As regular readers have probably picked up on, I’ve been in the process of relocating once again.  This should be the last move for a very long time, perhaps ever.  I loved my time in the Midwest (and it certainly had its advantages), but I’m happy to be back in New England.  While many costs between the two locations are similar, there are a few differences worth considering.

Housing

This is the major difference.  In the Midwest, people complained about the high cost of housing, but they really had no idea how inexpensive it was.  One woman lamented that “you can’t even get a starter home for under $60K any more.”  I hate to tell her, but a comparable home here in New England costs upwards of $300K.  Out there we built a brand new, 5 bedroom home with all the upgrades for just over $200K.  Here we found a wonderful 4 bedroom home, built in the early 70s, that cost well over twice as much.  My mortgage payment basically tripled.  Higher property value also means

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When looking at potential houses to buy, there’s a lot you can do to learn about the property without ever setting foot inside the door.  Whether it’s to save the time wasted on problem properties or gain negotiation leverage when making an offer, here are some of the steps you can take:

Visit the Realtor’s Website

You’ll probably use Realtor.com, or a similar site to start your real estate search.  One of the first things you should do after finding a house that looks promising is visit the listing agent’s website.  The agent site will often have a thorough description and many more pictures than what’s available on Realtor.com.  I’ve found virtual tours and learned a ton by visiting realtor’s sites, even when Realtor.com had only sketchy details and one, or no, pictures.  You’ll also find information about upcoming open houses.

Do a Drive-By

Another benefit of visiting the realtor’s site is that you can often get an address for the property.  This info isn’t always provided at the larger real estate search sites.  With the address in hand, you can do a drive-by of the house before deciding whether to schedule a showing.  Why is a drive-by so important?  Well, pictures of houses are usually taken from the best possible angle and don’t always tell the whole picture.

Here’s an uncropped version of the photo from above

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It’s a good thing that we all know not to judge a book by its cover, or I may never have opened Rich Like Them by Ryan D’Agostino.  The cover pictured an opulent mansion.  To correlate such excess with being rich is exactly the type of sentiment that makes those of us in the personal finance realm cringe.  Often, such lavish housing accommodations indicate poor money management, rife with waste rather than financial acumen.  I’d rather hear from the owner of a modest home with no outstanding mortgage than a mansion dweller with mortgage debt larger than their faux marble foyers.

Reading the introduction, I quickly learned that the title was somewhat misleading.  The premise of the book was to uncover how it was that the inhabitants of impressive looking houses came to live there.  I suppose “Living in a Mansion Like Them” wouldn’t have been as catchy a title.  Even though the obvious continuation of the premise was that people living in such large houses might reveal previously undisclosed secrets of wealth, I was willing to overlook the potential flaw in that logic.

To realize his project, D’Agostino compiled a list of the 100 wealthiest zip codes in the US and then simply began knocking on doors in some of those locations.  More than five hundred houses later, he had met enough people to compile his project into Rich Like Them.

The most poignant takeaway from the book occurred in the first few pages.  Summarizing what he had learned from the people he met, D’Agostino reported that

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The lagging housing market makes competition for house listings intense.  Many realtors offer incentives to entice prospective sellers to choose them.  One of the most common marketing techniques is a guarantee to sell your home in 90 days, or less.  There are certainly many reputable realtors out there, but analyzing the home sale guarantee often leaves you questioning the realtor’s motives.  There are a number of ways these guarantees are structured, so let’s examine two common ones:

Sold in 90 Days or I Will Buy Your House

This one sounds great.  If the realtor is unable to sell your home, they will buy it from you.  You probably figure the realtor is motivated to sell your home since they’ll get “stuck” buying it otherwise.  The reality is that most of these guarantees stipulate a purchase price of below market value for your house.  20% is fairly common.  So if the realtor can’t sell, they get to buy at a 20% discount.   But it gets even better for them because of their commission.

Assume your house is listed at

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There are many strategies to stall or stop foreclosure proceedings, but one of the fastest growing methods is known as “Produce the Note.”

Overview

The basic idea is rather simple.  In order for foreclosure to proceed, the lender who is foreclosing must prove that they are the ones who own the loan.  Proof is established by the lender producing the mortgage note, which is the original piece of paper you signed at closing.  This strategy may stall foreclosure because the original note may be difficult (or impossible) to find.

One side effect of the housing bubble was the repeated selling of mortgage notes.  Many notes were sliced up, combined with others and resold.  All of these transactions make finding the original note very difficult.  A University of Iowa study reported that in 40% of the bankruptcy cases caused by foreclosure they analyzed, the original note was not found.  Had the homeowners requested that the note be produced, the foreclosure may have been delayed.  Without proof of loan ownership, the judge may throw out the foreclosure proceedings until the lender locates the necessary paperwork.

The original note is usually found, and some judges may allow proceedings to continue with lesser documentation, but for people with no other options, requesting that lenders produce the note is worth a shot.  The request will likely stall forclosure, at least temporarily, and may give them the time you need to settle the debt and remain in their home.  In some cases, a little more time is all that is needed to avoid foreclosure entirely.

Fallout

While you can’t blame people for employing this method, the simplicity and rising use are cause for concern.  I tried to present the overview in the light in which it is normally presented to homeowners facing foreclosure.  Note that the pitch didn’t start with a caveat like, “If you lost you job, became disabled, or some other event beyond your control is forcing you towards foreclosure and a slight delay could save your house, try this method.”  Rather it’s seen as a blanket tactic for everyone facing foreclosure, regardless of whose fault.  A large percentage of homeowners are facing foreclosure simply because they bought way more house than they could afford.  Even people facing layoffs shouldn’t get too much sympathy if they’ve been living beyonds their means and have nothing in the way of an emergency fund.  There are certainly foreclosure situations that do deserve sympathy, but I fear that the majority do not.  Rather than promoting a blanket tactic to delay all foreclosures, I would prefer that Produce the Note requests would only be used in those truly sympathetic cases.  In the rest, I would urge an alternative strategy: homeowners taking personal responsibility for their own poor choices and the consequences that occur as a result.

 
photo credit: woodleywonderworks

Skyrocketing mortgage payments as adjustable rate mortgages (ARMs) reset was a leading contributor to the burst in the housing bubble.  These events reconfirm that fixed rate mortgages are generally the safer course of action for home buyers.  But which type of fixed rate mortgage is the best?  There are many different terms for fixed rate mortgages, but today we’ll be comparing the two most common types: the 30 year fixed and the 15 year fixed.

At first glance, you might expect a 15 year mortgage to have twice the payment of a 30 year, since you’ll pay the house off twice as fast.  In fact, since 15 year loans generally carry a lower interest rate and much of the cost of a mortgage goes out to interest, a 15 year mortgage may only have a marginally higher payment than a 30.

Let’s look at an example: Today’s rates are

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This post is part of my Freaky Financial Fridays series, where I argue a case from an opposing view, generally in contradiction to my own philosophy or conventional financial advice.

Interest only mortgages are often associated with the sub-prime meltdown and generally dismissed by responsible financial advisers.  While interest only loans are often poor vehicles for potential homeowners, there is one type of buyer who could stand to gain from their use.

Interest only mortgages are just that, only the interest portion of the loan is paid each month.  At the end of the term you’d owe just as much as when you started because no principal payments had been applied.  Unless the house appreciated, which is of course possible but less likely in today’s market, you would have zero equity in the home.  The one upside to that huge downside is that your monthly payment will be lower.  This fact has caused

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Many real estate sites can give you a profile of a town, or even a neighborhood, but none tell you about your actual future neighbors. To fill that need comes the site Rotten Neighbor. There you can see negative (and positive) comments made about people in your neighborhood. More than just barking dogs and lack of yard maintenance, you can get the inside scoop on other items that may devalue property that you are considering. Nation sex registry data is also included to show if dangerous predators live nearby. Foreclosure data is also available. Knowing the good and the bad about a potential neighbor may influence your interest in a property and may even cause you to reconsider the price you’ll offer. Not knowing this information could end up costing you both while your living in the home and when you try to sell.

This post is part of my Freaky Financial Fridays series, where I argue a case from an opposing view, generally in contradiction to my own philosophy or conventional financial advice.

Why is it that we are afraid to maximize our single greatest investment, the home in which we live? There may be better investments out there, but the fact is that most of us don’t take advantage of those alternatives. Even those who realize the incredible growth potential of real estate usually stop after buying their own home. Unless you are planning to take on an investment property with positive cash flow or take full advantage of other, better investments, then buying the most expensive home you can afford may help your finances to grow the most.

If your house goes up in value by 30% between when you buy it and when you sell it,

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Few things have as much impact over your personal finances as where you live. For most Americans, housing is their largest expense. Moving to an affordable market can do for your personal finances what years of frugal living in an expensive area cannot.

In her article To Cut Costs, Move to Small Town USA, Liz Pulliam Weston profiled a few families that made such a move and the dramatic personal finance gains that followed. One of those profiled is Rob Bennett, whose book Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work, is on my list of books to review for Richer by the Day. In his profile, Rob mentioned two things missing from his new small town, a movie theater and a bookstore. You might think that such amenities are a small price to pay for a lower cost of living, and you’d certainly be correct. I have another strategy to cut costs, but without such down sides.

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