Posted by: homeyhelper | October 2, 2009

Homeowner History Part I

After they wrote the check for the down payment at the closing and were standing in their beautiful but barely furnished grand old Victorian home, my grandfather said to his young wife, “You know, honey, we don’t actually have enough in our bank account to cover the check we just wrote for this house.”
She just laughed and said, “Don’t worry, we’ll make it work.”
He worked three jobs and she, full time at one while raising three children before they finally paid off their mortgage. By that time, they had moved to another house, which was a little bit smaller and easier to maintain. Now my grandfather lives with no debt in a condo that he paid cash for.
I frequently dwell on the importance of planning and financial preparedness when making any large purchases, arguably to a fault sometimes. After we wrote the check, nearly sixty years later, for our own down payment and left the closing (with more than enough cash to cover the check), I called my grandfather to tell him that I was a new homeowner. I began to list all of the things we needed to do to the house and run down the cost of every last detail when he interrupted me and said, of course, “Don’t worry, you’ll make it work.”
My grandfather had given me not exactly the most sound advice financially, but I’m beginning to realize that sometimes having the confidence and faith that things will work out is worth more than any number in a bank account.
Homeowner History will be a new Friday series, in which I’ll cover the idea of how we got where we are today. We always refer to the ARMs and McMansions that got us into our current mess, but what happened before that? How did our parents and our grandparents live? Every house has a history, and maybe in order to improve ourselves today, we need to look even further back to before the housing bubble was even in our vocabulary. What is your Homeowner History?
Posted by: homeyhelper | September 30, 2009

What Are You Saving For?

These days, I like to ask myself the question, “What are you saving for?” Six months ago I would have said that I was saving to purchase a home. Whoever I was talking with would inevitably reply with a smirk that that was a pretty lofty goal for a twenty-something. I’d usually just smile and laugh nervously and change the subject, all the while thinking to myself that maybe they were right and I was getting in over my head. Was I really just the stupid kid who couldn’t get her act together? Would dwelling on my less than responsible past turn into a self-fulfilling prophecy of my future?

Fast forward to the present, and I’m happy and comfortable in my own home. Now that I’m here, I can in retrospect see that all of my doubts about my abilities to save were really just projections from others around me.

There was pressure from marketers, jealousy from peers and the lure of excess and credit cards. Nevertheless, I worked a second job and tried to forgo anything that wasn’t a necessity. I cut out buying coffee, clothes and handbags, previously some of my biggest vices. It took years to change my habits from a spender to a saver. The best thing I did to make it easier was to take small steps.

To start, ignore what the financial planners tell you: its never too early or too late to save. There is no magic number that must be achieved in order to validate saving. I found that starting out with two simple things made the transition into a frugal lifestyle much easier.

I started saving my change. True, I didn’t buy a house on change alone, but just being able to see the money accumulating in front of me was a great motivator to save more.

Once I had that down, I set up an automated savings plan. I had $50 a month automatically deducted from my checking and sent to a savings account. Once I had those two habits in place, everything else came naturally.

These days, saving is almost like breathing, although money doesn’t buy happiness, there is a certain peace of mind that comes with it. Right now, I’m working to eliminate my car loan, which feels like another pretty lofty goal. I”ll never let anyone tell me, though, that I can’t do it, because of my past habits or based what my income is.

Saving is not a competitive sport, but more like a long climb up Mt. Everest. Its not easy to get to the top, and maybe I never will, but once you get high enough, you can’t even hear the naysayers at the bottom anymore.

So, what are you saving for?money

Posted by: homeyhelper | September 25, 2009

Bull v. Bear

I came across these two headlines on cnn.com this morning that paint very different pictures of the current real estate market:

“New Home Sales up 5 Straight Months”

vs.

“Existing Home Sales Slide Unexpectedly”

Now certainly new homes and existing homes are two different animals, but what’s going on here…are we rebounding, sliding into the abyss or are these two factors cancelling each other out and we’re simply stagnating?

Its the great debate: bull v. bear.

Considering that the 8k tax credit is set to expire shortly, my vote is with the bears. Thoughts?

Posted by: homeyhelper | September 25, 2009

Know Your REO

If you’re in the market for a home or have simply been following recent real estate news, you u ndorealestate_muncy_modesto_1176582_tnubtedly are aware of the vast opportunities out there for buyers right now. The large inventory of homes and drop in prices coupled, of course, with the $8k first time homebuyer credit, makes this an excellent time to purchase a home. (Before continuing, a bit of a disclaimer – Purchasing a home is an incredible financial commitment that should only be undertaken by those who are ready for the risk and financial resources it requires, to be discussed further in a future post. Regardless of the amazing deal or tax credit available, it is never a good idea to buy if you’re not ready. After all, that’s how we got into this mess in the first place)

Ok, enough with the financial caveats, we’re back on track now. When Mr. Homeownerhelper and  I were getting ready to look at houses, we were sure that we would find the deal of the century. We had heard so much about foreclosures coming on the market at a fraction of their peak value, and we felt like a couple of kids in a candy shop. What we didn’t realize until much later, however, was that not all sales are created equal, and the price on the house might not be at all near the true cost of homeownership.

We wanted to spend somewhere between $275k and $330k on our home. Imagine our excitement, then, when we found a three bedroom, two bath 2005 Colonial in our target area for $260k. The catch? It was an REO. A comparable home in the area that we looked at, which was a traditional sale, was on the market for about $330k. A $70k discount sounded amazing, so we began to research the different types of sales out there, and in the process, discovered that we knew very little about foreclosures, and their lesser known counterparts, short-sales and REOs.

Briefly, the process begins when a homeowner becomes delinquent on their mortgage. In an effort to save not only the homeowners credit but also the mortgage lender from a major headache, the home might go on the market as a short-sale. In this situation, the home will be listed for less than the balance owed on the loan. The lender will take all of the proceeds of the sale, and the now ex-homeowner will be able to walk away, avoiding foreclosure. This benefits the bank as well, because although they may be taking a loss, the house will not be languishing on their books until they can find a buyer. And, as we all know, some money is better than none at all.

If there is no buyer in the short sale and the homeowner remains delinquent, the house will eventually be seized by the lender and go into foreclosure. At this point, the home will most likely go to auction. This is what the late night get-rich-quick infomercials are probably referring to as they dangle the lure of financial freedom from behind the television’s glow. Don’t be fooled by them: while there are great deals to be found at auctions, there are also even bigger headaches. There are other catches too; some auctions may require immediate payment. In short, they are not for the faint of heart.

A great deal of houses leave the auction process unsold. In this event, the home goes back to the mortgage lender as a REO, or Real Estate Owned. This is where the deep discounts are to be found, much like the Colonial we were eyeing.  Unfortunately, the foreclosure process is slow to begin with, and delayed even more by the large inventory of homes, so these houses will often sit vacant for months, if not over a year, before they are finally listed again. All while this process is going on, the house is decaying.

So, which type of property is the best bet, and which did we go with? The fact of the matter is that there is no easy way to say which type of sale is the best, because everyone’s needs and abilities are different. I will point out, though, that a non-traditional sale (foreclosure, etc.) may be for you if you are skilled in a trade such as carpentry or plumbing. If you can do much of the work yourself, there is excellent value to be found. If not, you will find yourself immediately laying out much of the cash you saved on the purchase price just to get it livable and up to code. So, if you went the foreclosure route because you were a little short on cash, you could find yourself in big trouble right from the get go.

Another place where there is value is in short sales. Many times, these homes are still owner occupied, and have not spent any time subject to the elements. In many cases, however, you will need to be approved by the current lending institution, a process which can be extremely discouraging and time consuming. It can be worth the wait, though, to get a deeply discounted home in livable condition.

So, which type of sale did we go with, the REO or traditional sale? In the end, despite the lure of the cheap deal, we spent the extra money and went with the more expensive, owner occupied home. And the other home? Its still vacant, decaying every day with a half fallen over “For Sale” sign stuck in the overgrown weeds. Not only did our home ace the inspection, where the other one clearly had visible issues, but we couldn’t have been happier walking in on the first day and being able to unpack and enjoy our home. Besides, we still have had to do our fair share and dump quite a bit of money into it anyway.

Whichever option you choose, your best bet is to make sure you do your homework and always look at the comparables. What’s wrong for me might be right for you, and vice versa, and the best decision is an informed one. One more thing: even if you choose the immaculate well kept home, take that carefully worked out budget and scrap it. Add an extra $500 to your home fund a month. You might not know it now, but you’ll need it, whether it be the foreclosure or owner occupied home.

Posted by: homeyhelper | September 21, 2009

Welcome to Homeowner Helper

Homeowner Helper is the place to find out what the realtors don’t tell you about homeownership. I decided to start this blog because I’ve recently moved into the home of my dreams, only to discover that owning a home, with all of the perks it has to offer, is not exactly the cakewalk I expected it to be.

I intend to focus on everything from how to get the look you want without breaking the bank (Pottery Barn, anyone? –just flipping through the catalouge makes my wallet hurt) to necessary around-the-home how to’s, like installing a toilet. (We learned that one the hard way when the flusher on the toilet in the master bathroom broke the first day in our home)

Of course, more than anything, I want to know what you, the reader, wants to see. Comments are always welcome!

I’ll end my first post with some coupon and sale updates…more precious than gold to any new or seasoned homeowner!

True Value’s Bargains of the Month

100 pc. Home Project Kit – $5.97 after $10 mail-in rebate
18 Gal. Recycling/Storage Bin – $7.99
5 pk. Compact Flourescent Light Bulbs – $8.88

Save 10% on Lowe’s purchases up to $5,000

Printable K-Mart Coupons

Stonyfield Farms Printable Coupons

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