As published in the Savannah Morning News - 22 September 2013

 

 

 

 

 

 

Many times I am called in to do assessments, manage renovations, and stage homes for safety and maneuverability.  Some homes are easily adapted to the physical capabilities of the client, and others are not.   If not, assisted living is the beginning of a journey to a safer, healthier life, providing the support that you need.  

 

Assisted living communities also provide a social setting to develop friendships, while living at home can be very isolating, a common cause of senior depression.   Some see isolation as the lesser of two evils when compared to the fear of moving and the unknown.  If you could only observe the positive changes I see in my clients (and my own mother) who have moved to new communities, you would think twice about staying at home.   They are transformed - happier, healthier, and enjoying new friends and activities, with a full support system.

 

Additionally, seniors lose the energy and/or ability to properly maintain their homes, and when I come to list a property for sale, I discover a plethora of maintenance and repair issues that need to be addressed.  Properties deteriorate without attention, and so does the value.  

 

Don’t let the fear of moving paralyze you.  This next step can be an exciting adventure...not the end, but a new beginning!  It can boost your social activities, lift your spirits and provide a safe environment in which to enjoy your life.  There are many communities to choose from; just take the first step.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Last week we talked about rebound buyers, who are on a determined track of recovery following bankruptcy or foreclosure.  These buyers have worked hard to rebuild their lives, their credit, save money and re-qualify for home ownership.  They are also being “seasoned” to meet the time line requirements set by the following lenders:  Fannie Mae/Freddie Mac; Department of Veterans Affairs; Federal Housing Administration.

 

“Seasoning” is less like herbs and more like wine, as buyers are not qualified for another home loan until they have met the minimum waiting period, the time in which they must demonstrate that they are a good credit risk.  During seasoning, the buyers must perform:  improve their credit scores, pay bills on time and lower debt.  Some buyers have told me they took out a higher interest rate car loan just to show they can make the payments.  Car payments are reported to the credit bureaus and, when paid responsibly, can help re-establish credit post-bankruptcy.

 

So, how long does it take to get seasoned?  There are grey areas, or extenuating circumstances, that can shorten a time line requirement, including job loss or a prolonged illness followed by the subsequent death of the wage earner.  It is up to the person who reviews the file to make an exception; there is no guarantee. Having said that, the big 3time lines basically look like this: 

 

Fannie May and Freddie Mac:  Foreclosure – 7 years; 3 years if extenuating circumstances are met.  Chapter 7 or 11 Bankruptcy – 4 years; 2 years with extenuating circumstances.  Chapter 13 Bankruptcy – 2 years from discharge date; 4 years from dismissal date.***

 

Department of Veterans Affairs:  Foreclosure, Chapter 7 or 11 Bankruptcy – generally, not less than 2 years with foreclosures and bankruptcies filed under straight liquidation and discharge provisions.  If the foreclosure was a VA loan, the buyer must have paid the VA for its loss before qualifying for a new VA loan.  Chapter 13 Bankruptcy – After making 12 months of payments, or a court-appointed trustee and the trustee ,or the bankruptcy judge approves new credit.***

Federal Housing Administration:  (Note:  This program is most commonly used by rebound buyers, since the down payment requirement is only 3.5 percent, with a waiting period of  2 to 3 years after foreclosure).   Foreclosure – 3 years;2 years with extenuating circumstances, and the borrower has reestablished good credit. Chapter 7 Bankruptcy – 2 years after the discharge with re-established good credit or no incurred new credit obligations.  Chapter 13 Bankruptcy – To be considered, the buyer must be current on required payments for 1 year.***

 

So what happens when these buyers come knocking at your door?  Remember, they are survivors dedicated to the American Dream.  If they choose your home, be assured they will do everything they can to close.  They have a different mindset from the norm, and if your home is “the one” for them, it means more than buying a house - it represents their new beginning.  Their skin is in the game.  Their hearts are in it.  They are dreaming of sleeping in their own home, cooking in their own kitchen, planting their flowers and raising their kids.  Without a doubt, when these folks are properly seasoned, they will buy a home again.    

 

***Information provided by Starkey Mortgage and Realtor.org.

 

As published in the Savannah Morning News - 5 May 2013

 

It’s been a rough six years.  We are spotting the survivors…peeking their heads out of the sand, working their way out of debt, improving their credit scores, saving for a down payment and working hard in their recovery efforts to buy a home again.  Many have lost jobs, spouses, have experienced illnesses, the collapse of companies, and yet we all share a common thread in the American Dream, that of home ownership. 

 

It’s been a painful and embarrassing recovery for many of these former home owners, whose personal stories have begun to sound like a blur in the sea of economic hard times.  My heart goes out to those that have suffered great loss, both emotional and financial, sometimes through no fault of their own.  Their recovery is admirable, many setting out immediately, post bankruptcy or foreclosure, to rebuild their lives, their credit and their ability to provide again for themselves and their families.  It has been through dogged determination, education, sacrifice and hard work that they are now able to buy again.

 

With rents creeping up and interest rates still at record lows, and the fact that rebound buyers are missing the mortgage interest deductions, it’s no wonder we are seeing these determined folks back in the market now.  They still think and feel like home owners and want a place to call their own. 

 

As Realtors®, in order to work with these buyers affectively, we must understand the ramifications of foreclosures and bankruptcies.  Rebound buyers are plentiful, so both buyers and sellers should know the rules of the game.  Buyers have been working hard to get to this point, and they know when they are approved for a loan.  Sellers need to know what a “seasoned” buyer looks like, and how to spot one who is not.  Avoiding a Purchase and Sales Agreement with an unqualified purchaser saves lost time on the market and headaches in the long run.

 

But financing is difficult these days, even for those with good credit. 

 

Unless a buyer has 20-percent of the purchase price saved for a down payment, they will be required to secure mortgage insurance.  They can’t originate a loan without it, and because the real estate crisis pushed many mortgage insurers out of business, those that survived are extremely picky.  Buyers with a foreclosure in their history may have a tough time.  They will probably pay more for mortgage insurance, homeowners insurance, have to lower their home expectations and save more for a down payment.

 

Guidelines for rebounding buyers hoping to qualify for a loan are not black and white, and subject to interpretation.  “Seasoning” refers to a time line that lenders follow in which the rebound buyer must meet certain post-foreclosure and post-bankruptcy dates and requirements in order to qualify for a new loan.  Credit score is still a consideration, but the dates follow the discharge or dismissal date of a bankruptcy, or the recorded date of a resale of the home (by the lender) post foreclosure.  These dates must mature, or an exception must be made in order to get a loan approved by one of the big three:   Fannie Mae (FNMA)/Freddie Mac; Department of Veterans Affairs (VA); and Federal Housing Administration (FHA).  Exceptions may be granted and timelines shortened for extenuating circumstances, such as job loss or a prolonged illness and subsequent death of a wage earner.

 

I just had a buyer turned down by FHA after a job loss forced him into eventual bankruptcy.  Post-bankruptcy, he gave up his home by giving his lender the keys to the property and a Deed in Lieu of Foreclosure.  If he had included the house in the bankruptcy instead of holding on, his “seasoning” would have started at the bankruptcy date and not the foreclosure resale date, which was later.  FHA did not approve his job loss as extenuating circumstances, even though he depleted all resources before giving up the keys.  The lender argued the buyer’s hardship with FHA, but to no avail.  The buyer consequently has another year to season, post-foreclosure.

 

 

Time lines are a bit involved, so next week I’ll talk about the specific time lines for all three types of loans and what to expect from rebounding buyers. 

 

 

The road map to a secure financial future, and knowing what you can afford to buy or rent after you sell your home, is all about planning.  Meeting with a financial planner is an important step in the process of knowing how long your retirement money will last and what you can afford to spend on your next home.

 

Too often I meet with senior customers who want to list and sell their home, but don’t have a clear picture as to what comes next.  They have no idea how much money they will need in order to live out their life, and they don’t know whether they should buy or rent, or what they can afford.  My next question is always, “have you met with a financial planner?” These folks are trained to review your financials and give you advice.  They can estimate, based on your assets and investments, what your projected monthly income will be for the rest of your life.  You will then be able to see what your income can support in a home or retirement community over the long haul.

 

Additionally, it is important that both spouses know the full extent of their financial picture.  Depression era babies are often of the traditional mindset:  the husband takes care of the bills and everything financial; the wife takes care of the cooking, laundry and the house.  That’s fine, but I believe in cross-training, because if you lose a spouse due to death or divorce, the other is left without a clue.  With seniors, occasionally I see the roles reversed, but not often.  And let’s face it, a good number of women outlive their spouses.  Regardless, it’s always wise for both spouses to know all about their assets, the name of a key advisor to call in case they need to suddenly step into their spouse’s role, where the files are kept, etc.  Read on…

 

We have all heard about shocking revelations where one spouse spends all the money and the other has no knowledge?  Recently, a neighbor had a heart attack and died unexpectedly.  His wife thought the finances were in order because her husband took care of everything.  In the midst of her grieving and dealing with estate issues, she discovered the husband had tapped their retirement and mortgaged the house to the max.  Their assets were depleted.  It was not long before the lender foreclosed on the house and this shattered woman was forced to leave her home.

 

Another scenario which happens all too often:  A newly widowed woman has been “taken care of” all her life and now finds herself alone.  She has never managed the money nor lived on a budget, and since they have always lived well, she thinks there must be enough money to last.  All too soon, the nest egg dwindles, and when it comes time to sell the house and move to a retirement community or assisted living facility, she cannot afford it. 

 

I am told that Savannah’s average annual cost for assisted living is about $45K a year. A good long term care policy should be in your plan, but you still must have the monthly income to support yourself above and beyond that coverage.   And, if you plan to move into a buy-in continuing care retirement community, they often require that you qualify based on your total assets, plus your monthly income.  If either falls short, you will not meet their qualifications to buy-in.  Financial planners can assist in this assessment and guide you accordingly.

 

Planning while both spouses are still alive is the solution to making sure you can live out the rest of your lives in comfort and with the proper finances in place.  Establishing an accurate budget will be an essential piece of the puzzle and your financial planner can provide you with forms to help you establish your budget.  You will be able to see if your income can support the new lifestyle you desire, and if not, how much of a draw from your capital you must take each month to meet your expenses.  That subsequent decrease in assets will be factored into your projections.   Your family longevity will also be a factor.   Your planner can then estimate how much you can spend on a home and project your monthly income for the rest of your life.

 

After your financial plan is mapped out, you can move forward to find your next home with confidence.  Your peace of mind is worth it and you will be ready for the next step.