrong with a L/O? They've been done for years. The L/O violates a lender's due-on-sale admonitions (See. 12USC1701-j-3). An unscrupulous optioner can change the terms on a whim relative to the option price and rent credits, requiring extensive legal action to rectify. If the Optionis recorded, the lender's due-on-sale admonitions are brought to ber and the house and the option could be lost; if not recorded there is no guarantee the property wouldn't/couldn't be sold or leased to someone else without the optionee's knowledge. Optioners can, and often do, refuse to honor their commitments in the face of increasing values (again, forcing expensive and tenuous litigation). Very few Lease Options are ever consummated, thereby most often wasting one's Option Fee and Rent Credit payments.

Contract for Deed (CFD)
- The CF is essentially a "Lay Away Plan." The property's legal title is given to the buyer only after all debt has been retired: ie., there is no legal ownership until the property is fully paid for.

And the problems are...? The CFD violates a lender's due-on-sale clause; and (either) parties' creditor liens, lawsuits, judgments, marital dispute litigation, and tax liens will attach to the property. And...the death of either party throws the prperty into a decend's probate (re. posthumous creditor claims.)

The "Wrap" All Inclusive Mortgage
- In a "Wrap" a seller creates a mortgage loan that is equal to or greater than the existing loan/s on the property. Then from the buyer's monthly payment to the seller the mortgage payment/s is/are made...thereby leaving the seller a positive cash flow.

So, what's wrong with that? Violation of the Due-on-Sale Clause; the seller's, suits, judgments, marital litigation, probate and tax liens attach to the property; and the death of the seller puts the entire property in probate. There IS, however, a better way to accomplish the same objectives without the risks.

The Equity Share (ES)
- A shared-ownership of real estate, wherein two or more parties hold title as tenants-in-common. Typically, one party makes the down payment while the other lives in the property and makes the monthly payments for an equal share in profits upon sale.

So, and the problem is...? Another due-on-sale violation. The other party's liens, lawsuits, judgments, marital dissolution litigation, tax liens and affairs of probate attach to the property...thereby negatively affecting the surviving party's ownership interests. Once again, the objectives of equity sharing can be safely accomplished without the risks and downsides by use of the Equity Holding Trust Transfer™.

The "Subject-To"
- The Subject-To is an informal assumption of mortgage payments subject to a loan's existing terms, with or without the lender's knowledge and/or permission.

And the problem...? "Subject-To" is basically a generic term that can be applied to any of the above schemes. And like all the above, an unauthorized Subject-To violates the lender's due-on-sale clause. The Subject-To clouds the property's clarity of title; it invites disastrous dissension and frequent litigation between parties. And...any party's business, personal and legal actions attach to the property: thereby seriously negatively affecting the interests of the other party/ies. The solution follows with an explanation of the NARS Equity Holding Trust Transfer™.

The Equity Holding Land Trust Transfer System (EHT) - Protection with virtually none of the downsides, but all of the benefits and advantages of Seller-Assisted-Financing
. With the EHT, a seller's property is vested with a 3rd party trustee in a land trust. Income tax benefits can be conveyed to a co-beneficiary/buyer. In that the trustee is the property owner, no party can act independently of the other. No party can jeopardize title. The property is shielded from public view,and is well insulated from lawsuits, creditor judgments, tax liens, bankruptcy, marital dispute and probate on behalf of either (any) party to the arrangement. And...the lenders' "due-on-sale" clause is not violated.

Problems? As is common with ANY financing method, a seller (trust grantor) could "stir up trouble (although without effect)." The property could lose value over the term of the agreement, necessitating a future sale at a loss, or requiring mutual agreement for an extension of the agreement; without proper caution one's real estate could fall into disrepair. No negative exists, however, that would not be in common with any form of home mortgage financing.

WHEW! That is a screen full. If you made it through all that, congrats! As you can see the EHTrust Transfer is far superior and without most of the downfalls of any other seller-assisted financing.

Why Acquire My Home via an Equity Holding Trust™ Transfer?

Very good question! Below are some of the major benefits of acquiring your next home with an EHTrust (Equity Holding Trust) Transfer.

  • Minimal Up-Front Cash Requirement
  • No Credit Qualifying
  • No Loan Application or Approval Needed
  • A Lender's "Due-on-Sale" Clause Avoided (i.e., A lender's demand for full loan payoff due to prohibited title transfer)
  • Legal Protection, Privacy and Safety
  • Ease of Transfer, Especially When There is to be No New Loan
  • Income Tax Deduction
  • Asset Protection
  • Shielding from Litigation, Creditor Judgment, Tax Lien and/or Probate
There are many other reasons one may wish to obtain their home via and EHTrust Transfer as opposed to getting a traditional loan. One may not be able to qualify for a new loan but can afford the home or maybe they have a bankruptcy or foreclosure on their record. None of that needs to impact your ability to get into a new home and obtain all the benefits of homeownership such as the income tax deductions mentioned above.

Saturday, October 13, 2007

What is it that I do?

Starting Monday, Oct. 15th I am going to be posting a few times a day as I run across interesting tidbits of information, post about the details of a transaction I am currently working on, tips for buyers and sellers, info for real estate professionals (Realtors, Mortgage Brokers, and so on) and my thoughts on Real Estate and related areas. However, I thought it would only be appropriate to give a description of what it is I do exactly so, lets get on with it already!

All-State Housing Solutions is based in Davison, MI. We work with buyers, sellers, Realtors, Mortgage Brokers, investors and others in the Real Estate field throughout the U.S. however. Where we excel is putting together transactions when a seller needs his property out of his hair sooner rather than later and would-be buyers who either can't or don't want to get traditional financing.

We are willing to give a seller Full Price (or More!) for his property if he is willing to hold any equity he may have in it for a couple of years at which point it will be paid in full. During our agreement with the seller there will be no landlord responsibilities, no maintenance, repairs or upkeep to worry about and we even take care of the taxes and insurance. We will also provide the sellers new Lender with documentation allowing them to give 100% credit for the payment being covered instead of the typical 60-75% for a rental. We are able to do so through a tried, true, safe and legal (although vastly underutilized) process called the EHTrust Transfer. (We will talk more about it in a later post, for now get an overview at the link provided). Going this route is beneficial to any seller who wants to get out of the responsibility of making the payments and upkeep immediately. It is also probably the best option for those with little or no equity in their property and even up-side-down. Anyone, regardless of their situation be it behind on their payments or what have you, if they are willing to carry their equity for a few short years we are willing to work with them. We also purchase homes outright as well but in order to do so we need to get a good price.

Would-be buyers get all the benefits of homeownership without the necessity of a new loan, no down payment and no credit check. We qualify someone automatically if they can cover 3 payments plus the closing costs. After a couple years of on time payments we can qualify roughly 90% of those in our houses for a refinance loan instead of a new mortgage. The reason we require 3 payments is we place 2 in a contingency fund with our 3rd party bill paying service to ensure on time payments and 1 for the first months payment. The closing costs are the costs of the transaction which we will get into in a later post. At the end of our agreement we also refund the full amount of the closing costs and the payments from the contingency fund.

So what are the benefits of homeownership that one is able to obtain without traditional financing? During the term of our agreement you are allowed the income tax deductions for mortgage interest and taxes as well as a share of the equity build up through appreciation and principle pay down. Since our transactions are structured the way they are you are also able to claim more exemptions on your W-4 at work, possibly bring home hundreds of dollars more each month (I am not qualified to give tax advice so please speak to a CPA) All that is required is the payments made on time and that the property is refinanced within a couple years.

Now that is a rather general overview of what we do for buyers and sellers. Most of our transactions also involve Realtors and other real estate professionals. For the mean time if you want more information on how we are able to provide the benefits we do the "buyers" and "sellers" please visit North American Real Estate Services for an overview of the property transfer process we utilize. As the days pass we will get into the details.

Have a great rest of the weekend and I look forward to sharing myself with anyone who may be reading.

Eric West

Friday, October 12, 2007

Who am I?

Fair question.

My name is Eric West and work with buyers, sellers and real estate professionals. My passion is to show would-be homeowners who feel they are resigned to never obtaining the American Dream of homeownership that everyone is capable of it.

The lending industry has been tightening up for some time now and if the buyer doesn't have squeaky clean credit, a large down payment and solid job history you might as well forget about obtaining a traditional mortgage. There are better options available however and that is where my expertise is. The goal of this blog is to show you that your credit or past need not have any bearing on your dreams of homeownership even if it contains a bankruptcy or foreclosure.

I will be providing daily posts consisting of information for buyers, sellers and real estate professionals as well as my own personal observations.

Please check back, it is bound to be informative and maybe even a little bit fun!